After reaching its previous high of 75.7% in 2011, the median funding ratio of municipal pension funds steadily declined to 2014 where it bottomed at 72.7%. The recent resurgence comes as many cities have implemented pension reform to focus on improving their funding ratios, but also in the face of new regulations by way of GASB 67 and 68 pension accounting rules. The rules require greater transparency and more conservative actuarial assumptions aimed at getting to a more accurate valuation of liabilities, usually to the detriment of the funding ratio.
Municipal funded ratios improve
Indianapolis, Portland, Ore., and Charleston, W. Va were among the cities with the lowest funding ratios, but have arrangements with their respective states and local tax authorities to operate as a pay-as-you-go system. Chicago, with its 2.7 million population, had an average funding ratio of 23% among its four reported plans, two of which triggered the GASB rule requiring lower discount rates.