Industry News

On August 18, 2020, the Center for Retirement Research at Boston College (CRR) and the Center for State and Local Government Excellence (SLGE) released their research brief, The Status of Local Government Pension Plans in the Midst of COVID-19.  According to the brief, the average funded ratio of local government pension plans will likely remain unchanged during fiscal year 2020 despite the ongoing COVID-19 pandemic and economic downturn.

In addition, their projections indicate that local pensions are relatively sustainable on a cash-flow basis. Furthermore, most local plans will maintain sufficient assets to pay benefits indefinitely at their current contribution levels.  However, the exceptions would be the very worst-funded local pension plans, which may face the real risk of exhausting their assets.  

Due to the COVID-19 recession, stresses on government finances may affect the ability for localities to cover their required pension contributions.  Beyond 2020, the projections suggest that the finances for all public plans may further deteriorate, and local plans could be slightly worse off than state plans.  The research projects that local plans will have an aggregate funded ratio between 61.7% and 64.6% by fiscal year 2025, while state plans are projected to have an aggregate funded ratio between 65.2% and 68.2%.

The brief is available here.