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Public pension plan funding dips thanks to increased liabilities — study

Public pension plans' unfunded liabilities rose to more than $900 billion in 2011 from $700 billion in 2009, while assets held steady at $2.7 trillion, according to a Center for State and Local Government Excellence report.

The increase in liabilities caused the aggregate funding ratio of pension plans to dip to 75% in 2011, down from 84% in 2008, as investment losses were absorbed.

The aggregate funding ratio is expected to rise to 82% by 2015, according to estimates from Boston College's Center for Retirement Research cited in the report, with whom the CSLGE maintains the Public Plan Database, on which the analysis was based. “I think we can take some heart in the fact that we're starting to turn the corner,” Elizabeth Kellar, president and CEO of the CSLGE, said in an interview. “Investment performance is better, and we're starting to see some benefit from those plans that have dealt with their losses.”

Increased employee contributions have also helped in some cases. Forty-three states enacted major changes from 2009 to 2011, most commonly to increase employee contributions and/or to establish a less-generous tier of benefits for new hires.

One of the biggest challenges now, Ms. Kellar said, is getting pension fund officials to make their annual required contributions. The percentage of plans doing so dipped to 79% in 2011 from 92% in 2008.