Industry News

On January 19, 2021, the National Conference of Public Employee Retirement Systems (NCPERS) released the results of its 2020 NCPERS Public Retirement Systems Study. The comprehensive survey provides information on investment experience, actuarial assumptions, plan administration and operations, trends, innovations and best practices. 

The key findings include: 

• Due to the COVID-19 pandemic, 58% of pension systems allowed board members to participate and vote by teleconference or phone, up from 19% in 2019. About 54% offered live webinars to members and 19% were considering implementing such conferences.
• During 2020, the average funding levels (the value of the assets in the pension plan divided by an actuarial measure of the pension obligation) rose slightly. Average funding levels increased to 75.1% in 2020 from 72.4% in 2019. 
• In 2020, the average investment return assumption was 7.26% compared to 7.24% in 2019. About 69% of responding funds reported that they have reduced their actuarial assumed rate of return or are considering doing so in the future.  
• About 35% of reporting funds have implemented or are considering implementing higher age and service benefit requirements, while 46% have increased employee contributions or are considering implementing that change in the future.
• Overall, the reporting funds experienced solid returns, with the 10-year average returns exceeding the assumed rate of return and the 20-year returns falling below the assumed rate of return. On average, 20-year returns were 6.3%, 10-year returns were 8.7%, 5-year returns were 6.8%, and 1-year returns were 8.1%. Importantly, the funds with a December end-date reported significantly higher 1-year returns at 16.8% than those with non-calendar fiscal years.
• Pension funds increased the cost of administering funds and paying investment managers to 60 basis points (or 60 cents per $100 invested) versus 55 basis points in 2019. This is comparable to the average fee of 62 basis points for hybrid funds. 

The survey included 138 state and local government pension funds with more than 12.8 million active and retired members and total assets exceeding $1.5 trillion in actuarial and market value.  Of the pension funds surveyed, 49% were local government funds and 51% were state pension funds.

The report is available here.