Skip to main content
MENU
Subscribe
  • Login
  • My Account
  • Logout
  • Register For Free
  • Subscribe
  • Topics
    • Alternatives
    • Artificial Intelligence
    • CIOs
    • Consultants
    • Defined Contribution
    • ESG
    • Face to Face
    • Hedge Funds
    • Industry Voices
    • Investing
    • Money Management
    • Partner Content
    • Private Credit
    • Pension Funds
    • Private Equity
    • Real Estate
    • Regulation
    • Special Reports
    • Washington
    • White Papers
  • International
    • U.K.
    • Canada
    • Europe
    • Asia
    • Australia - New Zealand
    • Middle East
    • Latin America
    • Africa
  • Rankings & Awards
    • 1,000 Largest Retirement Plans
    • Top-Performing Managers
    • Largest Money Managers
    • DC Money Managers
    • DC Record Keepers
    • Largest Hedge Fund Managers
    • World's Largest Retirement Funds
    • Best Places to Work in Money Management
    • Excellence & Innovation Awards
    • WPS Innovation Awards
    • Influential Women in Institutional Investing 2024
    • Eddy Awards
  • Resource Guides
    • Active Thematic Global Equities
    • Retirement Income
    • Fixed Income
    • Pension Risk Transfer
    • Pooled Employer Plans (PEPs)
  • ETFs
    • Latest ETF News
    • Fund Screener
    • Education Center
    • Equities
    • Fixed Income
    • Commodities
    • Actively Managed
    • Alternatives
    • ESG Rated
  • ESG
    • Latest ESG News
    • The Institutional Investor’s Guide to ESG Investing
    • ESG Sustainability - Gaining Momentum
    • ESG Investing | Industry Brief
    • Innovation in ESG Investing
    • ESG Rated ETFs
    • Divestment Database
  • Defined Contribution
    • Latest DC News
    • The Plan Sponsor's Guide to Retirement Income
    • DC Money Manager Rankings
    • DC Record Keeper Rankings
    • Innovations in DC
    • DC Plan Design: Improving Participant Outcomes
  • Searches & Hires
    • Latest Searches & Hires News
    • Searches & Hires Database
    • RFPs
  • Research Center
    • The P&I Research Center
    • Earnings Tracker
    • Endowment Returns Tracker
    • Corporate Pension Contribution Tracker
    • Pension Fund Returns Tracker
    • Pension Risk Transfer Database
  • Careers
  • Events
    • View All Conferences
    • View All Webinars
  • Print
Breadcrumb
  1. Home
  2. DEFINED BENEFIT
February 20, 2017 12:00 AM

Public funds stay strong despite major challenges

Rob Kozlowski
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print
    Vincent Ricardel
    The Brookings Institution's Joshua Gotbaum: 'Traditional pension plans are not going out of existence everywhere by any means.'

    While experts point to ERISA and the Pension Protection Act of 2006 as contributing to the demise of private-sector pension plans, public plans are not expected to follow their corporate brethren anytime soon.

    “Traditional pension plans are not going out of existence everywhere by any means,” said Joshua Gotbaum, guest scholar in the Economics Studies Program at the Brookings Institution and a former executive director of the Pension Benefit Guaranty Corp.

    “They're still the dominant form in the public sector in the U.S. They are dominant in northern Europe. They are dominant in Canada etc., etc.,” Mr. Gotbaum said.

    Public plans held $3.6 trillion in defined benefit assets out of a total of $6.117 trillion as of Sept. 30 among the 1,000 largest U.S. retirement plans, according to Pensions & Investments data.

    However, even though public DB plans remain open, they still face challenges being in the public arena. Specifically, in a number of states, underfunding remains a deep concern and pension reform legislation on the state and local levels is being widely discussed.

    While the actual closing of DB plans on the public level is rare, smaller plans have taken that step. For example, Jacksonville, Fla., is currently in negotiations with collective bargaining units to close the city's three pension funds to new employees. New employees would instead be enrolled in a defined contribution plan.

    Joey Greive, the city's treasurer and chief investment officer of the city retirement system, said in an earlier interview the general employees fund is about 65% funded, and the corrections officer and police and fire pension funds are below 50% funding currently. The total unfunded liability for the three funds — which have combined assets of about $3.8 billion — is between $2.8 billion and $3 billion, Mr. Greive had said.

    States like Illinois, whose five state pension systems have $129.8 billion in total unfunded liabilities and an aggregate funding ratio of 37.6% on a market-value basis as of June 30, have attempted pension reform measures to reduce benefits but are hamstrung by state constitution requirements.

    Other states, however, have been able to make changes to their defined benefit plans due to concerns about underfunding. Rather than switching to a defined contribution plan model, they've closed their traditional DB plans and moved to some kind of hybrid or cash-balance plan for their state plans.

    One of the largest retirement systems to move to a hybrid plan in recent years was the $44.4 billion Tennessee Consolidated Retirement System, Nashville, which created the Hybrid Pension Plan for State Employees and Teachers for state employees, higher-education employees and public school teachers hired after June 30, 2014.

    The defined benefit plan component requires a 5% employee contribution and 4% employer contribution, while the defined-contribution component requires a separate 5% employer contribution and a 2% employee contribution, with an opt-out feature.

    Tennessee Treasurer David H. Lillard Jr. originally proposed the hybrid plan in 2013 despite the retirement system having a funding ratio of over 90%. His reasoning, he said in a news release at the time, was that “it is important to take a long view when trying to anticipate what a retirement plan's future costs will be. Based on the actuarial projections and other information my staff and I have studied, we believe changes are needed now to protect taxpayers, employees and retirees in the future.”

