U.S. state pension plans' estimated aggregate funding ratio at the end of fiscal year 2020 fell to 70% from 72.7% in the previous year, a report from Wilshire Associates shows.
Based on over 100 state plans' most recent annual reports, most of which provide data as of June 30, the aggregate funding ratio is based on $3.253 trillion in aggregate assets and $4.647 trillion in aggregate total pension liabilities, according to Wilshire's 2021 Report on State Retirement Systems.
Asset levels rose 0.5% from $3.238 trillion at the end of fiscal year 2019, but aggregate total liabilities advanced 4.3% from $4.456 trillion at the end of the prior fiscal year.
Wilshire attributed the rise in assets to positive investment returns and contributions. The report said about 30% of contributions came from plan participants.
Contributions increased the asset value by almost 5%, while returns increased the asset value by 3.2% for the year. Benefit payments are estimated to have decreased asset values by 7.8%. "Other" items increased asset values by 0.1%, according to the report.
On the liability side, the estimated increase due to interest cost (approximately equal to discount rate as a percentage of the beginning-of-year total liabilities) was 7%, annual benefit accruals increased liabilities by 1.9% and actuarial losses and "other" increased the liability by 1.1%. Benefit payments are estimated to have lowered liability values by 5.7%.
The median discount rate was 7.1% at the end of fiscal year, down 0.15 percentage points from a year earlier. The range of discount rates was 2.87% to 7.75% for fiscal year 2020.
The aggregate asset allocation of the universe was 30.3% domestic equities, 21.7% total fixed income, 17.7% international equities, 12% real assets, 9.6% private equity and 8.7% other.
According to the report, the aggregate asset allocation to domestic and international equities remained relatively unchanged in the last decade. For fiscal year 2010, the aggregate asset allocations to domestic and international equities were 31.1% and 17.6%, respectively.
Total fixed income fell to 21.7% from 28.1% and total real assets doubled to 12% from 6% in that time period.
Private equity increased slightly to 9.6% from 9% in the past 10 years, while "other" increased to 8.7% from 8.2%.
Other assets can include any other asset class, including hedge funds and commodities.
