Two Studies, One Conclusion: Public Pensions Are Healthy


Not only have public pension plans seen their overall health improve in recent months, they're also outperforming their private-sector counterparts and seeing better than expected returns on investments.

Those were the findings of a pair of recent independent studies reviewing the current condition of state and local pension plans.

According to the non-profit, Washington, D.C.-based National Institute on Retirement Security (NIRS), public pension plans returned an average of 16.0% in 2009. This was three percentage points better than the investment returns for their defined benefit counterparts in the private sector.

"Public pension plans have avoided making drastic moves, largely staying the course through the recent market turmoil, and reaping the rewards of a patient, long-term approach to investing," said the NIRS report titled New Fed Data Sheds Light on Pension Investments.

The figures for this analysis came from the U.S. Federal Reserve's Flow of Funds data for 2009. The Federal Reserve data examines how public and private pension funds invest their assets and how their investment allocations change over time.

NIRS is a research and educational organization which "seeks to encourage the development of public policies that enhance retirement security in America."

Meanwhile, a recent review by the National Association of State Retirement Administrators (NASRA) shows that since 1985, public pension fund returns have actually exceeded expectations – in spite of the three economic downturns during that period. Their report says the median public pension investment return for the 25-year period ended December 31, 2009 was 9.25%, well ahead of the assumed rate of return for 8.0%.

According to the NASRA report: "Although public pension funds, along with other investors, have experienced subpar returns over the past decade, median public pension fund returns over longer periods exceeded the assumed rates used by most plans."

NASRA represents the nation's largest public retirement systems, including NYSTRS. Together, these systems hold more than $2 trillion in assets.

Read the companion article "Public Pension Plans Prove Their Worth."

This article appeared in the Summer 2010 editions of Your Source and Resource.

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