Industry News

On December 18, 2019, the National Association of State Retirement Administrators (NASRA) released its Public Fund Survey Summary of Findings for FY 2018.  The survey presents key data from 98 public defined benefit (DB) retirement systems with 120 plans, covering 12.9 million active members, 9.6 million retirees and other annuitants, and holding $3.62 trillion in assets.  

Overall, the retirement systems surveyed represent approximately 85% of state and local DB plan membership and assets as of Fiscal Year (FY) 2018.  The Summary of Findings presents information regarding plan funding, membership, benefits, contribution rates, cash flows, and actuarial assumptions. 

According to the report: 

• The average actuarial funded ratio for the surveyed plans was 72.6% in FY 2018, slightly higher than the prior year.  Between FY 2017 and FY 2018, the aggregate actuarial value of assets increased 6.1% and the actuarial value of liabilities increased 5.4%.  Many state and local plans smooth investment gains and losses into the actuarial value of assets over time (typically five years and sometimes longer). 
• Growth in pension liabilities remains at a median rate below 4.0% (the lowest historical rate), as a result of low salary growth and employment levels among states and local governments and the effects of many pension benefit reforms (mainly reductions) enacted in recent years.
• The combined allocation of plan assets to public equities and fixed income securities was 71.7% in FY 2018.  Continued low interest rates have caused most plans to seek higher returns in other asset classes.  In recent years, allocations to real estate has steadily increased to over 7% for the second consecutive year and allocations to alternative investments (such as private equity and hedge funds) has continued to grow to about 19%.  In FY 2017, the allocation to fixed income securities remained about 23% and equities at about 48%. 
• For most of the Public Fund Survey’s measurement period, the median investment return assumption used by public pension plans was 8.0%.  However, in FY 2018, the median actuarial assumption for investment return was 7.25%.  Notably, since 2009, many plans have reduced their investment return assumptions.
• Since the inception of the survey, employer contribution rates have increased significantly mainly due to larger unfunded pension liabilities and often include lower investment return assumptions.  For some plans, higher employer contribution rates are the result of a disciplined approach to contribute all or more of their actuarially determined contributions.

The survey data is available for each individual retirement system and plan in Appendices A and B.  The data includes: plan membership, plan assets and liabilities, and actuarial funding levels.  

The summary is available here.