Locally-Administered Pension Plan Funding Lags That Of State Plans

Jan 31, 2013, 07:00 ET from Center for State and Local Government Excellence

New Center for Excellence issue brief

WASHINGTON, Jan. 31, 2013 /PRNewswire-USNewswire/ -- A new issue brief from the Center for State and Local Government Excellence, Locally-Administered Pension Plans,2007-2011, finds that, despite having a better track record of paying the annual required contribution, locally-administered pension plans have not yet caught up with the funded levels of state-administered plans.

Written by Alicia H. Munnell, Jean-Pierre Aubry, and Joshua Hurwitzof the Center for Retirement Research at Boston College, the brief's key findings include:

  • 2011 data show that locally-administered pension plans continue to be slightly less funded than state-run plans – 72 percent vs. 76 percent.
  • This result is puzzling because local plan sponsors generally pay a larger share of their annual required contribution than state plan sponsors.
  • The explanation is that state plans have historically earned higher returns because they invest more in risky assets.
  • For mature plans with substantial assets, higher returns more than offset lower contributions.
  • During the financial crisis, though, local plans were able to narrow the funding gap because their less risky portfolios fared better.

Read the full brief at http://slge.org/publications/locally-administered-pension-plans-2007-2011

Access all Center retirement research at http://slge.org/research/retirement

About the Center for State and Local Government Excellence
The Center for State and Local Government Excellence helps state and local governments become knowledgeable and competitive employers so they can attract and retain a talented and committed workforce. The Center identifies best practices and conducts research on competitive employment practices, workforce development, pensions, retiree health security, and financial planning. The Center also brings state and local leaders together with respected researchers and features the latest demographic data on the aging workforce, research studies, and news on health care, recruitment, and succession planning on its website, www.slge.org

SOURCE Center for State and Local Government Excellence