The period between 2009 and 2014 marked the greatest period of change in the history of public pensions, according to a new report from the National Association of State Retirement Administrators (NASRA), “Significant Reforms to State Retirement Systems.”
Following the Great Recession of 2008, nearly every state reduced benefits, increased employee contributions, or both. Most of the reforms transferred a higher share of the risk associated with providing retirement benefits from the state or local government to its employees. A number of states employed self-adjusting features that did not require legislative changes but nevertheless altered financing and benefit levels. In some cases, these automatic adjustments were more significant than legislative pension reforms.
Thirty-six states increased the amount that employees are required to contribute to the pension plan, and 29 states increased length-of-service eligibility requirements for full retirement benefits, which typically took the form of an increase in age, years of employment, or a combination of both to qualify for retirement.
As the report notes, “The global stock market crash sharply reduced state and local pension fund asset values, from $3.2 trillion at the end of 2007 to $2.1 trillion in March 2009, and due to this loss, pension costs increased. While a few states retirement plans prior to the recent reforms did not have mandatory employee pension contributions, nearly all now have this requirement. Generally, plans that were more poorly funded enacted reforms that were more comprehensive than states that were well funded.”
The full report, which details changes in all 50 states, can be downloaded here.