WASHINGTON — The 100 largest public pension plans reported assets of $2.71 trillion and accrued liabilities of $3.6 trillion, for an aggregate underfunding of $895 billion during the past year, according to a new report.
The eight-page report, which measured the aggregate funded status of the 100 largest public pension funds and found their funded ratio was only 75.1%, was compiled by Milliman Inc., an independent firm that provides actuarial and related products and services. It was released earlier this week.
Milliman said the plans would be underfunded by a greater amount, $1.193 trillion, if the reported figures were revised to reflect current views on future investment return levels. That would involve using current market asset values of $2.51 trillion, and current views on investment returns, of $3.71 trillion, it said.
Not surprisingly, just before the recession began in 2007 and immediately following when it officially ended in 2009, most U.S. pension plans experienced steep asset losses.
“While these losses were generally followed by sizeable gains during 2009-2011, those gains were typically not as large as the losses that preceded them, leading to plans generally having reported actuarial asset values larger than market values,” wrote Rebecca Sielman, author of the report.
The Washington State Law Enforcement Officers’ and Fire Fighters’ Plan 1 and 2 had the highest pension funded ratio at 126%.
The New York State Teachers’ Retirement System, the North Carolina Local Governmental Employees’ Retirement System and the Wisconsin Retirement System had plans that were 100% funded.
The Puerto Rico Government Employees Retirement System has the lowest funded ratio, at 7%. The State Employees’ Retirement System of Illinois and the Kentucky Employee Retirement Systems each had funded ratios of 36%.
The report also found that over the past year, the public pension plans had assets sufficient to cover 100% of the accrued liability for retirees and inactive members but only 33% of the assets needed to cover the accrued liability for active plan members.
As a whole, the study found that 50.8% of the public pension plans were invested in equities, 25.7% in fixed income, 6.6% in real estate, 12.7% in a combination of private equity, hedge funds and commodities and 4.2% in cash.