WASHINGTON -- The funding ratio of pension assets-to-liabilities fell to 74% percent last year from 77% in 2014 for 131 state-sponsored defined benefit retirement systems, according to an annual report released Tuesday by Wilshire Consulting.
In its 2016 Report on State Retirement Systems: Funding Levels and Asset Allocation, Santa Monica, Calif.-based Wilshire Consulting reported that, of the 98 state systems that reported actuarial data on or after June 30, pension assets grew by 0.4 percent to $2.14 trillion last year from $2.13 trillion in 2014. Liabilities grew to $2.94 trillion from $2.82 trillion over the same time period, an increase of 4.3%. The aggregate shortfall for those systems increased to $802.3 billion in 2015 from $687.6 billion in 2014.
The remaining 33 systems reported findings prior to June 30.
"Despite relatively strong performance from U.S. stocks in the fiscal year … an increase in U.S. interest rates in the second quarter of 2015 combined with a stronger U.S. dollar to dampen performance of fixed income and non-U.S. dollar investments for fiscal 2015," said Russ Walker, vice president of Wilshire Consulting and a member of the firm's Investment Research Group. "This resulted in pension liabilities outgrowing pension assets over the fiscal year."
The report, using data from the most recent financial and actuarial reports released by the retirement systems sponsored by states and the District of Columbia, found that 92 percent of 98 systems reporting on or after June 30 were underfunded, a rise from 88 percent in 2014, with the average underfunded plan holding a ratio of assets-to-liabilities equal to 73 percent.
Using a time frame of 10 years or more, Wilshire forecasted a median plan return equal to 6.24 percent per annum, which would be 1.26 percentage points below the median actuarial interest rate assumption. Under a 30-year asset class assumption, the median estimated return would be 8.3 percent, the firm predicted.
Wilshire Consulting, the investment advisory business and outsourced-CIO business unit of financial services farm Wilshire Associates, Inc., provides consulting and retirement services for roughly 49 million Americans. Tuesday's report marks its 20th annual state retirement systems report.
