Most public pension plans found to be financially sound.

• Position: News & Numbers

Public pension plan administrators are increasingly confident about the sustainability of their funds and their readiness to address future retirement issues, according to a new survey by the National Conference on Public Employee Retirement Systems. The survey concludes that defined benefit public pension plans are the least costly way to ensure retirement security for American workers.

The 2013 NCPERS Public Retirement System Study also shows continuing financial strength for public funds, with continuing improvement in long-term investment returns.

NCPERS surveyed 241 state and local government pension funds with more than 12.4 million active and retired members and with assets exceeding $1.4 trillion. The majority--82 percent--were local pension funds, while 18 percent were state pension funds. The survey used the most current data available on the funds' fiscal conditions and the steps they are taking to ensure fiscal and operational integrity. For the first time, the annual survey also included public pension funds that are not members of NCPERS--39 percent of respondents.

The major findings of the 2013 NCPERS Public Retirement System Study include the following:

* Although the economy remains sluggish and the economic markets are still volatile, public pension plan administrators are increasingly confident about their ability to address future retirement trends and issues. Respondents provided an overall confidence rating of 7.8 on a 10-point scale, up slightly from 7.7 in 2012.

* Despite market declines in recent years, returns on long-term investments continue to rise. Returns on three-year investments were 10 percent, up from 4 percent in 2012; returns on 10-year investments were 7 percent, up from 5 percent in 2012; and returns on 20-year investments remained essentially steady at 8 percent this year, compared to 9 percent in 2012.

* The overall average cost of administering public pension plans and paying investment manager fees decreased significantly--from the 2012 level of 73.1 basis points to 57.3 basis points. (According to the Investment Company Institute, the expenses for most equity and hybrid mutual funds average 77 basis points.)

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