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Funding of US Public Pension Funds Nearly Unchanged in 2015

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Friday, 17 Jun 2016 09:23 AM

The funding status of U.S. public worker pension plans remained nearly unchanged in 2015, according to a new study.

State and local pension plan funding rose from 73 percent in 2014 to 74 percent in 2015, based on actuarial valuations, according to a study released on Thursday by the Center for Retirement Research at Boston College.

However, under the Governmental Accounting Standards Board's new accounting rules, in which assets are valued at market, the funding of pension plans declined slightly, reflecting the poor stock performance in 2015, the study found.

If public pension plans meet their assumed expected returns over the next four years, plans should be 78 percent funded by 2020, the report found. Funds are highly sensitive to investment performance.

Across the country, many public pension funds have been recasting investment priorities as cash flows turn negative, meaning funds pay out more in benefits than they collect from contributions and investment income, a repercussion of more baby boomers retiring. Adding to the challenges, most retirement systems are underfunded, and investment returns have been choppy.

Pension plans on average assume a nominal return of 7.6 percent on their total portfolios and nominal stock returns of 9.6 percent.

Returns this year will likely be much lower. New York state's employees' retirement fund earned a return on investment of just 0.19 percent in fiscal 2016, it said on Monday, its worst showing since the U.S. recession ended in 2009 and a worrying indicator for other funds.

The California Public Employees' Retirement System (CalPERS), the nation's largest public pension plan, also warned this week that its rate of return for the 12 months ending June 30, is "likely to be flat."

© 2017 Thomson/Reuters. All rights reserved.

 
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The funding status of U.S. public worker pension plans remained nearly unchanged in 2015, according to a new study.
pension, funding, public worker, retire
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2016-23-17
Friday, 17 Jun 2016 09:23 AM
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