State and local pension plan funding sputters in FY 2016

Abstract

The brief's key findings are: (1) In 2016, the funded ratio of state and local pensions declined under both old and new accounting rules. (2) This decline reflected steady growth in liabilities and slow growth in assets due to poor stock performance. (3) More recently, the revival of the stock market is helping plan assets recover, with funded ratios expected to improve in 2017. (4) But, looking further ahead, funding ratios are projected to remain essentially flat due largely to the current approach of calculating required contributions. (5) Thus, to achieve more meaningful progress, plans need to establish contribution levels that will actually reduce unfunded liabilities.