Stephen H. Cypen, Esq., Editor

NCPERS RELEASES PRELIMINARY
RESULTS OF 2011 PUBLIC FUND STUDY

In March and April 2011, National Conference on Public Employee Retirement Systems began a study to collect the most recently available data on member funds’ fiscal condition and steps they are taking to ensure fiscal and operational integrity. NCPERS is the largest trade association for public sector pension funds, representing more than 500 funds throughout the United States and Canada.  It is a unique non-profit network of public trustees, administrators, public officials and investment professionals who collectively manage nearly $3 Trillion in pension assets.  Founded in 1941, NCPERS has been the principal trade association working to promote and protect pensions by focusing on advocacy, research and education for benefit of public sector pension stakeholders. 

The 2011 NCPERS Public Fund Study includes responses from 216 member funds with a total number active and retired memberships surpassing 7,599,000 and assets exceeding $900 Billion.  It is the most comprehensive study addressing retirement issues for this segment of the public sector. 

Here are some key findings: 

• Despite weak short-term investment experience in 2008 and 2009, the long-term investment discipline of fund managers has produced an average 1-year return of 13.5 percent based on most recently reported data.  Funds participating in the study reported a 20-year average of 8.2 percent.  The average return that respondents used to calculate assets is 7.7 percent with an assumed rate of inflation of 3.5 percent. 
• Investment returns are the single most significant source of plan funding, making up about 66 percent of fund revenue. Members are an important source of plan funding, and contributed 10 percent of plan revenue. Employer contributions compose only 24 percent of plan revenue. 
• Although media coverage has focused on a handful of troubled funds, most funds are managed responsibly, and maintain strong funding levels. On average, funds are 75.7 percent funded, and continue to work toward full funding.  According to its February 2011 report, Fitch Ratings considers a funded ratio of 70 percent or above to be adequate.  As with any home mortgage, funding levels are designed to be funded slowly over many years.  The average amortization period for respondents is 25.8 years. 

These preliminary data represent only a portion of findings in the 2011 study.  Other areas to be reviewed include changes funds have made or plan to make in the following areas: benefit changes, design changes, operational practices, oversight practices and communication/member engagement practices. We look forward to the full report later this Spring.