report - The State Pension Funding Gap: 2016

rforno

(x-posted)

Interesting - and lengthy - reading. Again, for various reasons as I've opined here over the years it reinforces the notion that I did the right thing by opting for my ORP 403(b) plan instead of the state's (MD) pension system.

The State Pension Funding Gap: 2016

http://www.pewtrusts.org/en/research-and-analysis/issue-briefs/2018/04/the-state-pension-funding-gap-2016

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Ultimately, differences in state pension funding levels are driven by policy choices, with well-funded states having records of making actuarial contributions, managing risk, and avoiding unfunded benefit increases. Measures of plan assets as a percentage of liabilities in 2016 ranged from 31 percent in New Jersey to 99 percent in Wisconsin. Colorado, Connecticut, Illinois, Kentucky, and New Jersey were less than 50 percent funded, and another 17 states had less than two-thirds of the assets needed to pay promised benefits. Only New York, South Dakota, Tennessee, and Wisconsin were at least 90 percent funded.

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bee

Akin to a private company promising an employee a match on your 401(K) and inconsistently contributing. A lack of funding is never a good matrix for a long term investment whether its an IRA or a pension. Also, along with market risk; pensions take on the challenges of longevity risk (a pension needs to last a lifetime) and inflation risk (pensions often have COLA increases). Add a lack of funding and it's all a recipe for funding gaps.

Politician's get in the middle of these issues making campaign promises to voters and negotiate contract promises with state union members that often conflict.

Here's one politician's recent campaign solution that may be coming to the campaign trail in these other underfunded states:
attacking-state-pensions-stemerman-tries-break-up

davidrmoran

oops

https://www.nytimes.com/2018/04/14/business/pension-finance-oregon.html