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Report: Public-Sector Pension Plans Are Trillions Short

a graphic showing two binders with its bindings reading retirement and pension

By    |   Thursday, 14 November 2019 08:44 PM

The average public pension plan is just 72% funded, racking up a collective shortfall of more than $1.6 trillion, The Economist reported Thursday.

Cities and states are paying more, but still not enough, according to the outlet.

In 2001 public-sector employers contributed 5.3% of their payroll to meet pension promises; now that figure is around 16.5% on average, the outlet reported.

Yet in no year since 2001 has the average employer contributed as much as demanded by actuaries. 

America's buoyant stockmarket has done its best to help, The Economist reported, noting returns on government bonds have also been good for much of the past three decades. 

Yet despite that, the average public-sector scheme is less well funded now than it was in 2001.

According to the outlet, the markets are unlikely to keep being so helpful, noting in 1982 the government sold long-term Treasury bonds with a yield of 14.6%; now such bonds yield just 2.4%. 

The Economist noted the accounts of troubled pension plans illustrates the shortfall crisis.

For example, it reported, the Chicago Teachers pension fund has a shortfall of $13.4 billion, and a funding ratio of 47.9% on the basis of an assumed return of 6.8%. Its financial report reveals a one-percentage-point fall in the discount rate would increase the deficit by $3 billion.

The Chicago Teachers scheme is aiming for 90% funding, but not until 2059 — long after many retired members will have died. New Jersey's teachers' pension plan is not scheduled to be fully funded until 2048, The Economist reported.

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Racking up a collective shortfall of more than $1.6 trillion, the average public pension plan is just 72% funded, according to The Economist.
public, pension, plans, retirement, the economist
Thursday, 14 November 2019 08:44 PM
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