Locally-Administered Pension Plans: 2007-2011

Alicia H. MunnellJean-Pierre Aubry Josh Hurwitz

SLP#29

The brief’s key findings are:

  • 2011 data show that locally-administered pension plans continue to be slightly less funded than state-run plans – 72 percent vs. 76 percent.
  • This result is puzzling because local plan sponsors generally pay a larger share of their annual required contribution than state plan sponsors.
  • The explanation is that state plans have historically earned higher returns because they invest more in risky assets.
  • For mature plans with substantial assets, higher returns more than offset lower contributions.
  • During the financial crisis, though, local plans were able to narrow the funding gap because their less risky portfolios fared better.