Industry News

On February 12, 2019, the Society of Actuaries (SOA) released its report, U.S. Public Pension Plan Contribution Analysis. The study compared public pension plan employer contributions to certain benchmarks for contribution levels required to reduce unfunded liabilities.   The report updates the June 2017 SOA study of employer contributions of 180 U.S. large-city and state-based defined benefit pension plans. 

According to the report, for the plans studied, most received insufficient contributions to reduce their unfunded liabilities. Of the plans whose contributions were insufficient to reduce unfunded liabilities as a dollar amount, but were sufficient to reduce unfunded liabilities as a percent-of-payroll, their employer contributions increased from 36% in 2003 to 77% in 2017. Of those whose contributions did not reduce unfunded liabilities as a dollar amount, more than 50% were lower than the plans’ actuarially determined contributions (ADC) or other target contributions.

The report concludes, “Contribution amounts are only one of the many factors that influence pension plans’ funded status, including approaches to plan, cost and risk management; asset allocation; investment experience; changing plan demographics; actuarial methods and assumptions for computing plan liabilities; relatively long budget planning cycles; and contribution decisions that may be subject to legislative processes.”

It adds, “Regardless of the complexities, the goal is to provide the plan with enough assets to pay participants’ benefits when they come due.”

The report is available here.