NEW YORK, Sept. 18 (UPI) -- Overly optimistic assumptions by pension-fund managers could leave U.S. retirement plans with a gap in coverage, an official said.
The median expected investment return for more than 100 U.S. public pension plans is 8 percent, and if the return is less, taxpayers could have to come up with huge additional contributions, The Wall Street Journal reported.
"It's unrealistic," John Bogle, founder of mutual fund giant Vanguard, said of the return assumptions in place at most pension plans.
Pension funds at companies in the Standard & Poor's 500 had a $260 billion shortfall at the end of 2009, and estimates of deficits faced by state and local governments range from $500 billion to $1 trillion, the newspaper said.
Some public retirement plans have reduced their return forecasts. In New York, State Comptroller Thomas DiNapoli said he would reduce the expected rate of return for the nation's third-largest pension system to 7.5 percent, from 8 percent.
The California Public Employees Retirement System, and the California State Teachers Retirement System, the country's two largest plans, were conducting reviews of their projected investment returns.
Many plans have kept the 8 percent return rate for years, and over the past 25 years public pension plans posted a median, annualized return of 9.3 percent. But over the past 10 years the rate of return is just 3.9 percent, the newspaper said.
