New Report Examines Innovative Public Pension Funding Strategies

WASHINGTON, Dec. 7, 2020 /PRNewswire/ -- As state and local governments face budget shortfalls in the wake of the COVID-19 pandemic and recession, a new report examines innovative funding strategies for public pension plans in California, Colorado, Indiana, Kentucky, Louisiana, Maine, Montana, New York, North Carolina, Oklahoma, Oregon, Pennsylvania and West Virginia.

The report examines several innovative and often lesser-known pension funding strategies that have been utilized in the public sector to address legacy pension costs and create stable costs over time. The funding strategies utilized in these states include separate funding strategies for existing liabilities and on-going plan costs; employer side accounts; pension obligation bonds; withdrawal liabilities; and dedicated revenue streams from sources like sports betting.

Beyond the ARC: Innovative Funding Strategies from the Public Sector was prepared by the National Institute on Retirement Security (NIRS) and is available here. Register here for a webinar on Wednesday, December 9, 2020, at 2:00 PM ET for an overview of the findings and the opportunity to ask questions.

"The good news is that unlike the recent Great Recession, investment markets have been resilient during the COVID-19 recession. As a result, public pension funds have not experienced significant losses in the financial markets, and the overall funded status of public pension plans has held steady," said Dan Doonan, NIRS executive director. 

"However, there certainly are concerns that cash-strapped state and local governments may look at reducing required contributions to public pension plans. A decrease in funding could be particularly problematic for a handful of public pensions that are not adequately funded due to past funding practices," Doonan explained. "It is our hope that these pension funding case studies are a useful reference guide for policymakers interested in ensuring a well-functioning public pension system while delivering retirement benefits that have been earned by state and local government employees."

The report clearly defines what the various funding strategies do and do not accomplish. And, these innovative strategies extend well beyond the oft-cited paying the Annual Required Contributions (ARC) or Actuarially Determined Employer Contribution (ADEC). While the case studies are not an exhaustive list of funding strategies, the examples illustrate how a wide range of goals can be achieved with various policies.

The National Institute on Retirement Security is a non-profit, non-partisan organization established to contribute to informed policymaking by fostering a deep understanding of the value of retirement security to employees, employers and the economy as a whole. Located in Washington, D.C., NIRS' diverse membership includes financial services firms, employee benefit plans, trade associations, and other retirement service providers. More information is available at www.nirsonline.org. Follow NIRS on Twitter @NIRSonline.

SOURCE National Institute on Retirement Security

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