Median investment returns for public pension defined benefit plans increased at a double-digit rate in fiscal 2010, while declines in funding levels slowed a bit, according to a study by the National Association of State Retirement Administrators and the National Council on Teacher Retirement.
Investment returns helped to offset the market declines in 2008 and 2009, which raised the aggregate value of public pension fund assets by 35% at the end of fiscal year 2010.
Roughly three-fourths of plans included in the study have fiscal years ended June 30.
Keith Brainard, NASRA research director, said in an e-mail that the funding level decline was anticipated, “and is expected to continue for another couple of years, albeit at a decreasing pace, as 2008-09 investment losses are factored in.”
Other developments that could affect funding levels include investment gains since March 2009 and slowing liability growth.
“The trend that I would expect to continue in FY 2011 is a slowing rate of liability growth as the public-sector employment base has continued to drop, along with the other factors,” including slower salary growth and some modifications of benefit levels, he said.
Aggregate funding levels of public pension plans declined in fiscal 2010 to 77%, compared to 78.9% at the end of fiscal 2009. The decline was slowed by improving asset values and slowing or reversing liability growth rates.
Funding levels are expected to continue to drift lower through fiscal 2013, but begin to improve once all of the investment losses of 2008-09 have been factored in to actuarial calculations.
The study looked at 100 systems and 126 plans with a combined 85% of all state and local government assets and participants. Four of every 10 plans received less than 90% of their full required contribution.