Public Pensions Struggle to Make Required Contributions
The brief, titled, “The Funding of State and Local Pensions 2011-2015,” finds a number of states and localities are having difficulty paying their full annual required contribution (ARC). In 2011, employer contributions equaled 79% of the required payments.
The brief notes there is a wide variation in the funded status of pension plans. While 36% of the 126 state and local pension plans in the sample have a funded ratio of over 80%, a majority of plans have slipped below that level. A few pension plans face serious problems that must be addressed; most are making modest changes that are needed to stabilize employer costs and ensure that pension promises can be kept.
Other key findings in the brief include:
- During 2011, the funded status of public plans slipped slightly from 76% to 75%;
- This decline reflected slow asset growth due to actuarial smoothing, which was partly mitigated by an unexpected reduction in liability growth; and
- Going forward, the funded ratio is projected to remain steady next year and then gradually improve as the market meltdown is phased out of the calculations.
The brief is written by Alicia H. Munnell, Jean-Pierre Aubry, Josh Hurwitz, Madeline Medenica and Laura Quinby of the Center for Retirement Research at Boston College, and can be read in its entirety at: http://slge.org/publications/the-funding-of-state-and-local-pensions-2011-2015