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:
Covid-19 Pandemic Puts Squeeze on Pension Plans by Heather Gillers. In this article for the Wall Street Journal, Gillers writes that the COVID-19-induced economic crisis negatively impacted public pensions this year. Research from the Center for State and Local Government Excellence and the Boston College Center for Retirement Research, however, shows that this has not been the case. According to a joint report from the organizations, the average funded ratio for local plans in the fiscal year 2020 was 70.8 percent, and for state plans, it was 72.4 percent. These numbers are roughly the same as they were in the last fiscal year before the current economic downturn. Also, Gillers notes towards the end of the article that “retirement funds generally met or approached their investment targets for the year ended Sept. 30,” which contradicts the article’s argument that there is a “squeeze” on public pensions.
Retirement warning signs? Pension crisis hits states. Here’s the biggest, smallest funding shortfalls by Grant Suneson. In this article for USA Today, Suneson ranks every states’ unfunded liabilities to claim that public pensions are in a state of “crisis.” First, as we’ve noted above, research shows that the average funded ratio for local and state plans held steady in the fiscal year 2020, which shows they are not in a “crisis.” Second, as we’ve written before, it’s misleading to rank states based on their pension plans’ funded status. An unfunded liability “means that at a specific point in time, the pension plan does not have the full amount of money it will need to pay out ALL of the retirement benefits it will owe in the future to ALL of its current and former employees.” This has never happened given that pension plans are specifically designed to earn investment returns over a long period of time, ensuring they will have enough assets to pay out benefits for retirees. Finally, the reason a select few states have larger unfunded liabilities than others isn’t because of public employees, it’s because politicians in these states “repeatedly skipped, deferred, or only partially paid into pension funds every budget cycle.” Public employees have paid into these systems with each and every paycheck.
Be sure to check back next week for the latest news in the fight for a secure retirement!