NCPERS Study Shows Public Pensions Produced Strong 2018 Returns As They Tightened Assumptions


Fueled by strong investment returns, public retirement systems continued to strengthen their funding levels and fine-tune their assumptions, according to an annual study by the National Conference on Public Employee Retirement Systems.

The 2018 NCPERS Public Retirement Systems Study underscores the success of efforts by pension trustees, managers, and administrators to make steady improvements that enhance the sustainability of pension funds, said Hank H. Kim, executive director and chief counsel of NCPERS.

The nations public pension systems are constantly adapting plan designs and assumptions to strengthen their ability to provide a secure retirement for millions of retired public servants, Kim said. Pension fund results improved in 2018 even as they became more conservative in their assumptions.

The 2018 study draws on responses from 167 state and local government pension funds with more than 18.7 million active and retired memberships, actuarial assets exceeding $2.5 trillion and market assets exceeding $2.6 trillion. The majority62 percentwere local pension funds, while 38 percent were state-wide pension funds. NCPERS conducted the eighth annual study in September through December 2018 in partnership with Cobalt Community Research.

Fifty-nine percent of the 2018 study participants, or 98 pension systems, also completed the study in 2017, in effect serving as a control group that provides particularly valuable comparisons.

The average funded level for all funds studied rose to 72.6 percent, from 71.4 percent in 2017. For funds that participated two years in a row, the average funded level jumped more than three points, to 72.2 percent. Fitch Ratings considers a funded-level target of 70 percent to be adequate.

An interactive version of the study is available to NCPERS members at no cost. This dashboard enables public pension funds to build their own comparisons and peer groups in order to analyze their performance, assumptions, and expenses.

Among the other key findings:

  • One-year investment returns averaged 13.4 percent for all plans reporting in 2018, well above the 7.8 percent return reported in 2017. The five- and 10-year returns were also higher, and the 20-year returned averaged 7.2 percent.
  • The average annual investment return assumption fell to 7.34 percent in 2018, versus 7.49 percent in 2017. In all, 65 percent of funds that responded to the 2018 study had reduced their assumptions, and 18 percent were considering doing so.
  • In addition to reducing their investment return assumptions, pension funds used more conservative amortization periodsa calculation of the period of time over which pensions liabilities must be funded. Pension funds participating in the survey shortened their amortization periods to an average of 22.4 years in 2018, down from 23.8 years in 2017.
  • Contribution rates to pension funds remain stable. Among study respondents who participated two years in a row, employer contribution rates edged down to 20 percent of payroll in 2018, from 21 percent in 2017. Employee contribution rates were unchanged.
  • Public pension funds remained cost-effective in 2018. The control group of funds that took part in the study two years in a row reported average expenses of 0.6 percent of assets, or 60 basis points. Average expenses also clocked in at 60 basis points for all study participants, up from 55 basis points a year earlier. For comparison, the average expenses for mutual funds are 59 basis points for an equity fund and 70 basis points for a hybrid (mixed equity/bond) fund, according to the Investment Company Institute.
  • In 2018, 46 percent of study participants offered a health plan or subsidy, up from 40 percent in 2017.


The National Conference on Public Employee Retirement Systems (NCPERS) is the largest trade association for public sector pension funds, representing more than 500 funds throughout the United States and Canada. It is a unique non-profit network of public trustees, administrators, public officials and investment professionals who collectively manage more than $3.5 trillion in pension assets. Founded in 1941, NCPERS is the principal trade association working to promote and protect pensions by focusing on advocacy, research and education for the benefit of public sector pension stakeholders.

Debra Cope
[email protected]

Nick Peters
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(323) 646-2651 (mobile)