Public pension plans continue to improve their funding levels. This is the big takeaway from the latest plan survey by the National Conference on Public Employee Retirement Systems (NCPERS). Each year NCPERS, a trade association representing more than 500 state and local public pension plans, conducts a survey of its member plans. In its 2018 plan survey, NCPERS reports that the average funded level for all funds rose from 71.4 percent to 72.6 percent.
Following the Great Recession, anti-pension ideologues claimed that the sky was falling and that pension plans would be unable to meet their obligations. These critics have been proven wrong repeatedly over the years. Far from being unable to meet their obligations, public pension plans have gradually and steadily improved their funded levels since the recession.
These plans have improved their funded levels while also becoming more conservative in their assumptions. Pension plans continue to lower their assumed rate of return on their investments, moving from an average of 7.49 percent in 2017 to 7.34 percent in 2018. They have also shortened amortization periods –the period of time to pay off an unfunded liability– and adopted mortality tables that assume people will live longer (because they are living longer). All of these moves require a greater investment in the plan (in a responsible manner) and yet plans have still been able to improve their funded levels! In part, this is because public pension plans continue to be cost-effective, with investment expenses holding steady from 2017 to 2018 at low levels.
Public pensions are a good investment for taxpayers, public agencies, and state & local governments. They provide a secure and reliable retirement to public employees at a reasonable cost. They can weather financial market downturns and improve their funding status over time. This is why cities and states have offered public pension plans for more than 100 years.
