Welcome to this week’s edition of This Week in Pensions! This is the news you need to know in the fight for a secure retirement.
Before you dive into our top stories from this week, check out some stories of public employees helping their communities during the coronavirus pandemic.
Here are the top stories from this week:
State and Local Public Pension Funding Levels Steady—For Now by Bill Lucia. In this article for Route Fifty, Lucia writes about a new study from the Center for State and Local Government Excellence (SLGE) and the Center for Retirement Research at Boston College released on Tuesday which shows state and local pension plans are well-equipped to pay out benefits during the current economic crisis and beyond. According to the study, for the fiscal year 2020 the average funded ratio for local plans is 70.8 percent, and 72.4 percent for state plans. This report is further evidence that public pensions, with their focus on investing for the long-term, are resilient enough to withstand the ups and downs of the markets to continue paying out benefits for their members, unlike defined-contribution accounts like 401(k)s. It also showcases the importance for state and local governments to practice funding discipline by making their required contributions to pension plans to maintain optimal funding levels in both economic downturns and upswings.
Equable Institute Analysis Shows U.S Statewide Public Pension Funds Entering COVID-19 Pandemic Recession in Worse Position Than 2008 by PR Newswire. The Equable Institute, a longstanding opponent of public pensions, released a misleading report on Tuesday which falsely claims that public pensions were in a worse financial shape heading into the current economic crisis than they were following the Great Recession in 2008. The Institute claims that funded ratios have taken a major financial hit because of current market activity, when this is incorrect. This week, the S&P 500 hit its highest level on record, erasing all of its losses following the original market downturn in March. Secondly, Equable’s estimates for funded ratios are notably lower than more reputable, non-partisan research organizations like the aforementioned SLGE, which estimate that average funded ratios for states are projected to remain about the same as they were in the fiscal year 2019. Finally, Equable’s analysis conveniently ignores a small but highly important fact, which is debt in relation to the Gross Domestic Product (GDP). According to a report from the National Conference on Public Employee Retirement Systems (NCPERS) in June, pension debt has remained stable over the past 20 years, which includes major economic crises like the dot com crash in 2001 and the Great Recession of 2008. If GDP rises alongside pension debt over the long term (which has been true for the past several decades, even taking into account the aforementioned recessions), pension plans will be well-equipped to manage their levels of debt. Unfortunately, Equable is not the first anti-pension organization to use the current downturn to falsely claim that public pensions are in a crisis; the Reason Foundation did the same thing in July. Their arguments do not hold up to the fact that public pensions have demonstrated their ability to provide a secure and dignified retirement in economic crises and beyond.
Be sure to check back next week for the latest news in the fight for a secure retirement!
