How Did State/Local Plans Become Underfunded?

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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.