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Global Future of Retirement Conference

Pension fund executive director warns of coming pension fund defaults

Sanford Rich, the executive director of the New York City Board of Education Retirement System, said public and private U.S. defined benefit plans could face growing defaults over the coming decade, with governance a key factor in separating the weak from the relatively strong.

Speaking Tuesday at the final session of Pensions & Investments' two-day Global Future of Retirement conference on the topic of the biggest issues facing retirement plans now, Mr. Rich said corporate single-employer plans, multiemployer systems and public defined benefit systems offer reasons "to be worried about." Mr. Rich served for three years through January 2016 as the Pension Benefit Guaranty Corp.'s chief of negotiations and restructuring.

He predicted that for multiemployer plans, "the incidence of default is likely to be close to 8% over the next 10 years," with the scale of benefits lost to beneficiaries as a result likely to be close to 6%.

As recent developments in Detroit and Jacksonville, Fla., suggest, public defined benefit plans will face losses as well, he said.

For public retirement systems, "defined benefit plans will go away, except for very strong economies," he predicted, adding he'd like to think New York City will be "one of those."

The difference, meanwhile, between the vulnerable and the strong will come down to "good governance, a very small word that covers a lot of territory," he said.