Local government pension plans as well funded as state plans.(News & Numbers)

Pension plans administered by local governments have funding strategies that are as good as or better than those of state plans, according The Funding Status of Locally Administered Pension Plans, the eighth issue brief on retirement plans by the Center for State and Local Government Excellence. Local plans in the center's study had a funding ratio of 85 percent, compared with 84 percent for state plans. In addition, 69 percent of localities made their annual required contribution (ARC), versus 54 percent of states. State and local pension plans are both about as well-funded as private-sector plans, although they are not subject to the same funding requirements. The brief is based on data from 84 plans from 38 states, as of 2006.

Funding ratios compare assets with liabilities, and a 100 percent ratio means the plan's assets cover its liabilities. In addition to funding ratio and whether the employer covers the ARC (which measures the extent to which the sponsor is keeping up with benefits as they accrue and paying down unfunded obligations), the study also looks at the increase required, as a percentage of payroll, to pay 100 percent of the ARC (which, over time, eliminates the unfunded liability). The local plans in the center's sample would have to increase payroll by 1.6 percent to meet 100 percent of ARC, compared with 1.8 percent for state-administered plans.

The full brief can be downloaded from the center's Web site at http://www.slge.org.

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