Welcome to this month’s final 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:
Investment Earnings Drive 71% of Public Pension Revenue by the National Conference on Public Employee Retirement Systems (NCPERS). On Tuesday, NCPERS released a new study that showed investment earnings continue to make up a majority of public pensions’ revenues. The survey (which examined both state and local pensions) also found that the average funded ratio for these plans increased from 72.4% in 2019 to 75.1% in 2020, despite the original market volatility at the beginning of the coronavirus pandemic. Check out Defined Benefit next Wednesday for more details on this research and its implications for public pensions.
America’s Public Pension System Remains Mired in Crisis by Kevin O’Connor. If we rolled our eyes every time someone falsely claimed that public pensions were in a state of supposed crisis, our ocular muscles might spasm and eject our eyeballs. In this article for Morning Consult, O’Connor misleadingly cites figures from the economic crisis to argue that public pensions are “mired in crisis.” O’Connor writes that “the public pension system lost $1 trillion, a 21 percent loss for the fiscal year, following the COVID-19 lockdowns in March.” His source for this information is an article that includes a projection from Moody’s Analytics about the potential impact of the pandemic on pension funds that was published last March. Data shows this projection to be incorrect. While the financial markets did experience some aforementioned volatility at the start of the pandemic, they largely recovered those losses and ended the year with record-highs. As a result, according to NCPERS and others, the average funded ratio for pension plans increased from 2019 to 2020. O’Connor also claims that “public pension liabilities are on track to increase to $1.62 trillion this year, up from $1.35 trillion in 2019.” While O’Connor doesn’t cite a source for this number, that projection comes from the Equable Institute, a frequent critic of public pensions that publishes biased and misleading research on retirement security. Furthermore, Equable’s inaccurate projection was that liabilities would increase to $1.62 trillion in 2020, not this year. These claims do not stand up to in-depth scrutiny and, for the sake of our ocular muscles, we will do our best to avoid rolling our eyes if they are mentioned.
Half of today’s households are at risk for retirement by Alicia H. Munnell. Munnell, the Director of the Center for Retirement Research at Boston College, cites her organization’s research to show that too many Americans face the potential of an insecure retirement. The Center utilized the Federal Reserve’s 2019 Survey of Consumer Finances (SCF) to estimate what the National Retirement Risk Index (NRRI) would have looked like if the SCF was conducted this year. The researchers found that the NRRI would’ve been 2% higher for 2020, meaning that “half of today’s households will not have enough retirement income to maintain their preretirement standard of living.” This research is further proof that public pensions should be protected because they can guarantee a secure retirement.
Be sure to check back next week for the latest news in the fight for a secure retirement!