Industry News

On April 7, 2021, the National Association of State Retirement Administrators (NASRA) updated its issue brief, State and Local Government Contributions to Statewide Pension Plans: FY 19. 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 2019 accounted for nearly three-fourths of all contributions received by public pension plans…. [Of] the $8+ trillion in public pension revenue since 1990, 39 percent, or more than $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 $116.6 billion in Fiscal Year (FY) 18 to $121.9 billion in FY 19, up 4.9%. 

The update introduces a new analysis which compares the Actuarially Determined Contribution (ADC) experience for the plans for the two halves of the most recent 10-year period of available data. The analysis illustrates the significant improvement of public employers contributing to public pension plans over the last five years.

According to NASRA, “the median percentage of ADC received in FY 19 was 100 percent, and the dollar-weighted average was 95 percent. FY 19 marks the fifth consecutive year in which the aggregate ADC experience was higher than 90 percent.”

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 10 to FY 19.  

The brief is available here.