Locally-Administered Pension Plans, 2007-2011
Most pension-related attention in the wake of the financial crisis and ensuing recession has focused on state-administered plans. But cities often administer their own plans, and stories circulate about the perils facing cities such as Chicago, Philadelphia, Providence, and others.
To assess the status of locally-administered plans, this issue brief reports on a survey of 128 locally-administered plans in 43 states. Key findings and observations include:
- 2011 data show that locally-administered pension plans continue to be slightly less funded than state-run plans (72 vs. 76 percent).
- This result is puzzling because local plan sponsors generally pay a larger share of their annual required contribution than state plan sponsors.
- The explanation is that state plans have historically earned higher returns because they invest more in risky assets.
- For mature plans with substantial assets, higher returns more than offset lower contributions.
- During the financial crisis, though, local plans were able to narrow the funding gap because their less risky portfolios fared better.