Funding Policies

A pension plan funding policy describes how pension benefits will be financed. State pension funding policies typically come in the form of statutes and retirement system board policies and practices. Core elements of a public pension funding policy are the actuarial cost method, the asset smoothing method, and the amortization policy.

National organizations representing the nation's governors, state legislatures, local officials and public finance professionals formed a Pension Funding Task Force and released "Pension Funding: A Guide For Elected Officials" in March 2013, which recommends state and local governments adopt pension funding policies based on the following five general policy objectives:

Have a pension funding policy that is based on an actuarially determined contribution.
Build funding discipline into the policy to ensure that promised benefits can be paid.
Maintain intergenerational equity so that the cost of employee benefits is paid by the generation of taxpayers who receives services.
Make employer costs a consistent percentage of payroll.
Require clear reporting to show how and when pension plans will be fully funded.

Dedicated Funding Sources

Dedicated pension funding sources

State and local examples of revenue streams dedicated to pension unfunded liabilities

28 examples

19 states & localities

5 funding categories

No entries match this filter.

NASRA Resources

Selected States Appropriating Funds Above the ADEC to Public Pension Plans since FY 21, July 2025
NASRA Overview of Public Pension Amortization Policies, April 2022
NASRA Analysis of Employer Contribution Governance Structures and Pension Funding Experience, October 2023
State Legal Provisions Addressing Pension Funding, April 2017
Resolution 2011-01: Funding Discipline in Public Employee Retirement Systems
The ARC Experience of State Retirement Plans, FY 01 to FY 13, March 2015
Issue Brief: State and Local Government Contributions to Statewide Pension Plans, November 2023
Pension Funding: An Elected Official's Guide, Report from the Pension Funding Task Force, 2013
The 80 percent threshold: Its source as a healthy or minimum funding level for public plans, Keith Brainard and Paul Zorn, January 2012
Perspectives on the "GASB Won't Let Me" Report, Memorandum from Keith Brainard, May 2012

Other Resources

Actuarial Funding Policies and Practices for Public Pension Plans, Second Edition, Conference of Consulting Actuaries Public Plans Community, August 2024
A Roadmap to Full Funding for Public Pension Plans, Daniel Siblik and Julian Regan, Segal
A Comprehensive Funding Policy: The Recommended Instrument for Navigating Public Plan Funding, GRS Consulting
Sustainability Checklist for Defined Benefit Plans, GRS Consulting
South Dakota Retirement System Funding Policy
Texas Pension Review Board Pension Funding Guidelines, adopted July 2024
The Rise of Layered Amortization, GRS Consulting
‘Surplus’ Considerations for Public Pension Plans, American Academy of Actuaries
Understanding the Valuation of Public Pension Liabilities Expected Cost versus Market Price, Paul Angelo
Milliman Series on Pension Funding Policies
- Public Pension Plan Funding Policy: Implications for revised Actuarial Standards of Practice No. 4
- Public Pension Plan Funding Policy: Effectiveness of Amortization Methods Under Stochastic Returns
- Public Pension Plan Funding Policy: Effectiveness of Amortization Methods Under Deterministic Projections
- Public Pension Plan Funding Policy: Effectiveness of Amortization Methods Under Projected Investment Scenarios
Beyond the ARC: Innovative Funding Strategies From the Public Sector, National Institute on Retirement Security
Assessing Pension Plan Health: More Than One Right Number Tells the Whole Story, American Academy of Actuaries, July 2017
Success Strategies for Well-Funded Pension Plans, Center for State & Local Government Excellence, February 2015
Funding Policies for Fixed-Rate Pension Plans, Texas Pension Review Board
Case Study: Setting a New Funding Policy Independent of GASB Standards, Milliman, July 2014
The 80% Pension Funding Myth, American Academy of Actuaries, October 2021
Issue Brief: Objectives and Principles for Funding Public Sector Pension Plans, American Academy of Actuaries, February 2014
Actuarial Funding Policy Guidance: Comparison of Recommendations, Segal, October 2014
Books, Budgets, and Bonds: Understanding New Public Pension Funding Guidelines and Calculations, June 2013
Best Practice: Core Elements of a Pension Funding Policy, Government Finance Officers Association
Advisory: In-Kind Asset Transfer to Defined Benefit Pension Plans, Government Finance Officers Association
Sustainable Funding Practices for Defined Benefit Pensions and Other Postemployment Benefits, Government Finance Officers Association
Developing a Pension Funding Policy for State and Local Governments, Gabriel, Roeder, Smith & Co., January 2012
Planning a Successful Funding Policy, Segal, November 2012

Become A Member

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: Employee Contributions to Public Pension Plans

Employee contributions remain a central part of public pension financing, and the way those contributions are structured is subject to change depending each states' governance rules. . NASRA’s 2026 updated brief finds median employee contribution rates of 6.2 percent of pay for employees who participate in Social Security and 9.0 percent for those who do not. For employees who do not participate in Social Security, the public pension often plays a broader role in retirement security, effectively providing two of the traditional three legs of the retirement stool rather than one.

Since 2009, 41 states increased employee contributions in at least one plan, while some states recently reduced rates for selected employees. Variable contributions are also becoming more common, with 26 plans in 17 states adjusting employee rates based on funding, plan costs, or other factors. The brief provides current trends and a state-by-state look at employee contribution requirements across public retirement systems.