State and local pension reform efforts are beginning to offset the effects of the financial crisis, according to a new study from the Center for Retirement Research at Boston College.
The center looked at 32 plans in 15 states and found that for most of them, pension reforms have “fully offset or more than offset the impact of the financial crisis.” When measuring pension costs as a share of state or local budgets, costs could even fall below pre-crisis levels, study authors Alicia H. Munnell, Jean-Pierre Aubry, Anek Belbase and Josh Hurwitz found.
That is good news for public-sector employees, noted Californians for Retirement Security spokesman Steven Maviglio in an interview. “Public employees have already made the sacrifices,” said Mr. Maviglio, whose group represents 1.2 million active and retired public employees in the largest state in the study.
The American Federation of State, County and Municipal Employees “has said from the outset of the Great Recession that pensions are durable and resilient benefit programs. It is not at all surprising to us that pension funding levels will return to historical levels … what is surprising is that the levels of funding have bounced back so quickly,” Steve Kreisberg, AFSCME director of collective bargaining, wrote in an e-mail.
But the authors cautioned the actual results will depend on whether reforms are continued even when the economy improves, if plans consistently make their annual required contribution, and whether investment returns are lower than expected going forward.