Forensics and the future of a Connecticut pension plan

Abstract

The brief's key findings are: (1) Connecticut's State Employees Retirement System faces a large unfunded liability, despite recent efforts by the State to fund. (2) A significant source of the liability is the "legacy debt" built up before the State began pre-funding its pensions in the 1970s. (3) More recently, inadequate contributions, low investment returns (since 2000), and early retirement incentives have added to the problem. (4) A promising approach for addressing the funding problem is to provide more breathing room in exchange for a real and sustained commitment to funding by: (a) separately funding the legacy debt over multiple generations; while (b) funding ongoing benefits using a stricter method for calculating required contributions, and reducing the long-term assumed return on plan assets.