Three final notes: “According to the Congressional Budget Office, 80% is sufficient for public sector plans. Private sector plans require 100% because of concerns over bankruptcy or otherwise choosing to go out of business, concerns which do not pertain to the public sector. Yes, plan actuaries still set 100% as the goal because their sole concern is the pension system—they do not give a whit about the state’s responsibility to fund services, pay other debt or existing tax system, all of which matter” (Ralph M. Martire, Executive Director of Center for Tax and Budget Accountability).
Most states today (60% of them) are funded below 59%. Illinois’ funded ratio has never been above 70%. Furthermore, according to Alicia Munnell, Director of the Center for Retirement Research at Boston College, the distribution of funded ratios for state and local pension plans in 2010 on average were the following: 12% of the state and local pension plans were funded between 35-59%; 48% were funded between 60-79%; 35% were funded between 80-99% and 5% were funded at 100+% (State and Local Pensions: What Now? 2012).
(Most of this essay was originally posted on this blog in July 2011).