Public Pension Funding Ratios Still Tumbling

Claire Emory

doi:10.2469/dig.v43.n1.8

The State of Public Pension Funding: Are Government Employee Plans Back on Track?

SSRN Electronic Journal ◽

10.2139/ssrn.3024261 ◽

2015 ◽

Cited By ~ 2

Author(s):

Andrew G. Biggs

Keyword(s):

The State ◽

Public Pension ◽

Government Employee ◽

Pension Funding

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Public pension funding in practice

Journal of Pension Economics and Finance ◽

10.1017/s1474747211000126 ◽

2011 ◽

Vol 10 (2) ◽

pp. 247-268 ◽

Cited By ~ 26

Author(s):

ALICIA H. MUNNELL ◽

JEAN-PIERRE AUBRY ◽

LAURA QUINBY

Keyword(s):

Financial Crisis ◽

Policy Issue ◽

Public Pension ◽

Bottom Line ◽

Pension Funding ◽

Large Numbers ◽

Near Term ◽

State And Local ◽

Private Investors ◽

Funded Status

AbstractPublic pension funding has recently become a front-burner policy issue in the wake of the financial crisis and given the pending retirement of large numbers of baby boomers. This paper examines the current funding of state and local pensions using a sample of 126 plans, estimating an aggregate funded ratio in 2009 of 78% using GASB accounting methods. Projections for 2010–2013 suggest that some continued deterioration is likely. Funded status can vary significantly among plans, and so the paper explores the influence of four types of factors: funding discipline, plan governance, plan characteristics, and the fiscal situation of the state. Judging the long-term health of plans requires more than just a snapshot of assets and liabilities, and so the paper examines how well plans are meeting their Annual Required Contributions and what factors influence whether they make them. The paper also addresses the controversy over what discount rate to use for valuing liabilities, concluding that using a riskless rate of return could help improve funding discipline but would need to be implemented in a manageable way. Finally, the paper assesses whether plans face a near-term liquidity crisis and finds that most have assets on hand to cover benefits over the next 15–20 years. The bottom line is that, like private investors, public plans have been hit hard by the financial crisis and their full recovery is dependent on the rebound of the economy and the stock market.

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The effect of board composition on public sector pension funding

Journal of Public Budgeting Accounting & Financial Management ◽

10.1108/jpbafm-27-03-2015-b003 ◽

2015 ◽

Vol 27 (3) ◽

pp. 352-376 ◽

Cited By ~ 2

Author(s):

Gang Chen ◽

Kenneth Kriz ◽

Carol Ebdon

Keyword(s):

Key Management ◽

Pension System ◽

Pension Plans ◽

Public Pension ◽

Board Composition ◽

Data Set ◽

Pension Funding ◽

Political Appointees ◽

Time Period ◽

Public Pension Plans

Public pension plans in the U.S. are seriously underfunded, especially following the financial market crisis of 2008-2009 which resulted in large investment losses. However, funding levels vary widely across plans. Pension boards of trustees make key management decisions in pension systems and these decisions have significant effects on funded levels, yet our empirical knowledge of board management is limited. This study explores the effect of board composition on pension funding levels. Existing theoretical debates lead to differing expectations, and previous studies have mixed results. Our research uses a panel data set of large public pension plans from 2001-2009. We also collect data for pension board composition from this time period. We find that increasing political appointees and employee members on the board increases the funding performance of the pension system.

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