Funding levels for state and local pension plans throughout last year was nearly unchanged, having risen from 73 percent in 2014 to 74 percent in 2015, according to a report released by the Center for Retirement Research at Boston College.
Funding declined slightly, however, when assets are valued per the new accounting rules of the Governmental Accounting Standards Board.
If public pension plans meet their assumed expected returns over the next four years, plans should be 78 percent funded by 2020, the report found. Funds are highly sensitive to investment performance.
Across the country, many public pension funds have been recasting investment priorities as cash flows turn negative, meaning funds pay out more in benefits than they collect from contributions and investment income, a repercussion of more baby boomers retiring. Adding to the challenges, most retirement systems are underfunded, and investment returns have been choppy.
Pension plans on average assume a nominal return of 7.6 percent on their total portfolios and nominal stock returns of 9.6 percent.
Returns this year will likely be much lower.