How Did State/Local Plans Become Underfunded?

The brief’s key findings are:

• A new analytical tool tells a clear story of why unfunded liabilities rose during 2001-2013.
• The primary factor was investment returns that fell short of expectations due to the two financial crises.
• A secondary factor was that many plans failed to make adequate contributions, a more serious problem among the worst-funded plans.
• This type of analysis should be added to every plan’s annual actuarial valuation.