About the Public Fund Survey
The Public Fund Survey is an online compendium of key
characteristics of most of the nationís largest public retirement
systems. The Survey is sponsored by the National Association of
State Retirement Administrators. Keith Brainard maintains the Survey.
Beginning with fiscal year 2001, the Survey contains data on public
retirement systems that provide pension and other benefits for 12.6
million active (working) members and 8.2 million annuitants (those
receiving a regular benefit, including retirees, disabilitants and
beneficiaries). At the end of FY 13, systems in the Survey held
assets of $2.86 trillion. The membership and assets of systems
included in the Survey comprise approximately 85 percent of the
entire state and local government retirement system community.
The primary source of Survey data is public retirement system annual
financial reports. Data also is culled from actuarial valuations,
benefits guides, system websites, and input from system
representatives. The Survey is updated continuously as new
information, particularly annual financial reports, becomes
available. This report focuses on fiscal year 2013. Using graphs,
this summary describes changes in selected elements of the survey.
Summary of Findings
Figure A plots the aggregate actuarial funding level among plans
in the Survey since its inception in FY 2001. The funding level in
FY 13 declined to 71.8 percent, down from 73.5 percent the prior
year. The aggregate actuarial value of assets grew slightly, by
3.4 percent, from $2.65 trillion to $2.74 trillion. Liabilities
grow primarily as active plan participants accrue retirement
benefit service credits. This increase was outpaced by growth in
the actuarial value of liabilities, from $3.60 trillion to $3.81
trillion, or 5.9 percent. The actuarial value of assets reflects
the phasing-in, or smoothing, of investment gains and losses. Most
plans either have completed, or are nearing completion, of
recognition of the sharp investment losses incurred in 2008-09.
Those losses are being offset by asset gains since the market
Figure B presents the aggregate actuarial funding level since
1990, measured by Standard & Poorís from 1990 to 2000 and the
Survey since 2001. This figure illustrates the substantial effect
investment returns have on a pension planís funding level:
investment market performance was relatively strong during the
1990s, followed by two periods, from 2000-2002 and 2008-09, of
sharp market declines. Other factors that affect a planís funding
level include contributions made relative to those that are
required; changes in benefit levels; changes in actuarial
assumptions, and rates of employee salary growth.
The individual funding levels of the 126 plans in the Survey are
depicted in Figure C. The size of each circle in the chart is
roughly proportionate to the size of each planís actuarial
liabilitiesólarger bubbles reflect larger plans and smaller
bubbles reflect smaller plans. The median funding level is 72.8
percent, and the range is 25.8 percent to 134.3 percent.
Figure D plots the median annual change among plans in the Survey
in the actuarial value of assets and liabilities since FY 01. For
a pension planís funding level to improve, its actuarial value of
assets must grow faster than its liabilities. Liability growth
remains notably lower, at a median rate of below 4.5 percent for
four consecutive years. This lower rate of growth in liabilities
is due to several factors, chiefly low salary growth and the many
reforms (reductions) in pension benefits enacted in recent years.
Tepid asset growth reflects the phased recognition (also known as
actuarial smoothing of assets) of the sharp market declines
experienced in 2008 and 2009. These losses now have been nearly or
fully recognized, depending on the length of each planís smoothing
period; the sharp increase in FY 13 is a preview of anticipated
improvement in actuarial value of asset levels as the robust
market gains since March 2009 are recognized (see Figure L).
Presenting the annual change in assets and liabilities based on
median (midpoint) data, rather than aggregate (total), reduces the
effects that very large plans and plans with extreme or exceptional
results would have on the total. This method of presentation enables
readers to focus on the experience of a typical plan instead of
seeing results that could be skewed by the experience of a few
The Survey measures two types of retirement system members:
Actives and Annuitants. Actives are those who currently are
working and earning retirement service credits. Annuitants are
those who receive a regular benefit from a public retirement
system; these are predominantly retired members, but also include
those who receive a disability benefit, and survivors of retired
members or disabilitants.
As shown in Figure E, the rate of increase in annuitants among
systems in the Survey continued a pattern of annual growth of more
than four percent. For the fifth consecutive year, the number of
active members declined. This decline is consistent with US Census
Bureau reports showing a reduction in the number of persons employed
by state and local government, a trend Census data shows began in
The difference between the continued increase in annuitants and a
declining number of active members is driving a sustained reduction
in the overall ratio of actives to annuitants. In FY 13, this ratio
dropped to 1.55.
A low or declining ratio of actives to annuitants is not necessarily
problematic for a public pension plan, because the typical public
pension funding model features accumulation, during plan
participantsí working years, of assets needed to fund retirement
When combined with an unfunded liability, however, a low or
declining ratio of actives to annuitants can cause fiscal distress
for a pension plan sponsor. An unfunded liability represents a
shortfall in accumulated assets, and results in an increase to the
required cost of the plan. A lower ratio of actives to annuitants
results in costs to amortize a planís unfunded liability over a
relatively smaller payroll base, which increases the cost of the
plan as a percentage of employee payroll. Thus, although a declining
active-annuitant ratio does not, by itself, pose an actuarial or
financial problem, when combined with a poorly-funded plan, a low or
declining ratio of actives to annuitants can result in relatively
high required pension costs.
