State and Local Pension Plan Funding Sputters in FY 2016

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The brief’s key findings are:

  • In 2016, the funded ratio of state and local pensions declined under both old and new accounting rules.
  • This decline reflected steady growth in liabilities and slow growth in assets due to poor stock performance.
  • More recently, the revival of the stock market is helping plan assets recover, with funded ratios expected to improve in 2017.
  • But, looking further ahead, funding ratios are projected to remain essentially flat due largely to the current approach of calculating required contributions.
  • Thus, to achieve more meaningful progress, plans need to establish contribution levels that will actually reduce unfunded liabilities.