The aggregate funded status of the 100 largest public pension plans rose 4.3 percentage points last year because of strong market gains, said Milliman’s annual public pension funding study released Monday.
The funded status rose to 75% from 70.7% on a market value basis, based on data reported by the plans in their most recent annual reports. The majority of the valuation dates are June 30, 2014, or later.
Milliman also independently determined an actuarial interest rate assumption for each plan based on the asset allocation to calculate plan liabilities and funded status. Under Milliman’s calculations using those rates, the funded status rose to 71.7% from 68.2% on a market value basis.
From an actuarial value perspective, the aggregate funded status of the 100 largest public pension funds decreased slightly as recent investment gains were not fully realized. The funded status declined to 72% from 72.1%, based on data reported by the plans. Under Milliman’s own actuarial calculations, the funded status decreased to 68.9% from 69.4%.
Excluding Puerto Rico, Kentucky Employees Retirement System had the lowest funding ratio among the plans at 25.2% and 23.9% on a market value and actuarial basis, respectively. Washington State Law Enforcement Officers and Fire Fighters Retirement System-Plan 1 and 2 had the highest funding ratio at 113.4% and 118.7% on a market value and actuarial basis, respectively, according to the study.
Plan executives’ investment return assumptions declined 10 basis points to 7.65% last year, according to plan reports.
On a market value basis, total assets of the 100 plans rose 11%, to $3.06 trillion, from the year prior. On an actuarial value basis, assets rose to $2.94 trillion, up 5%. Accrued liabilities totaled $4.08 trillion, also up 5%.
Milliman’s study also found that retirees and inactive workers outnumbered active workers by a ratio of 12.6-to-12.5 vs. 12.1-to-12.5 the previous year. It is the first time in the survey’s four-year history that the number of retired and inactive workers has outweighed active workers.
While last year’s funded status improvement is “nice to see,” the good news is “not permanent,” said Rebecca A. Sielman, principal, consulting actuary and author of the report said. Challenging equity markets in 2015 could lead to a deterioration in funded status, Ms. Sielman said.
