WASHINGTON — The funding level for state-sponsored defined benefit retirement systems increased to 75% in 2013 from 72% the previous year, Wilshire Consulting reported on Wednesday.
The 75% funding level, which is the ratio of assets-to-liabilities, is slightly higher than the average underfunded plan, which has a ratio of 70%, the firm said in its 18th annual Wilshire Report on State Retirement Systems: Funding Levels and Asset Allocation.
The report is based on data gathered by the firm from the most recent financial and actuarial reports of 134 retirements systems sponsored by the 50 states and District of Columbia. Most of the systems, 111 to be exact, reported actuarial values on or after June 30, 2013, with 23 reporting before that date.
For the 111 state retirement systems reporting actuarial data for 2013, pension assets increased by 8.0% or $156.7 billion to $2.12 trillion in 2013 from $1.96 trillion the previous year. Liabilities rose only 2.6% or $73.2 billion to almost $2.90 trillion in 2013 compared to $2.82 trillion in 2012, the report said.
For the 134 state retirement systems that reported actuarial data for 2012, pension assets were $2.51 trillion and liabilities were almost $3.50 trillion in liabilities in that year, according to the report.
On average, state pension portfolios have a 65% percent allocation to equities, including real estate and private equity, and a 35% allocation to fixed income and other non-equity assets, Wilshire said.
"It's important to note that asset allocation varies by retirement system," said Russ Walker, vice president of Santa Monica, Calif.-based Wilshire Associates, Inc., of which Wilshire Consulting is an institutional investment advisory and outsourced-CIO business unit. "Sixteen of the 134 retirement systems have allocations to equity that equal or exceed 75% and 16 systems have an equity allocation below 50%."
Wilshire forecasts a long-term median plan return of 6.63% per year, which is 1.12 percentage points below the median actuarial interest rate assumption of 7.75%, the report said.
