Public Pension Plan Reforms Help Improve Finances, Still Provide Retirement Security for Workers


Summary:

These fact sheets update the case studies in Strengthening State and Local Government Finances: Lessons for Negotiating Public Pension Plan Reforms (September 2011). Governments include Iowa, Oregon, Vermont, Gwinnett County (GA), and Houston (TX). (6/21/12) Denver (CO) added 8/16/13.

Author(s):
Center staff led by Danielle Miller Wagner
Publication date:
6/21/12
Filed under:
Fact Sheets
Key findings:
  • Iowa: Reduced its normal costs and unfunded liabilities through strong investment performance, increased contributions, changed projected benefits, among other actions. The amortization period has decreased from infinity to 34 years.
  • Oregon: Reduced the annual employer costs for unfunded liabilities to 16.3 percent of payroll. Without reform, employer contribution rates would have been 32 percent for all pension plans combined. Since 2008, its funding ratio has continued to improve.
  • Vermont: Adopted a more conservative approach for assumed investment returns.
  • Gwinnett County: Added new investment options for DC plan members.
  • Houston: While the plan’s funded ratio has declined since 2008, the city expects to pay its full actuarially required contribution by 2015.
  • Denver: Began reforms in 2004, lowering the formula multiplier, and in 2011, creating a second tier of benefits for new hires. While the plan's funded ratio has declined since 2008, the goal is to achieve 100 percent funding by earning assumed rate of return long-term; prudently managing liabilities; and consistently paying the ARC.
Download publication:
12-239 CSLGE Pension Fact Sheet-Oregon-FINAL 12-239 CSLGE Pension Fact Sheet-Vermont-FINAL 12-239 CSLGE Pension Fact Sheet-Gwinnett County-FINAL 12-239 CSLGE Pension Fact Sheet-Houston 12-239-CSLGE-Pension-Fact-Sheet-Iowa_2012 update 14-097-CSLGE-Pension-Fact-Sheet-Denver-2013

The original report, Strengthening State and Local Government Finances: Lessons for Negotiating Public Pension Plan Reforms (September 2011), examined how Iowa, Oregon, Vermont, Gwinnett County (GA), and Houston (TX) reformed their pension plans to make them more fiscally sustainable while still meeting their obligations to their employees.

Its recommendations included:

  • Pensions should be viewed as part of a broader human resources strategy that can affect recruitment and retention.
  • Policy makers need high quality data and analyses as they consider benefit changes.
  • Strong communication with all stakeholders helps employees, elected officials, and the public understand the need for change.
  • Discipline in funding a plan’s annual required contribution is important to achieve full funding.
  • Workplace financial education will help public employees learn how to build their retirement savings.

Related

Unions Play an Important Role in Pension Reform