Survey Indicates State and Local Retirement Plans in Great Shape.

• Author: Greifer, Nicholas
• Position: Analysis of results of Public Pension Coordinating Council research

A new survey finds that state and local pension systems continue to show financial strength. Retirement systems have a funding ratio of almost 96 percent, and annual pension costs as a percentage of payroll are dropping. This article examines these and other survey results while highlighting the risks that may face pension administrators in the coming years.

In a new survey of public-sector retirement systems, the Public Pension Coordinating Council found that the nation's state and local pension systems remain in strong financial health. While the results vary from jurisdiction to jurisdiction, the general conclusion is that state and local retirement plans have prospered during the unprecedented bull market of the 1990s.

How the Survey Was Conducted. The PENDAT survey was a joint effort of the four associations that comprise the Public Pension Coordinating Council (PPCC): the Government Finance Officers Association; the National Association of State Retirement Administrators; the National Conference on Public Employee Retirement Systems; and the National Council on Teacher Retirement. The GFOA carried out the tasks involved in data collection and analysis in 1999.

In terms of scope, the PPCC survey is considered one of the nation's largest and most comprehensive surveys of public-sector retirement systems. More than 200,000 individual pieces of data reside in the survey database. [1] The data are based largely on fiscal year 1998 information provided by survey respondents. Ninety-one percent of the respondents provide a defined benefit retirement plan [2] as the primary retirement plan.

The PPCC sent the survey to more than 700 pension systems. It received responses from 246 retirement systems, which manage 371 retirement plans. The 246 responding systems serve 85 percent of the 12.8 million active state and local plan members reported by the U.S. Bureau of the Census and hold 77 percent of the $2.3 trillion in state and local retirement system assets (as reported by the Federal Reserve).

The respondents reflected each of the major geographic regions, system-size categories, types of employees, and administrating jurisdictions, suggesting that they are generally representative of state and local systems in the United States. However, smaller systems, which may not have had the resources to complete the detailed survey, had a lower participation rate.

Financial Health Good

One key indicator of retirement system health is the funding ratio. [3] The funding ratio compares the...