The Financial Crisis and State/Local Defined Benefit Plans

The brief’s key findings are:

• Prior to the financial crisis, most public pension plans were on a path to full funding.

• But the crisis has pushed the aggregate funding ratio below 80 percent.

• Without action, in five years the funding ratio could be as low as 59 percent or as high as 75 percent.

• The ability to smooth pension asset values provides a buffer against the need for imminent hikes in pension contribution rates.

• But, eventually, taxpayers will have to pay for any permanent damage done by the financial crisis.