Effects of Pension Plan Changes


Introduction

Since 2009, fiscal constraints have forced state governments to reduce costs, often by laying off or furloughing employees, imposing salary freezes and/or reducing benefits. In fact, according to the National Conference of State Legislatures, since 2009, more than 45 states have made significant changes to their retirement plans, including increasing employee contributions, reducing benefits, or both. Other states have modified their plan design, choosing to transfer more of the risk associated with providing retirement benefits from the state and its political subdivisions to its employees.

While we know a great deal about the unfunded liabilities of public pension plans, we know little about the effects pension plan changes will have on the retirement income of public employees.

This report calculates the retirement income state and participating local employees hired under the new benefit conditions may expect, and compares it with the retirement income they would have earned before the plan was changed. The report also summarizes interviews conducted with state human resource executives and retirement experts from 10 states that have made significant pension plan changes.
 

Date published

April 25, 2014

Contact

Alex Brown, Research Manager
 

Download report

Press release


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Becoming a member of NASRA offers a unique opportunity to join a community committed to the sound, efficient, and innovative stewardship of public retirement systems. Membership connects you with a network of professionals and experts, providing valuable insights into managing public retirement systems with a focus on sustainability and risk-averse strategies.

By joining NASRA, you gain the tools and resources to enhance the management of public retirement systems, ensuring their long-term success and reliability for generations to come.


 

What's New at NASRA: Public Pension Investment Return Assumption Brief Updated

NASRA’s latest update to standing issue briefs, Public Pension Plan Investment Return Assumptions underscores the critical role the investment return assumption plays in the financial health of public pension plans. Of all actuarial assumptions, it has the greatest impact on plan funding levels and cost. This brief traces how a decade of low interest rates and inflation, beginning in 2009, prompted many plans to reduce their long-term expected returns in line with more modest capital market projections. However, since inflation began rising in early 2021, the trend toward lowering return assumptions has largely paused. While reducing a plan’s assumed return can increase both costs and unfunded liabilities, setting this assumption is a careful, thorough process. It draws on expert input from actuaries and investment professionals and is guided by actuarial standards of practice.