On a market value basis, as of FY 13, systems in the Survey held a
combined $2.86 trillion in assets. Figure F, which plots the
fiscal year-end value of public pension funds in the Survey,
reflects the result of market volatility in recent years,
including the strong asset gains since 2009.
Figure G plots the combined revenues and expenditures of the
systems in the Public Fund Survey. The green line reflects
investment gains and losses, which vacillate as investment markets
fluctuate. Blue bars indicate contributions, from employees and
employers, and red bars show benefit payments. Contributions and
investment earnings accrue to pension trust funds, established for
the sole purpose of paying benefits and funding administrative
costs. The benefits paid by public retirement systems are paid
from trust funds; pension payments are not made from state and
local government operating budgets or general funds.
Figure H plots the distribution of changes in payroll over the
three-year period from FY 10 to FY 13, among 113 plans in the
survey for which this data is available. (The chart excludes plans
in the Survey that are closed to new hires: the Alaska PERS and
TRS, Michigan SERS, and three plans in Washington state.)
As the chart shows, the median change in payroll over this
three-year period was 0.8 percent, although plansí experience
covered a wide range, from a decline of 25 percent to an increase of
16 percent. (The plan with the 25 percent decline experienced the
withdrawal of a large employer.) Two-thirds of these plans
experienced total payroll growth over the three-year period of less
than three percent, and the aggregate change during the period was a
reduction of 0.9 percent. The decline in payroll reflects two basic
factors: stagnant or declining employment levels, combined with
modest salary growth among employees of state and local government.
Information provided by the U.S. Bureau of Labor Statistics
indicates that annual growth in wages and salaries for employees of
state and local government has remained around one percent since
mid-2009. BLS data suggest that wage growth for public workers has
increased at a higher rate since FY 13.
Figure I plots median external cash flow since FY 01. External cash
flow is the difference between a systemís revenue from
contributions, and payouts for benefits and administrative expenses.
Dividing a systemís cash flow into the value of the systemís assets
produces a measure of cash flow as a percentage of assets, which is
shown in Figure H. A growing number of annuitants, combined with a
low or negative rate of growth in active members will result in a
reduction in a retirement systemís external cash flow. Conversely, a
growing asset base will offset a rate of negative cash flow.
A negative cash flow is not, by itself, an indication of financial
or actuarial distress. Nearly all systems in the survey have an
external cash flow that is negative, meaning they pay out each year
more than they collect in contributions. A lower (more negative)
cash flow may require the systemís assets to be managed more
conservatively, with a larger allocation to more liquid assets in
order to meet current benefit payroll requirements.
Figure J illustrates the changes over time in two measures
pertaining to the Annual Required Contribution (ARC): the average
ARC received by all plans in the Survey; and the percentage of plans
that received at least 90 percent of their ARC. The investment
market losses of 2008-09 increased public pensionsí unfunded
liabilities, resulting in higher costs to amortize those
liabilities. Meanwhile, the Great Recession decimated state and
local government revenues, an experience from which most plan
sponsors continue to recover.
Implementing higher contributions, from employees and employers,
takes time. The effect of factors that change contribution rates,
such as investment losses, must first be measured through an
actuarial valuation; then a legislature or other governing body must
approve new rates. This cycle, from actuarial event to
implementation of higher contribution rates, can take several years.
Figure J indicates that efforts to fund public pensions are
improving after a period of declining ARC effort during and after
the Great Recession.
As shown in Figure K, the median investment return for plans with
a FY-end date of June 30, 2013 (used by approximately
three-fourths of the funds in the survey), was 12.0 percent; the
return for plans whose fiscal year-end coincides with the calendar
year was 16.1 percent.
Returns for longer periods are mostly strong, with the exception of
the five-year period ended 6/30/13, which includes the sharp market
decline of July 2008 to March 2009. Notably, for longer periods,
particularly 20+ years, median public pension fund returns are
consistent with or greater than the investment return assumptions
used by most plans.
Of all actuarial assumptions, a public pension planís investment
return assumption has the greatest projected effect on the long-term cost of
the plan. This is because a majority of revenues of a typical
public pension fund come from investment earnings. Even a minor
change in a planís investment return assumption can impose a
disproportionate impact on a planís funding level and cost.
For most of the Public Fund Surveyís measurement period, the median
investment return assumption used by public pension plans was 8.0
percent. Since 2009, a majority of plans have reduced their
investment return assumption, resulting in a reduction to the median
to 7.75 percent. Figure L compares the distribution of investment
return assumptions since the inception of the Survey through FY 13.
Figure L illustrates the steady reduction in assumed rates of
return, particularly since 2009.
Figure M plots the average asset allocation of 96 funds in the
Public Fund Survey since its inception. For the first time in
several years, the average allocation to equities grew, to just
above 50 percent, while Fixed Income declined to below 24 percent,
its lowest allocation ever. Real Estate continued to increase, now
above 7 percent, while allocations to Alternatives, which is
composed primarily of private equity and hedge funds, held steady at
around 15 percent.
Appendix A and B are accessible via the Report Selection page to registered users of the Public
Survey. Access these appendices by logging in via the
- Appendix A presents a listing of systems in the survey,
including their market value of assets and membership counts.
- Appendix B presents a listing of plans in the survey,
including their actuarial value of assets and liabilities and