National Association of State Retirement Administrators

State and Local Government Contributions to Statewide Pension Plans: FY 16

Introduction

Pension benefits for employees of state and local governments are paid from trust funds to which public employees and their employers contribute during employees’ working years. Timely contributions are vital to adequate funding and the sustainability of these plans: failing to pay required contributions results in higher future costs, due to foregone principal and investment earnings that the contributions would have generated. 

Nationally, contributions made by state and local governments to pension trust funds in recent years account for just less than five percent of all spending. Overall, the experience for FY 16 reflects a continuation of an improved effort among state and local governments to make actuarially determined pension contributions: on a dollar-weighted basis, the percentage of required contributions that was paid by public employers increased for the fourth consecutive year, while the rate of growth in pension costs continued to decline. Pension spending levels, however, vary widely among states and are actuarially sufficient for some pension plans and insufficient for others. Unlike employees, who must always contribute the amount prescribed in statute or by plan rules, a broad range of funding statutes, rules, policies, and practices is used to determine the contributions public employers—states, cities, etc.—make to public pension plans. This disparity in contribution governance arrangements is one of several factors contributing to a wide range of experience among public employers concerning required contributions. 

This brief describes how contributions are determined; the recent public employer contribution experience; and trends in employer contributions over time.

Date  Published

June 2018

Contact

Keith Brainard, Research Director
Alex Brown, Research Manager


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