Key findings:
"In 2015, the funded ratio of state and local pensions using traditional accounting rules, with smoothed asset values, rose from 73 percent to 74 percent. The funded ratio using new accounting rules, with market value, declined slightly." [However, the funded ratio of the five largest state-administered pension plans in Illinois (TRS, SURS, SERS, JRS, and GARS with a total unfunded liability of $112 billion), was 39 percent funded in 2015].
"Required
contributions continued to climb in 2015, but plans also stepped up their
payments from 86 percent to 91 percent of the required amount." [Payments to the
five largest state-administered public pension systems in Illinois have never come
near the required amount; thus, approximately ¾ of each payment to the five
Illinois pension systems is for the debt service incurred as a result of
politicians not paying fully into those systems].
"2015 was the second year that the new rules were in
effect for financial reporting. Under these provisions, funded ratios were
based on market asset values and 10 plans – those with assets projected to be
insufficient to cover future benefits – adopted a blended rate to calculate
liabilities.
"As a result of these two provisions, the overall ratio
of assets to liabilities was lower under the new rules than under the
traditional rules. What
happens from here on out depends very much on investment performance [and fully funding the systems]. In 2020,
assuming expected returns are realized, plans should be 78 percent funded. If
returns are lower, as predicted by many investment firms, funding will drift
lower."
To
read the complete article from the Center for Retirement Research at Boston
College, “The Funding of State and Local Pensions: 2015-2020” by Alicia H.
Munnell and Jean Pierre Aubry, click here.
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