Wilshire Consulting Reports 72.2 Percent Funding Ratio for State-Sponsored Defined Benefit Retirement Systems

The funding ratio of state pension plans rose 1.7 percentage points to 72.2 percent in fiscal year 2018, according to Wilshire Consulting, the institutional investment advisory and outsourced chief investment officer (OCIO) business unit of Wilshire Associates Incorporated (Wilshire), a diversified global financial services firm. The funded ratio at the beginning of the year was 70.5 percent, and this years rise marks two consecutive years of aggregate funded ratio increases.

The 2019 Wilshire Consulting Report on State Retirement Systems: Funding Levels and Asset Allocation is based upon data gathered by Wilshire Consulting from the most recent financial and actuarial reports issued by 134 retirement systems sponsored by the 50 states and the District of Columbia. Of the 134 systems studied, 106 systems reported actuarial values on or after June 30, 2018 and the remaining 28 systems last reported prior to that date. It is Wilshire Consultings 23rd report on the funding of state retirement systems.

Benefit accruals and interest cost decreased the funded ratio by nearly six percentage points, but this was more than offset by total contributions and asset returns, which increased the funded ratio by over nine percentage points, noted Ned McGuire, managing director and a member of the Pension Risk Solutions Group of Wilshire Consulting. The biggest year-over-year change has been the increase in plans with funded ratios between 70 and 80 percent.

Assets vs. Liabilities

According to the report, pension assets grew by close to 6 percent to reach $3,088 billion from $2,918 billion in 2017, while the aggregate Total Pension Liability (TPL) increased more than 3 percent to $4,278 billion from $4,141 billion in 2017.

Despite the increase in aggregate TPL, the aggregate shortfall is estimated to have decreased by $33 billion to $1,190 billion from $1,223. This decline in the aggregate shortfall is the result of the nearly six percentage point increase in aggregate assets to $3,088 billion from $2,918 billion.

Discount Rates

Discount rates have trended lower over the past several years. This trend continued this year as nearly half of the plans studied lowered their discount rate. The range for discount rates in 2018 was 3.95% to 8.00% with a median of 7.25%, which is the same as last year.

Asset Allocation

Asset allocation varies greatly by retirement system. In aggregate, state pension plans had allocations to equity, including private equity, equal to 57.8% in 2018. Allocations to fixed income were equal to 23.7%, with the remaining 18.5% allocated to real assets, alternatives and cash.

Over the past ten years, the total allocation to equity has declined by nearly five percentage points. Interestingly, the allocation to private equity has increased by over four and a half percentage points with the allocation to U.S. Equity declining by nearly nine percentage points. The other significant change has been the increased allocation to total real assets such as real estate.


Financial data on public retirement systems historically have lacked the timeliness and uniform disclosure governing pension plans sponsored by publicly traded companies, making it difficult to conclude a study with data that are both current and consistent across systems. For this reason, our study methodology involves collecting data during the first one and a half months of each calendar year with the objective of acquiring as many reports as possible with a June 30 valuation date from the previous year. Even for systems with the desire to report in a timely manner, it often takes six months to a year for actuaries to determine liability values.

This study reports on the aggregate Total Pension Liability values used for financial reporting under the accounting and financial reporting standards for state and local governments: Governmental Accounting Standards Board Statements No. 67 and 68 (GASB 67/68). Through these Statements, GASB and the financial industry have taken major steps to increase transparency and comparability of pension plan accounting. GASBs Statement 67, Financial Reporting for Pension Plans, impacts the annual pension reporting for plans as of June 2014; Statement 68, Accounting and Financial Reporting for Pensions, impacts the annual pension reporting for the employers contributing into government agency-sponsored pensions, and applies to employers financial reporting starting in June 2015.

About Wilshire Consulting

Through its investment consulting services to public and corporate clients, Wilshire Consulting assists in ensuring secure and safe retirements for millions of Americans including those participating in some of the nations largest public and corporate retirement plans. Combined with its endowment, foundation and major insurance company clients, it consults on combined total assets of nearly $1 trillion.

As the institutional investment advisory and outsourced chief investment officer business unit of Wilshire Associates, Wilshire Consulting has provided custom investment consulting solutions to plan sponsors for 35 years. Wilshire consultants provide strategic advice on critical strategic advice including asset allocation, risk management, investment policy development, asset class structuring, investment manager evaluation and monitoring, and actuarial services.

Wilshire Consultings OCIO practice offers clients a holistic option that is built on our culture of risk management and our expertise in all areas of investment strategy. Wilshire Consulting’s customized OCIO services include full discretionary services or implemented services where plans outsource their back office.

Built on Wilshire Associates foundation in investment analytics, Wilshire Consulting offers clients access to and use of innovative and proprietary risk management consulting, which provides us a meaningful competitive advantage. Consulting clients can benefit from ex-ante, forwarding looking risk analysis at the manager, asset class and total fund levels. Wilshires global footprint and firm wide expertise in hedge funds, alternative risk premia and private markets allows our clients to effectively consider adding, expanding or modifying an alternatives investment program. Follow Wilshire Consulting on Twitter: @WilshireConsult.

About Wilshire Associates

Wilshire Associates, a leading global financial services firm, provides consulting services, analytics solutions and customized investment solutions to plan sponsors, investment managers and financial intermediaries. Its business units include, Wilshire Analytics, Wilshire Consulting, Wilshire Funds Management and Wilshire Private Markets. The firm was founded in 1972, providing revolutionary technology and acting as an early innovator in the application of investment analytics and research to investment managers in the institutional marketplace. Wilshire also is credited with helping to develop the field of quantitative investment analysis that uses mathematical tools to analyze market risks. All other business units evolved from Wilshires strong analytics foundation. Wilshire developed the Wilshire 5000 Total Market Index and became an early innovator in creating integrated asset/liability analysis/simulation models as well as practical models in risk budgeting through beta and active risk analysis. Wilshire has grown to a firm of approximately 275 employees serving the needs of investors around the world. Based in Santa Monica, California, Wilshire provides services to clients in more than 20 countries representing more than 500 organizations with assets totalling approximately US $8 trillion.* With ten offices worldwide, Wilshire Associates and its affiliates are dedicated to providing clients with the highest quality counsel, products and services. Wilshire and Wilshire 5000 are registered service marks of Wilshire Associates Incorporated. Wilshire 5000 Total Market Index„  is a service mark of Wilshire Associates Incorporated.

Please visit www.wilshire.com Twitter: @WilshireAssoc

*Client assets are as represented by Pensions & Investments (P&I), detailed in P&Is Largest Retirement Funds and P&Is Largest Money Managers (U.S. institutional tax-exempt assets) as of 9/30/17 and 12/31/17, and published 2/5/18 and 5/28/18, respectively. The data in this release are copyrighted and owned by Wilshire Associates Incorporated.

Prosek Partners
Tess Rodriguez
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