A Growing Gap Between Healthier and Worse Off Pension Plans

The gap has widened substantially between the best-off and worst-off pension plans.

The gap has widened substantially between the best-off and worst-off pension plans. Shutterstock

 

Connecting state and local government leaders

New research offers a dim assessment of some of the most poorly funded state and local public retirement systems.

There's a growing gap between some of the nation's best and worst funded pension plans for state and local government employees, according to a report out this week.

Researchers with the Center for State and Local Government Excellence looked at data for the 180 plans in what's known as the Public Plans Database. They found that the overall funding level for these plans, as of 2017, was 72 percent, similar to the prior year.

But they also went a step further and broke the plans into three equal-sized clusters based on their funded ratios in 2017. (This ratio provides a measure of how well a fund's assets stack up against its obligations.)

Funded-ratios ranged from 81 to 111 percent for the healthiest group, 68 to 80 percent for the middle group, and 16 to 67 percent for the most troubled plans. The average funded ratios for the three groups last year were 90 percent for the top group, 73 percent for the middle group, and 55 percent for the least healthy group.

This in itself is not that surprising—the worst-funded pensions had the worst average funded ratios.

Flashback to 2001 though, and do the same analysis, and the average funding ratios for the plans that fell into the same clusters during that year were: 110 percent, 100 percent and 90 percent.

In other words, the gap has widened substantially between the cluster of best-off and worst-off plans.

"Generalizations often are made about all public plans as if they were monolithic, but they are not," said Joshua Franzel, president and CEO of the Center for State and Local Government Excellence.

The report notes that much of the divergence between the different groups of plans has occurred since the financial crisis that unfolded in 2008 and that "the worst-funded group has continued to deteriorate while the other two groups have stabilized."

What's driving this trend? The researchers look at three possibilities: benefit costs, contributions to the plans, and investment returns.

They find that costs are similar among the three groups. But they also conclude that contributions and investment returns lagged among the worst-funded plans, compared to the healthier pension systems.

Examples of plans that had funded-ratios that fell between 16 and 67 percent in 2017, according to figures in the Public Plans Database include: Kentucky's state employee retirement system (16.3 percent), a New Jersey pension plan for teachers (42.1 percent), and Illinois teacher pension system (40.2 percent).

The report notes ominously in its conclusion that the nation's "worst-off plans will likely require intervention beyond traditional reforms to change the trajectory of their funded status."

Bill Lucia is a Senior Reporter for Government Executive's Route Fifty and is based in Washington, D.C.

NEXT STORY: Estimating How Many Jobs the Trade Deficit With China Has Cost the U.S.

X
This website uses cookies to enhance user experience and to analyze performance and traffic on our website. We also share information about your use of our site with our social media, advertising and analytics partners. Learn More / Do Not Sell My Personal Information
Accept Cookies
X
Cookie Preferences Cookie List

Do Not Sell My Personal Information

When you visit our website, we store cookies on your browser to collect information. The information collected might relate to you, your preferences or your device, and is mostly used to make the site work as you expect it to and to provide a more personalized web experience. However, you can choose not to allow certain types of cookies, which may impact your experience of the site and the services we are able to offer. Click on the different category headings to find out more and change our default settings according to your preference. You cannot opt-out of our First Party Strictly Necessary Cookies as they are deployed in order to ensure the proper functioning of our website (such as prompting the cookie banner and remembering your settings, to log into your account, to redirect you when you log out, etc.). For more information about the First and Third Party Cookies used please follow this link.

Allow All Cookies

Manage Consent Preferences

Strictly Necessary Cookies - Always Active

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Sale of Personal Data, Targeting & Social Media Cookies

Under the California Consumer Privacy Act, you have the right to opt-out of the sale of your personal information to third parties. These cookies collect information for analytics and to personalize your experience with targeted ads. You may exercise your right to opt out of the sale of personal information by using this toggle switch. If you opt out we will not be able to offer you personalised ads and will not hand over your personal information to any third parties. Additionally, you may contact our legal department for further clarification about your rights as a California consumer by using this Exercise My Rights link

If you have enabled privacy controls on your browser (such as a plugin), we have to take that as a valid request to opt-out. Therefore we would not be able to track your activity through the web. This may affect our ability to personalize ads according to your preferences.

Targeting cookies may be set through our site by our advertising partners. They may be used by those companies to build a profile of your interests and show you relevant adverts on other sites. They do not store directly personal information, but are based on uniquely identifying your browser and internet device. If you do not allow these cookies, you will experience less targeted advertising.

Social media cookies are set by a range of social media services that we have added to the site to enable you to share our content with your friends and networks. They are capable of tracking your browser across other sites and building up a profile of your interests. This may impact the content and messages you see on other websites you visit. If you do not allow these cookies you may not be able to use or see these sharing tools.

If you want to opt out of all of our lead reports and lists, please submit a privacy request at our Do Not Sell page.

Save Settings
Cookie Preferences Cookie List

Cookie List

A cookie is a small piece of data (text file) that a website – when visited by a user – asks your browser to store on your device in order to remember information about you, such as your language preference or login information. Those cookies are set by us and called first-party cookies. We also use third-party cookies – which are cookies from a domain different than the domain of the website you are visiting – for our advertising and marketing efforts. More specifically, we use cookies and other tracking technologies for the following purposes:

Strictly Necessary Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Functional Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Performance Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Sale of Personal Data

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.

Social Media Cookies

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.

Targeting Cookies

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.