June 29, 2011, Washington D.C. -- A new NIRS research report examines selected statewide public pension plans to identify common elements of plans that remained well funded despite two severe economic downturns.
Download report here. Download PowerPoint here.
The study identifies six
features that enabled those plans examined to remain sustainable and
These findings are contained in the new study, "Lessons Learned from Well-Funded Public Pensions: An Analysis of Six Plans that Weathered the Financial Storm." The report was led by Dr. Jun Peng, associate
professor at the University of Arizona, and co-authored by Ilana Boivie, an
economist and NIRS director of programs.
Employer pension contributions that pay the full
amount of the annual required contribution, and that maintain stability
in the contribution rate over time;
Employee contributions to help share in the cost of
Beneﬁt improvements, such as multiplier increases,
that are actuarially valued before adoption and properly funded upon adoption;
Cost of living adjustments (COLAs) that are granted
responsibly, for example through an ad hoc COLA that is amortized quickly, or
an automatic COLA that is capped at a modest level;
"Anti-spiking" measures that ensure actuarial
integrity and transparency in pension beneﬁt determination; and
Economic actuarial assumptions, including both the
discount rate and inﬂation rate, that can reasonably be expected to be achieved
over the long term.
"Unfortunately, scant attention is focused on public
pension plans that were structured in ways that enabled them to weather severe
market turmoil," said Diane Oakley, NIRS executive director. "Separate from this study, data show that the
vast majority of public pensions were well-funded going into the financial
crisis, took a severe blow like all investors, and are recovering as the
financial markets rebound. As such, we
hope this new study serves to re-focus pension policy debate on a productive,
pragmatic examination of pension plans that remained strong even after a decade
of unprecedented financial market ups and downs," Oakley said.
Ilana Boivie, NIRS director of programs added, "This new
analysis can serve as a valuable tool for policymakers working to strengthen
public pensions so the plans can continue to keep their retirement commitment
to millions of working Americans at the lowest cost to taxpayers." Boivie added, "It's important to note,
however, that these six common features are NOT a ‘one-size-fits-all'
approach. Every pension plan is unique,
and so too is their funding policy, benefit design, and economic assumptions.
All six well-funded plans we studied remained sound even though their
approaches may have differed."
The study was conducted via a comprehensive analysis of
the funding policy, benefit design and economic assumptions for the following
six public pension plans selected for analysis:
NIRS will host a webinar for media and
interested parties on Wednesday, June 29, 2011 at 11:00 AM ET to
present the findings and respond to questions. For registration, visit https://www2.gotomeeting.com/register/731472850. Dial In:
(909) 259-0012, Access Code: 414-390-832, Audio PIN: Shown after joining the
Delaware State Employees Pension Plan
Idaho Public Employee Retirement Fund
Illinois Municipal Retirement Fund
New York State Teachers' Retirement System
North Carolina Teachers & State Employees
Teacher Retirement System of Texas
The National Institute on Retirement Security is a
not-for-profit, non-partisan organization established to contribute to informed
policymaking by fostering a deep understanding of the value of retirement
security to employees, employers, and the economy through national research and
education programs. Located in Washington, D.C., NIRS has a diverse membership
of organizations interested in retirement security including financial services
firms, retirement plan sponsors and service providers, and trade associations
among others. More information is