Funded Status of Local Pensions Inches Closer to States

While locally administered pension plans account for a smaller number of pension members and assets than state-administered plans do, they nonetheless play an important role in providing retirement security to public employees. Tracking the fiscal health of these local plans administered by cities and counties around the country remains a vital task.

This brief analyzes data from 130 of the country’s larger local jurisdictions to explore how the funded status of local plans compares to that of state plans. Key findings include:

• Since 2001, the aggregate funded status of local pension plans has lagged behind that of state plans;
• Since 2012, however, the gap between state and local funding has been shrinking due to two factors:
  • First, local plans continue to receive more of their required contributions than state plans and are a bit more likely to use stringent funding methods; and
  • Second, in recent years, local plans have earned stronger investment returns than state plans, perhaps partly due to a lower allocation to alternative investments.
• Despite this progress, many local plans — like their state counterparts — still face significant funding challenges.