The Funding of State and Local Pensions: 2012-2016

 In

As public pension plans continue to smooth in the losses from the 2008 stock market downturn, a decline in their funded status is to be expected. This brief examines changes in state and local pension plans’ funded status in 2012, offers projected funded ratios for 2013 through 2016, and tackles the road ahead as public pension plans calculate their assets and liabilities in 2014 according to new accounting standards issued by the Governmental Accounting Standards Board (GASB). Key findings include:

  • During 2012, using current GASB standards, the funded status of public plans declined slightly, from 75 to 73 percent.
  • Going forward, the funded ratio is projected to gradually move above 80 percent, assuming a healthy stock market.
  • The Annual Required Contribution (ARC) increased significantly over the last three years due to higher unfunded liabilities related to the financial crisis.
  • In 2012, employers contributed 80 percent of the ARC owed.

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