Many state and local pension plans have poor funding ratios in varying degrees of severity. That alone would seem challenge enough, but they also face additional stresses courtesy of a variety of economic factors, according to a recent report.
Slowing economic growth worldwide, lower prices for oil and commodities, and a strengthening dollar hurt state and local plans’ investment returns in 2015, says Wilshire Trust Universe Comparison Service. Bloomberg reports that according to Wilshire, last year’s +0.36% investment returns were the worst since before the Great Recession. And they are a dramatic shift: Wilshire says public pensions’ returns were a median of almost 8% for 2013-2015, 7.37% for 2011-2015 and almost 6% for 2005-2015.
Public systems have come to expect returns of 7%-8%, and investment returns below those levels can result in state and local plans turning to government money, Bloomberg says. Not that governments haven’t already been under pressure to help make up for skipped contributions to their pension plans. And further compounding the effect is that the credit ratings of plans that have to result to such funding can suffer.
Much like saying that February on the average is warmer than January, Wilshire does note that state and local plans’ investments did slightly better than private plans’ investments in 2015, which it says had a median loss of 0.37%.
Slowing economic growth worldwide, lower prices for oil and commodities, and a strengthening dollar hurt state and local plans’ investment returns in 2015, says Wilshire Trust Universe Comparison Service. Bloomberg reports that according to Wilshire, last year’s +0.36% investment returns were the worst since before the Great Recession. And they are a dramatic shift: Wilshire says public pensions’ returns were a median of almost 8% for 2013-2015, 7.37% for 2011-2015 and almost 6% for 2005-2015.
Public systems have come to expect returns of 7%-8%, and investment returns below those levels can result in state and local plans turning to government money, Bloomberg says. Not that governments haven’t already been under pressure to help make up for skipped contributions to their pension plans. And further compounding the effect is that the credit ratings of plans that have to result to such funding can suffer.
Much like saying that February on the average is warmer than January, Wilshire does note that state and local plans’ investments did slightly better than private plans’ investments in 2015, which it says had a median loss of 0.37%.
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