    Other public plans that made similar moves included the $47.6 billion Michigan Public School Employees Retirement System, Lansing, which created a hybrid plan for employees hired on or after July 1, 2010; and the $16 billion Kansas Public Employees Retirement System, Topeka, which created a cash balance tier for new employees hired after Jan. 1, 2015.

    Related Articles
    Stress testing a new normal for investors
    Waning returns have some doubting private equity's value
    Target-date funds continue their winning ways
    401(k) plans are gradually picking up features of their DB brethren
    Credit easing, regulation put plans on critical list
    401(k) plans are gradually picking up features of their DB brethren
    Credit easing, regulation put plans on critical list
    A sampling of changes in the DC record keeping arena
    Tennessee Consolidated commits $410 million
    City and county pension plans' funding dips to 67% in fiscal year 2016 – Wilshi…
    Recommended for You
    YWCA Building in Boston, July 20, 1922.
    YWCA Retirement Fund celebrates 100 years of empowering women through financial security
    A canal path in Huddersfield, West Yorkshire
    West Yorkshire Pension names incoming CIO
    U.K. regulator rejects ACCESS pool's request for authorization; government pushes for merger
    U.K. regulator rejects ACCESS pool's request for authorization; government pushes for merger
    Sponsored
    White Papers
    The State of Lifetime Income Report
    The Next Wave of LDI Evolution
    Retirement security to future income wins, TIAA brings you the latest financial…
    U.S. Public Funds Top Performers: Q2 2024
    Generative AI Investing: Opportunities at a Key Tech Inflection Point
    Research for Institutional Money Management: Advancing Physical Risk Modelling,…
    View More
    Sponsored Content
    Partner Content
    The Industrialization of ESG Investment
    For institutional investors, ETFs can make meeting liquidity needs easier
    Gold: the most effective commodity investment
    2021 Investment Outlook | Investing Beyond the Pandemic: A Reset for Portfolios
    Ten ways retirement plan professionals add value to plan sponsors
    Gold: an efficient hedge
    View More
    E-MAIL NEWSLETTERS

    Sign up and get the best of News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today
    October 23, 2023 page one

    Get access to the news, research and analysis of events affecting the retirement and institutional money management businesses from a worldwide network of reporters and editors.

    Subscribe
    Connect With Us
    • RSS
    • Twitter
    • Facebook
    • LinkedIn

    Our Mission

    To consistently deliver news, research and analysis to the executives who manage the flow of funds in the institutional investment market.

    About Us

    Main Office
    685 Third Avenue
    Tenth Floor
    New York, NY 10017-4036

    Chicago Office
    130 E. Randolph St.
    Suite 3200
    Chicago, IL 60601

    Contact Us

    Careers at Crain

    About Pensions & Investments

     

    Advertising
    • Media Kit
    • P&I Custom Content
    • P&I Careers | Post a Job
    • Reprints & Permissions
    Resources
    • Subscribe
    • Newsletters
    • FAQ
    • P&I Research Center
    • Site map
    • Staff Directory
    Legal
    • Privacy Policy
    • Terms and Conditions
    • Privacy Request
    Pensions & Investments
    Copyright © 1996-2025. Crain Communications, Inc. All Rights Reserved.
    • Topics
      • Alternatives
      • Artificial Intelligence
      • CIOs
      • Consultants
      • Defined Contribution
      • ESG
      • Face to Face
      • Hedge Funds
      • Industry Voices
      • Investing
      • Money Management
      • Partner Content
      • Private Credit
      • Pension Funds
      • Private Equity
      • Real Estate
      • Regulation
      • Special Reports
      • Washington
      • White Papers
    • International
      • U.K.
      • Canada
      • Europe
      • Asia
      • Australia - New Zealand
      • Middle East
      • Latin America
      • Africa
    • Rankings & Awards
      • 1,000 Largest Retirement Plans
      • Top-Performing Managers
      • Largest Money Managers
      • DC Money Managers
      • DC Record Keepers
      • Largest Hedge Fund Managers
      • World's Largest Retirement Funds
      • Best Places to Work in Money Management
      • Excellence & Innovation Awards
      • WPS Innovation Awards
      • Influential Women in Institutional Investing 2024
      • Eddy Awards
    • Resource Guides
      • Active Thematic Global Equities
      • Retirement Income
      • Fixed Income
      • Pension Risk Transfer
      • Pooled Employer Plans (PEPs)
    • ETFs
      • Latest ETF News
      • Fund Screener
      • Education Center
      • Equities
      • Fixed Income
      • Commodities
      • Actively Managed
      • Alternatives
      • ESG Rated
    • ESG
      • Latest ESG News
      • The Institutional Investor’s Guide to ESG Investing
      • ESG Sustainability - Gaining Momentum
      • ESG Investing | Industry Brief
      • Innovation in ESG Investing
      • ESG Rated ETFs
      • Divestment Database
    • Defined Contribution
      • Latest DC News
      • The Plan Sponsor's Guide to Retirement Income
      • DC Money Manager Rankings
      • DC Record Keeper Rankings
      • Innovations in DC
      • DC Plan Design: Improving Participant Outcomes
    • Searches & Hires
      • Latest Searches & Hires News
      • Searches & Hires Database
      • RFPs
    • Research Center
      • The P&I Research Center
      • Earnings Tracker
      • Endowment Returns Tracker
      • Corporate Pension Contribution Tracker
      • Pension Fund Returns Tracker
      • Pension Risk Transfer Database
    • Careers
    • Events
      • View All Conferences
      • View All Webinars
    • Print