State Pension Funding Improves For First Time in Six Years

State pension plans have improved their collective funding ratios for the first time since 2007, according to 2013 data.

From Bloomberg:

The median state system last year had 69.3 percent of the assets needed to meet promised benefits, up from 68.7 percent in 2012, according to data compiled by Bloomberg. It was the first increase since the start of the 18-month recession that ravaged retirement assets and led some officials to skip payments as tax revenue sank. Illinois and New Jersey, with the weakest state credit ratings, saw funding levels set new lows for the period.

Buoyed as the Standard & Poor’s 500 index set record highs, the nation’s 100 largest public pensions earned about $448 billion in 2013, the most in at least five years, Census data show. At the same time, governments added a record $95 billion to their plans as they socked away rebounding tax revenue toward obligations to retirees.

“States are playing catch-up — you see more discipline and more public acknowledgment that plans have got to make the required payment every year,” said Eileen Norcross, senior research fellow at George Mason University’s Mercatus Center in Arlington, Virginia.

[…]

The Bloomberg data for 2013, the latest available, underscore the findings in a June report from S&P that said funding levels “have likely bottomed out” and are poised to improve along with climbing stocks.

The S&P 500 index (SPX) rose almost 30 percent last year, the most since 1997, propping up the pensions as the Federal Reserve’s policy of keeping its benchmark interest rate close to zero suppresses debt yields.

But not all states got healthier. The funding statuses of pensions in Illinois and New Jersey have deteriorated further.

Illinois’ funding status dropped from 40.4 percent in 2012 to 39.3 percent in 2013.

New Jersey’s ratio fell from 67.5 percent in 2012 to 64.5 percent in 2013, according to Bloomberg data.

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