FOR IMMEDIATE RELEASE
NEW RESEARCH EXAMINES FUNDED RATIO OF STATE & LOCAL PUBLIC PENSION PLANS
Top Third of Public Pension Plans Have 90 Percent Funded Ratio While Bottom Third at 55 Percent
WASHINGTON, D.C., October 23, 2018 – A new analysis of the 2017 funded ratios of public pension plans finds the average funded status remained steady under the traditional Government Accounting Standard Board (GASB) guidelines – at 72 percent, which is largely unchanged from the past several years. However, separating the public pension plans into three groups by their 2017 funded status makes clear that underlying trends are not uniform.
The research finds that:
• The top third of plans now have an average funded ratio of 90 percent and should remain on track with continued maintenance.
• The average funded ratio for the middle third of plans has remained relatively steady at about 70 percent since the financial crisis. These plans can improve by adopting more stringent funding methods.
• The average funded ratio for the bottom third of plans is currently 55 percent and has continued to decline in the wake of the 2008-9 financial crisis. These plans likely will require intervention beyond the traditional reforms to change the trajectory of their funded status.
These findings are contained in a new brief from the Center for State and Local Government Excellence (SLGE) and the Boston College Center for Retirement Research (CRR), Stability in Overall Pension Plan Funding Masks A Growing Divide. The research is available here.
“Public pensions plans often are ‘clumped together’ when the funding status is described in policy discussions and covered by the news media,” says Joshua M. Franzel, PhD, president and CEO of SLGE. “Generalizations often are made about all public plans as if they were monolithic, but they are not. The data indicate that state and local plans are not in the same fiscal position, do not face the same challenges, and do not have the same funding histories,” Franzel explained.
Looking forward to 2018, the research indicates that the funded levels for plans likely will increase from 2017 levels due to the relatively strong market performance from July 2017 to June 2018. However, the possibility of a market downturn threatens and, if it occurs, could set back plan funding.
This research was conducted by CRR researchers Jean-Pierre Aubry, associate director of state and local research , Caroline V. Crawford, assistant director of state and local research, and Kevin Wandrei, research associate.
The Center for State and Local Government Excellence (SLGE) helps local and state governments become knowledgeable and competitive employers so they can attract and retain a talented and committed workforce. SLGE identifies leading practices and conducts research on public retirement plans, health care benefits, workforce demographics and skill set needs, and labor force development. SLGE brings state and local leaders together with respected researchers. Access all SLGE publications and sign up for its newsletter at slge.org and follow @4govtexcellence on Twitter.
Center for State and Local Government Excellence | 202.256.1445 | [email protected] | @4GovtExcellence