State & Local Pensions: An Overview of Funding Issues and Challenges
Retirement security is a key factor in attracting and retaining public sector employees, who generally have accepted more modest wages in exchange for more generous retirement benefits. This primer written for elected officials lays out key facts about public pension plans, how they compare with the private sector, and what kinds of reforms are taking place to restore pension plan health in the wake of the downturn. Key findings include:
- Unfunded liabilities increased from $0.7 trillion in 2009 to $0.9 trillion in 2011; the value of pension assets remains at $2.7 trillion.
- Aggregate funded ratios of pension plans declined from 84 percent in 2008 to 75 percent in 2011 as investment losses have been phased in. Funded ratios are expected to rise to 82 percent by 2015.
- The pace of retirement plan changes increased: 43 states enacted major changes between 2009 and 2011, most commonly to increase employee contributions and/or to establish a less generous tier of benefits for new hires.