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A run-up in stocks helped deliver a banner year for America’s public pensions, but the gains won’t be nearly enough to ensure all state and local retirees receive their promised future benefits, the Wall Street Journal reported. Large U.S. systems that oversee retirement funds for police, firefighters, teachers and other public workers earned median returns of 12.4 percent in the fiscal year ended June 30, according to Wilshire Trust Universe Comparison Service. That is their best annual result since 2014. Yet many of these public pensions remain severely underfunded despite the recent gains, meaning they don’t have enough assets on hand to fulfill all promises made to their workers. Estimates of their collective shortfall vary from $1.6 trillion to $4 trillion.

An arbitration panel has awarded a city union pay raises totaling 6.25 percent, even as Hartford's financial problems continue to mount, the Hartford (Conn.) Courant reported yesterday. The Hartford Municipal Employees Association received the raises retroactively as part of a contract that ran from July 2013 to June 2017. The group is now negotiating a new agreement with the city for future years. Former city leaders offered HMEA a 5 percent raise over the course of the contract, while the union sought a 7.5 percent pay increase. Arbitrators ultimately awarded the group 6.25 percent. The group made concessions in other areas — health care and pension contributions rose, and members agreed to eliminate a practice known as "runout," which allowed employees to remain on the books for weeks or months after they departed their city positions. Runout let workers stay on the payroll for the duration of their unused sick and vacation time. During that period, they were able to continue collecting paychecks and benefiting from the city's health insurance plan. The city abolished the practice for nonunion employees in 2013.

Connecticut’s $17 billion teachers’ pension returned an average of 3.2 percentage points less than its 8.5 percent assumed annual rate of return between fiscal 2001 and 2015, the sixth-widest gap among 112 state retirement funds over the period, according to data compiled by the Center for Retirement Research at Boston College. The difference between assumed and actual returns of Connecticut’s municipal employee and state workers’ pensions wasn’t much better, ranking eighth and 15th-widest, respectively, Bloomberg News reported yesterday. “Plans are aiming to hit their assumed return and so when they fall short, there’s something wrong with the system," said Jean-Pierre Aubry, associate director of state and local research at the Center for Retirement Research. “Either someone is telling them to set it too high or the investment manager isn’t hitting his goals." Connecticut’s pensions had less than half the assets needed to pay its $63.7 billion of pension promises, according to the most recent audited figures. In 2015, its retirement system was the fourth-worst among U.S. states behind New Jersey, Kentucky and Illinois, according to data compiled by Bloomberg.

The California Public Employees' Retirement System (CalPERS) on Monday said that it was considering making direct investments in private companies, a potential major shift in strategy that would be the first such action by a U.S. public pension fund, Reuters reported yesterday. The change, discussed at a meeting of CalPERS board in Monterey, would be closely watched by other U.S. public pensions as they look to improve returns on their investments, in part by cutting fees. The $323 billion pension fund, the largest in the country and a trend-setter, has been under increasing pressure to achieve returns closer to the fund's assumed rate of return of 7 percent by 2020. In the fiscal year ended June 30, private-equity investment returned 13.9 percent, the second-best performer behind public equities, or stock portfolio. The asset class helped to boost the fund's total year-end returns to 11.2 percent, exceeding expectations for the first time since 2014.