State and Local Pension Plans Funding Sputters in FY 2016

[Jean-Pierre Aubry]

The brief’s key findings are:

• In 2016, the funded ratio of state and local pensions declined under both old and new accounting rules.
• This decline reflected steady growth in liabilities and slow growth in assets due to poor stock performance.
• More recently, the revival of the stock market is helping plan assets recover, with funded ratios expected to improve in 2017.
• But, looking further ahead, funding ratios are projected to remain essentially flat due largely to the current approach of calculating required contributions.
• Thus, to achieve more meaningful progress, plans need to establish contribution levels that will actually reduce unfunded liabilities.