Wilshire: Local government pension plans’ funded status rises for fiscal 2011

The aggregate funded status of local government pension plans was 80% for the fiscal year ended June 30, 2011, up eight percentage points from a year earlier, according to a report from Wilshire Associates on 106 city- and county-sponsored defined benefit plans.

Pension assets increased by 15% to $367.8 billion, while liabilities grew 4% to $461.1 billion.

Only seven plans reported having a fully funded pension plan; the remaining plans had an aggregate 73% funding ratio. Sixty-three plans were less than 80% funded as of June 30, 2011, down from 80 plans the previous year.

“What's notable about this year is the funded ratio of the market value is the exact same as the actuarial value,” said Russ Walker, vice president at Wilshire and member of the investment research group of Wilshire Consulting, in a telephone interview. The actuarial value funding ratio was 83% in 2010.

While Mr. Walker said it was difficult to gauge major trends in asset allocations in the last year, fixed-income allocations have decreased five percentage points in the last 10 years while U.S. equity allocations have fallen more in the last five years. The average U.S. equity allocation was 32.5% in 2011, down from 44.7% in 2006, while non-U.S. equity increased to 18.9% from 14.6% in the same time period.

“We do still see a preponderance of exposure and risk in equity-based assets,” Mr. Walker said. “That has not changed dramatically, but we see a strong shift into alternatives.”

Wilshire includes private equity and real estate in its total equity. In the last five years, real estate allocations increased to 6.3% from 5.3%; private equity, increased to 4.1% from 1.7%. Other alternatives including hedge funds, TIPS and commodities, have increased to 9.9% from 4.9%.