Industry News

On November 28, 2023, the National Association of State Retirement Administrators (NASRA) released its Public Fund Survey Summary of Findings for FY 2022. The survey presents key data from 102 mostly statewide retirement systems with 130 public pension plans, covering 13.1 million active members, 10.6 million retirees and other annuitants, and holding $4.5 trillion in assets.

Overall, the retirement systems surveyed represent approximately 90% of state and local DB plan membership and assets as of Fiscal Year (FY) 2022. The Summary of Findings presents information regarding plan funding, membership, benefits, contribution rates, cash flows, and actuarial assumptions. 

Due to the COVID-19 pandemic, the analysis notes that there was an exceptional level of economic and investment market volatility which has continued since early 2020. The aggregate funding level was 76.1% in FY 2022, down from 76.9% in FY 2021. The predominant factor impacting lower funding levels in FY 2022 was the recognition of investment returns below assumptions in previous years, combined with investment returns in FY 2022 which fell short of actuarial assumptions and were sharply negative.

According to the report:  

• The aggregate funding level for the surveyed plans was 76.1% in FY 2022, down slightly from the prior year. Between FY 2021 and FY 2022, the aggregate actuarial value of assets increased 3.1% from $4.35 trillion to $4.49 trillion. The combined actuarial value of liabilities increased 4.1% from $5.66 trillion to $5.90 trillion. 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% for the fifth consecutive year, as a result of various factors such as plan maturity, 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 average allocation of plan assets to public equities has declined steadily since the major decrease in global capital markets in 2008-2009. In FY 2022, the allocation to fixed income securities declined to 20.6% and equities at about 42.2%. In recent years, allocations to real estate increased to 9.1% and allocations to alternative investments (such as private equity and hedge funds) has continued to grow reaching the threshold of 27.4%.
• 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 2021 and FY 2022, the median actuarial assumption for investment return was 7.0%. 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.