Public pension funds’ confidence levels on rise

Public pension funds are more confident in their ability to address retirement issues over the next two years, in part because they continue to pare back benefits, an industry study has shown.

The National Conference on Public Employee Retirement Systems said public funds have passed significant “organizational and operational changes to ensure long-term sustainability for their stakeholders.” They include reductions in retiree health care coverage, higher member contribution rates and better system oversight.

The “2014 NCPERS Public Employee Retirement Systems Study” included participation from 187 state, local and provincial government pension funds with membership of more than 11.8 million. The respondents have assets of more than $1.8 trillion.

NCPERS is the largest trade association for public-sector pension funds.

A few of the study’s key findings:

  • Public funds are more confidently addressing retirement trends: Overall confidence rating increased to 7.9 on a 10-point scale, up from 7.4 two years ago.
  • Funds are more efficient. Average administrative expenses are .14 percent, down a bit from a year earlier even in the face of rising investment management fees.
  • Public pension funding levels are increasing, an average of 71.5 percent, up from 70.5 percent in 2013. (OPERS was 82 percent funded at the end of 2013.)
  • Funds are doing well with their investments, with average 10-year net returns reported at 7.6 percent.

Michael Pramik

Michael Pramik is communication strategist for the Ohio Public Employees Retirement System and editor of the PERSpective blog. As an experienced business journalist, he clarifies complex pension policies and helps members make smart choices to secure their retirement.

Michael Pramik

Communication Strategist

  • Please explain what is meant by “percent funded.” It sounds great that OPERS’ percent funding is greater than the national average but I am concerned about the 18 percent that is not funded. How much is that 18 percent in actual dollars and what does it represent?

    • Dorothy,

      The funding level of the defined benefit plan compares its assets to its liabilities, with the goal being a one-to-one ratio. Ratios of 80 percent or higher are considered healthy. As of Dec. 31, 2013, the OPERS Defined Benefit Plan had $15.2 billion in unfunded liabilities, but the funding ratio was 82.4 percent. That means for every dollar we expect to pay out in benefits in the future, we have 82.4 cents in the bank right now. And, we always fund the entire pension benefit at the time our members retire.

      Think of it as a home mortgage. You may owe $100,000 or $200,000 or more on a mortgage. You may not have all the money right now to pay it off, but you don’t have to. It’s due over a period of decades. Similarly, we have an unfunded liability, but it’s not all due right now.

      –Ohio PERS

    • Sandra,

      You need to call us at 800-222-7377. We can either help you over the phone or set up an appointment with a counselor who can help you.

      –Ohio PERS

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