Public Pensions Fight Back, Claim Solid Funding

(June 9, 2011) — At least one study — albeit one by a public pension industry group — is claiming that the public pension funding problem in the United States may be actually improving.

“Public pension funds are experiencing a robust recovery from the historic market downturn of 2008-2009 — reporting strong investment returns, growing assets and funding levels on track to meet obligations,” says the National Conference of Public Employee Retirement Systems (NCPERS), which surveyed about 215 public pension funds in March and April.

The vast majority of those surveyed – 83% – were local pension funds, while the remaining 17% were state pension funds. The state and local systems surveyed represented 7.6 million people and assets exceeding $900 billion.

The study claims that pension systems are 76.1% funded, able to cover more than three-quarters of liabilities. According to the research, conducted by NCPERS along with Cobalt Community Research, over the last year, funds have achieved an annual investment return of 13.5%, nearly double the 7.7% rate most assume.

“The data we collected – the most current data available – tells a strongly positive story,” says Hank Kim, NCPERS Executive Director and Counsel, in a release. “Public pensions are experiencing a robust recovery from the Great Recession and are reporting strong investment returns, growing assets and funding levels on track to meet their obligations. And they are actively making structural changes to respond to the current economic, political and social landscape.”

A study in April by Towers Watson found similarly positive results in regards to US pension funding. The largest employer-sponsored pension plans in the US improved their funding levels in 2010, with investment returns averaging 13%, the consultant firm found.

Yet, according to the firm, funding levels remain far below their pre-crisis peaks in 2007, when plans were 104.2% funded on average. The consultancy’s analysis of financial statements filed by sponsors of the 100 largest pension programs found that plans were 83.4% funded on average at the end of 2010, an improvement from 2009, when plans on average were 80.2% funded.