Public retirement systems saw their investment management expenses drop significantly in fiscal 2023 from the prior year, reaching a four-year low, according to an annual study by the National Conference on Public Employee Retirement Systems.

In fiscal 2023, surveyed retirement systems averaged investment management expenses of 39 basis points, down from 49 basis points the year before, while administrative expenses remained steady, according to the study.

A Feb. 12 news release revealing the results of the study said the four-year low in investment expenses suggests a “return to normalcy from the pandemic.”

Also, 63% of surveyed respondents said they received their full actuarially determined contribution in fiscal 2023, up from 57% in fiscal 2022. Among those plans that received their full contributions, there was an average funding ratio of 79%, while those who failed to receive the full contributions posted an average funding ratio of 59%.

The average funding ratio among all survey respondents was 75.4%, down from 77.8% the year before.

“Through strong governance and oversight practices, public pensions have cut costs while continuing to efficiently deliver retirement benefits to teachers, first responders and other public servants across the country,” said Hank Kim, NCPERS’ executive director and counsel, in the news release.

“Investment returns make up the vast majority of public pensions’ revenue, but it’s crucial that state and local governments prioritize making their full actuarially determined contributions each year to support funds’ long-term health and ultimately reduce the costs to taxpayers over time,” he said.

The average assumed rate of return for fiscal 2023 rose slightly to 6.91% from 6.86% the year before. That latter number represented a decrease from the average assumed rate of return of 7.07% for fiscal 2021. According to the report based on the study, plans that responded to both the fiscal 2023 and fiscal 2022 survey reported similar assumptions.

When asked about the role of ESG factors in their investment decisions, about 46% of respondents said those factors were somewhat or very important in fiscal 2023, down from 54% the previous year.

NCPERS is the largest trade association for public-sector pension funds, representing more than 500 funds throughout the U.S. and Canada with about $4 trillion in pension assets collectively.

Of the 157 state and local pension systems that responded to a survey between September and December on which the annual study is based, 52% were local systems and the rest were state systems, with a combined 13.8 million participants and more than $2.3 trillion in assets.

The 2024 NCPERS Public Retirement Systems Study, conducted with Cobalt Community Research, covered the most recent fiscal year for each plan surveyed. The study is available on NCPERS’ website.