Industry News

In April 2020, the National Association of State Retirement Administrators (NASRA) updated its issue brief, State and Local Government Contributions to Statewide Pension Plans: FY 18.  The brief includes: 1) a brief history of public pension contributions; 2) recent public employer contribution experience; and 3) how governance structure may impact funding experience.

According to the brief, “[On] a national basis, contributions made by employers – states and local governments -in 2018 accounted for nearly three-fourths of all contributions received by public pension plans…. [Of] the $8 trillion in public pension revenue since 1989, 37 percent, or approximately $3 trillion, came from contributions paid by employers and employees.”

On average, employer contributions to public pension plans continue to be a small percentage of state and local government spending.  In recent years, employer contributions have been growing.  Among the statewide pension plans included in the study, the aggregate public employer contributions increased from $102.9 billion in Fiscal Year (FY) 17 to $116.7 billion in FY 18, up 13.4%. 

According to NASRA, “FY 18 marked the sixth consecutive year of increase on a dollar-weighted basis – from 93.3 percent in FY 17, to 97.4 percent – in the percentage of required contributions paid by public employers. This improved funding effort occurred even as the rate of increase in required contributions grew at its fastest pace since FY 11.” 

Furthermore, NASRA cited that, “Following the recession of 2007-09 and the market decline of 2008-09, many public pension plans have made changes to their funding policies and practices that have produced increases in required contributions in subsequent years, including implementation of more conservative (aggressive) funding policies; lower investment return assumptions; updated mortality assumptions; and reduced amortization periods.”

For the individual plans included in the analysis, the brief also provides an appendix with the basis of employer contributions and contribution history for FY 01 to FY 18.  The analysis utilizes four classifications of employer contributions: 1) Actuarially Determined Contributions; 2) Fixed Contribution Rates; 3) Actuarially Determined Contributions with Limitations; and 4) Other Methods for Determining Employer Contributions.

The brief is available here.