Public Pensions Making Slow Progress

State and local government employers are paying a larger share of required contributions, an analysis finds.

The funded status of public pensions has increased from 73% in 2014 to 74% in 2015, according to a new issue brief from the Center for State and Local Government Excellence, “The Funding of State and Local Pensions: 2015-2020.”

The analysis by Alicia H. Munnell and Jean-Pierre Aubry finds one reason for the improvement is that plan sponsors paid a greater share of their actuarially determined employer contribution (ADEC), even though that contribution has increased as a percentage of payroll. Employers paid 91% of their required contribution in 2015 compared with 86% in 2014.

The growth in the rate of pension liabilities remains low, reflecting benefit cutbacks that have been made in recent years. The issue brief authors project that plans will be 78% funded by 2020 if their portfolio achieves its assumed rate of return. If returns are lower, funding will drift lower.

While most pension plans are making slow, steady progress, and 38% are more than 80% funded, 20% of the plans are less than 60% funded, the report notes.

The analysis is based on the 160 largest state and local pension plans in The full Issue Brief can be downloaded from here.