State and Loc al Government Pension s in the United … and Loc al Government Pension s in the...
Transcript of State and Loc al Government Pension s in the United … and Loc al Government Pension s in the...
State and Local Government Pensions in the United States
November 7, 2013
Joshua Franzel, PhD Vice President, Research
Center for State and Local Government Excellence Washington, DC
This presentation has been created for general information purposes. It is not intended to give financial or professional advice.
The U.S. State and Local Government Pension Plan Context
! Over 3,400 state and local government public employee retirement systems (2011)
! 14.6 million active members and 8.6 million retirees (2011)
! 83% of state and local workers have access to a defined benefit pension plan
! 32% of state and local workers have access to a defined contribution plan
! ~30% of state and local workers do not participate in Social Security Sources: (1) http://www.bls.gov/ncs/ebs/benefits/2013/ownership/govt/table02a.pdf ; (2) http://www.census.gov/govs/retire/ ; (3) http://www.nasra.org/socialsecurity
Defined Benefit Plan Defined Contribution Plan Choice between plan types Hybrid Plan (DB/DC or Cash Balance)
U.S. State Pension Plan Structures State Employees
PR
Source: National Conference of State Legislatures, Checklist of State Defined Benefit, Defined Contribution and Hybrid Plans for State Employees and Teachers (2012) Note: Some of the structures listed have changed since 2012 (National Association of State Retirement Administrators).
U.S. State and Local Pensions: Assets, trillions
Source: Board of Governors of the Federal Reserve System, Federal Reserve Statistical Release, Financial Accounts of the United States (25/09/13)
U.S. State and Local Pensions: Average Funded Ratio
Source: SLGE and BC-CRR Public Plans Database Note: *preliminary data
U.S. State and Local Pensions: Plan Revenues
Sources: (1) http://www.census.gov/govs/retire/ ; (2) http://www.nasra.org/content.asp?contentid=120 Note: * most recent US Census data available
U.S. State and Local Pensions: Average Asset Allocation
Source: SLGE and BC-CRR Public Plans Database Note: *preliminary data / ** percentages do not total 100% due to rounding
2001** 2011 Alternatives / Other 5% 17% Cash / Short Term 3% 2% Real Estate 5% 7% Fixed Income 32% 24% Equities 55% 50%
U.S. State and Local Pensions: Plan Assets
! 2001-2011: Domestic Equity allocations dropped by 36%; International Equity allocations grew by 32%
! 2001-2011: Domestic Fixed Income allocations decreased by 39% and International Fixed Income allocations decreased by 4%
! 2013: examples of Alternatives / Other - Private Equity; Absolute Return; Commodities; Private Infrastructure; Energy; Timber Strategies; Farmland
Sources: (1) SLGE and BC-CRR Public Plans Database ; (2) National Association of State Retirement Administrators, 2013 Roll Call
Other state funds in the US --- examples
! Ohio Public Employees Retirement System Health Care Plan (established in 1974)
! Alaska Permanent Fund (established in 1976)
! Texas Permanent School Fund (established in 1856)
Ohio Public Employees Retirement System Health Care Plan
! “The primary objective# to secure health care coverage (a discretionary benefit) for eligible Traditional Pension and Combined Plan retirees.” (OPERS website)
! “Largest health care trust fund in the U.S.” with $12.8 billion in assets, as of 31/12/2012 (2012 Summary Annual Financial Report, pg. 2)
! 31/12/2012 Asset Allocation: 52% equities (25% US / 27% Int.); 36% Fixed Income (19% core fixed; 5% emerging market debt; 3.5% TIPS; etc.); 12% Alternatives (6% REIT; 4% Hedge Funds ; etc.)
Sources: (1) https://www.opers.org/investments/health-care/index.shtml ; (2) https://www.opers.org/pubs-archive/investments/inv-plan/2013_Investment_Plan.pdf ; (3) https://www.opers.org/pubs-archive/investments/cafr/2012-PAFR.pdf
Alaska Permanent Fund ! At least a quarter of income from oil and gas royalties is
deposited to fund. Realized income is used for Alaskans’ dividend checks ($900 in 2013), inflation proofing, and other uses determined by the AK Legislature.
! Value: $48.5 billion, as of 28/10/2013 ! Equities ! 28/10/2013 Asset Allocation (from apfc.org): 48% Equities
(13% US; 22% Non US; 13% Global); 17% Bonds (15% US Bonds; 2% Non US Bonds); 17% Alternatives; 10% Real Estate; 7% Real Return/External CIO; 1% Cash
! Assets managed by Alaska Permanent Fund Corporation (quasi-independent state entity)
Sources: (1) http://www.apfc.org/home/Media/publications/2009AlaskansGuide.pdf ; (2) http://www.apfc.org
Texas Permanent School Fund ! “created with a $2,000,000 appropriation by the Texas
Legislature in 1854 expressly for the benefit of the public schools of Texas.” Additional funds have come from the sale [and rental (minerals)] of state lands. (Texas PSF website)
! Value: $25.5 billion, as of 31/08/2013
! 31/08/2013 Asset Allocation: 54% Equities (37% US; 17% Non US); 21% Domestic Fixed Income; 10% Absolute Return; 7% Risk Parity; 3% Real Return; 2% Real Estate; 2% Private Equity; .05% Cash
! Assets managed by The State Board of Education
Sources: (1) http://www.tea.state.tx.us/index4.aspx?id=2147485578 ; (2) http://www.tea.state.tx.us/index4.aspx?id=2147489178&menu_id=2147483695
Challenges and Opportunities: 2013 and Beyond)
! Increasing importance of supplemental, defined contribution, retirement plans and assets
! Public employer costs and contributions ! State and local government retiree
healthcare trusts and assets ! New state and local funds in the U.S.?
For More Information On U.S. State and Local Government Pensions
! Center for State and Local Government Excellence (SLGE)
! National Association of State Retirement Administrators (NASRA)
! National Conference of State Legislatures (NCSL)
! U.S. Census Bureau {Annual Survey of Public Pensions: State and Local Data}
Joshua Franzel, PhD
Vice President, Research Center for State and Local Government Excellence
Washington, DC
This presentation has been created for general information purposes. It is not intended to give financial or professional advice.