Has the Makeup of Local Pension Plans Changed?

Has the Makeup of Local Pension Plans Changed?

The Pennsylvania Public Employee Retirement Commission-PERC for short-just issued its latest status report on local pensions in the state, municipalities, authorities, and counties. There are more than 3,200 local plans in the state, and the report is a real treasure trove for those looking to find data on specific plans or the overall characteristics of local plans in Pennsylvania.

Status reports date back to 1985 when PERC was charged by Act 205 with monitoring plans (Act 293 covers counties). Back then there were 2,372 plans: thus, another 856 plans have been created, about 33 per year through 2011, the year the latest status report collects actuarial data on.

So has the nature of plans changed much in that time? In the public sector pension lexicon there is the overarching distinction between defined benefit plans (where the employee is promised a defined retirement benefit that depends on retirement age, service length, and final average salary) and defined contribution plans (where the employee is promised a fixed contribution that is often matched by the employer and what is in the employee’s account upon retirement is the benefit).

In 1985 the PERC status report shows that 75% of plans were self-insured defined benefit plans, 21% were defined contribution, and 4% were "other". In 2011 the distribution of the pie (which had gotten bigger) shifted slightly with 70% of the plans defined benefit, 25% defined contribution, and the remaining 5% "other".

The number of employees covered by a specific plan has remained largely unchanged: in 1985 slightly over 94% of employees were participating in a defined benefit plan. By 2011 the percentage was 92%. There was a corresponding rise in the number of employees covered under defined contribution plans, rising from 5% to 7% over that time frame.

It is fair to conclude that the public sector plans at the local level in Pennsylvania are thus still defined benefit in nature. It is also fair to say that the majority of the plans are small: in 1985 67% of the plans had 10 or fewer members, and in 2011 68% had 10 or fewer.