For the 14 public teacher retirement systems in Pensions & Investments' universe of the 200 largest U.S. retirement plans, the relatively good news is that the growth rate in the gap between contributions made to the pension plans and benefits paid to participants appears to be slowing.
While the gap has grown at a compound annual rate of 3.1% since 2008, growth over the past five years has been just 1%, according to data submitted for the most recent plan year.
Still, the teacher systems are facing a formidable number, with 14 racking up a negative cash-flow gap of $40.7 billion as of Sept. 30, 2018, up from $28.9 billion in 2008, according to P&I survey data on employer contributions. (P&I's survey does not ask for employee contribution data for DB plans.)
Teacher pension fund officials in particular will have to pay attention to mortality tables. Teachers represent the largest public pension obligations compared with other public-sector job categories, according to the first comprehensive look at mortality tables for public-sector pension plans released Jan. 22 by the Society of Actuaries.
Teachers have the longest age-65 life expectancy, and higher rates of deferring pensions to at least age 62 compared with public safety and general employee categories. Female teachers reaching age 65 had life expectancies of 90.03, compared with 87.7 for male teachers.
Mortality tables are just one of many assumptions used to calculate pension funding, and plan sponsors can choose how and when to incorporate the new tables into their plan valuations. Updating assumptions can have an impact on liabilities, which in turn could change funding requirements, but those outcomes are plan specific.