The 1995 PPCC survey of pension plans: a healthy report.

• Author: Zorn, Paul
• Position: Includes related articles on Public Pension Coordinating Council and on analysis of PPCC data

Public-sector pension plans continued to improve their funded status in 1994 despite the downturn in financial markets, according to a 1995 survey of state and local government employee retirement systems conducted by the Public Pension Coordinating Council (PPCC). The survey was conducted in the summer of 1995 in order to obtain detailed information about the current practices of public employee retirement systems related to their administration, benefits, actuarial valuations, plan funding, employer and employee contributions, and investments.

The survey collects data for the prior fiscal year (i.e., the most recent year for which accurate data are available). The major findings of the 1995 survey, when compared to the 1993 survey, indicate that state and local retirement systems, in aggregate, are generally well-funded and that their financial health continued to improve between 1992 and 1994. Benefit formulas have remained stable, and there were only slight changes in actuarial assumptions. In addition, there were continued shifts away from domestic fixed-income securities toward domestic equities and international investments. Of all the changes shown in the survey, however, the most dramatic was the fall in investment return from an average annual rate of 9.29 percent in 1992 to 1.96 percent in 1994. This fall does not reflect a misallocation of assets but rather the significant downturn in investment markets that occurred in 1994. For the most part, these markets rebounded in 1995.

Survey Response

The PPCC's 1995 survey respondents reflect a large and diverse group of public employee retirement systems in the United States, representing systems of all sizes, geographic regions, types of covered employees, and administering jurisdictions. The council received responses from 309 retirement systems with a total of 457 plans covering 10.9 million active members and holding $960 billion in assets. These respondents represent 83 percent of all active state and local plan members in the U.S. and 82 percent of plan assets.

Exhibit 1 shows the distribution of respondent systems by geographic region and by membership size and indicates a fairly even distribution of the respondents across geographic regions. Approximately 40 percent of the respondent systems had less than 1,000 active members, while only 11 percent had more than 100,000 active members. It should be noted, however, that 70 percent of active members are covered by these large systems.

System Administration

State and local retirement systems exist within an administrative framework that is structured by state and local laws and typically are overseen by retirement boards made up of elected, appointed, and ex-officio board members. Retirement boards often have substantial authority over the system and usually are involved in decisions regarding investment policy, actuarial assumptions, and benefit provision. Almost half of the respondent systems had between five and eight retirement board members, and more than one-fourth had between nine and 11 board members. A typical board consisted of eight members, of whom three were elected by members, three were appointed,and two served in an ex-officio capacity. There was almost no change in the size of the boards between 1992 and 1994.

The daily activities of the system usually are directed by a chief administrative officer and carried out by system staff, with the number of staff varying by size of system. Small systems (i.e., those with fewer than 1,000 active members) had staffs averaging about three full-time-equivalent employees, while systems with 100,000 or more active members had an average staff of about 220. Staff sizes fluctuated somewhat between 1992 and 1994 but generally did not change significantly.

Public retirement system administrators are, in general, modestly paid officials. The annual pay for the system's highest paid official (usually the chief administrative officer) was less than $70,000 for half of the systems and $90,000 or more for only about one-sixth. Annual pay appears to have improved somewhat between 1992 and 1994, however. Of the systems providing data for both years, the percentage...