Public pension funding is extremely sensitive to investment returns, according to a study by the Center for Retirement Research at Boston College.
To determine the sensitivity of pension funding to investment returns, the analysis projected funded ratios through 2042 for large public plans using a stochastic (variable) model of year-to-year returns; and a median real return of 4.45 percent, the average used by plans in 2012.
In 2012, the nominal, long-term return assumption used by state and local pension plans averaged 7.75 percent. While the nominal rate of return usually receives the most scrutiny, the assumed real return — the nominal return minus the assumed rate of inflation — is of primary importance, the report's authors found.
Complete your profile to continue reading and get FREE access to BenefitsPRO, part of your ALM digital membership.
Your access to unlimited BenefitsPRO content isn’t changing.
Once you are an ALM digital member, you’ll receive:
- Critical BenefitsPRO information including cutting edge post-reform success strategies, access to educational webcasts and videos, resources from industry leaders, and informative Newsletters.
- Exclusive discounts on ALM, BenefitsPRO magazine and BenefitsPRO.com events
- Access to other award-winning ALM websites including ThinkAdvisor.com and Law.com
Already have an account? Sign In
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
