State pension plans continued to experience a significant gap between funding and liabilities in fiscal 2012, according to the Pew Charitable Trusts.
Using the most comprehensive data for all public plans, Pew researchers found that state-run retirement systems had a $914 billion shortfall between pension benefits promised and actual pension funding, which represents a 14% increase from 2010. The shortfall for local governments was more than $1 trillion in fiscal 2012.
Keith Brainard, research director of the National Association of State Retirement Administrators, in an interview dismissed the report as “old news. Between the strong investment returns of the last five years and the multiple reforms that have been made in every state, pension funding levels are improving.” Referring to the title of Pew's state funding reports of recent years, which have referenced a funding gap, he said, “I look forward to a new title — 'The Narrowing Gap' — because that's where we're headed.”
David Draine, a Pew senior researcher, said the funding gap is expected again in 2013 data, particularly as 2009 investment losses remain on balance sheets, but the gap could start to shrink this year or next. The key, said Mr. Draine, is whether states make and keep their commitments to improve funding levels.
“With the stronger market returns, we can anticipate that many pension plans will show greater asset growth,” said Elizabeth Kellar, president and CEO of the Center for State and Local Government Excellence. “The question remains – how much of the (actuarially required contribution) will most pension plans have made in 2013?”
According to Pew, only 14 states consistently made at least 95% of their ARC from 2010 through 2012.
