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Public Pensions’ Assets Growing, but Liabilities Still Higher

The Board of Governors of the Federal Reserve in its latest quarterly report about U.S. financial accounts, provides information on how state and local government defined benefit and defined contribution funds — 403(b) and 457 funds — fared from a variety of perspectives during the fourth quarter of 2015. The report, “Financial Accounts of the United States: Flow of Funds, Balance Sheets and Integrated Macroeconomic Accounts, Fourth Quarter 2015,” was issued on March 10.

Total financial assets of state and local government DB funds have grown consistently since 2011. By the fourth quarter of 2015, state and local governments’ DB plans had amassed a total of $5.162 trillion.

State and local government DB funds’ collective liabilities also have been growing, however. That figure stood at $4.604 trillion in 2011, and $5.308 trillion last year.

These governments’ DC plan assets have not enjoyed the steady progress that their DB plans have. Their DC plan assets grew from 2011 to 2013, but have been falling since then. After hitting a collective high of $504.9 billion in 2013, their DC plans had $478.4 billion by the fourth quarter of 2015.

The report also sheds light on how state and local government DB and DC funds are invested. The investments included the following in 2015:

Corporate Equities
DB plans: $1.66 trillion
DC plans: $122.1 billion

Debt Securities
DB plans: $728.8 billion
DC plans: $35.8 billion

Mutual Fund Shares
DB plans: $150.1 billion
DC plans: $141.2 billion

Money Market Fund Shares
DB plans: $42.2 billion
DC plans: $400 million

State and local governments have invested more funds in U.S. Treasury securities than have private pension plans. In 2015, state and local governments’ investment in Treasury securities stood at $681.2 billion in the fourth quarter.