Public pension funding levels are not improving, despite recent investment gains, because plans are not addressing their unfunded liabilities, according to an issue brief released Thursday from the Center for State and Local Government Excellence, based on an analysis by The Center for Retirement Research at Boston College,
Pension plan funding decreased to 72% in 2016 from 74% in 2015. "We are dismayed that we didn't really see much progress. It has gone up and down over the past seven years," co-author Jean-Pierre Aubry, director of state and local research for the Center for Retirement Research at Boston College, said in an interview.
"Even if you are achieving your (assumed rate of) return, you are not making meaningful progress because the contributions that are being calculated are inadequate," Mr. Aubry said.
According to the brief, public pension plans paid 92.4% of their required contributions in fiscal year 2016, continuing the steady increase in percentage paid since the global financial crisis. "We found that the (annual required contribution) they were calculating was not going to do the job," said Mr. Aubry, adding public plans have a way of "backloading costs" and letting unfunded liabilities grow.
"Now that things have stabilized, it's time for these plans to look at some the mechanics" of how they calculate payments, he said.
The study is available on the center's website.