Industry News

On December 7, 2022, the National Association of State Retirement Administrators (NASRA) updated its issue brief, State and Local Government Contributions to Statewide Pension Plans: FY 21. 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 2021 accounted for 76 percent of all contributions received by public pension plans…. [Of] the $10+ trillion in public pension revenue since 1992, 36 percent, or more than $3.5 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 $128.9 billion in Fiscal Year (FY) 20 to $137.8 billion in FY 21, up 6.9%.  

The update notes that ASOP No. 4 defines an actuarially determined contribution (ADC) as, “A potential payment to the plan as determined by the actuary using a contribution allocation procedure. It may or may not be the amount actually paid by the plan sponsor or other contributing entity.”

According to NASRA, “the median percentage of ADC received in FY 21 was 100 percent, and the dollar-weighted average grew to 99.3 percent. This marks the highest percentage of ADC received since FY 01, and the seventh 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 changed their funding policies and practices, resulting in increases in required contributions. Such changes include implementation of more 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 12 to FY 21.   

The brief is available here.