Local pensions show good bill of health
The 2019 status report for Pennsylvania’s local pension plans has been released. As earlier reports have illustrated, the pension system is actually a collection of 3,300 plans that separately cover police officers, firefighters and non-uniformed employees and are administered at the local level. The majority of the plans are small and are defined benefit in nature.
As of Jan. 1, 2017 the 304 plans in Allegheny County covered 7,921 active employees and had an aggregate funding ratio (assets divided by liabilities) of 75 percent. To see the influence of Pittsburgh’s police, fire and non-uniformed plans, removing those plans (combined funding ratio of 56 percent) raises the funding ratio to 91 percent. No municipalities in the county were “severely distressed” based on the Act 44 ratings.
A recent Policy Brief detailed the benefit structure for new hires of the state’s pension systems. To summarize, all new state and school hires will have a pension plan that either relies in part or wholly on a defined contribution aspect.
Is this happening in Allegheny County? 50 of 304 plans (16 percent) are defined contribution. There are 941 active employees covered by these plans and $110 million in actuarial assets, about 12 percent and 5 percent, respectively, of the totals in the county.
Since the 2015 valuations, on net there are 29 more active employees in a defined contribution plan (a 3.2 percent increase) and actuarial assets grew from $103.1 million to $110 million (a 6.6 percent increase). The growth in actives was greater than the 2.3 percent increase in actives in defined benefit plans but slower than the 9.6 percent increase in asset value for defined benefit plans. Four new defined contribution plans in Findlay, Ross and South Fayette Townships and Thornburg Borough were created sometime between 2015 and 2017.
Will there be additional growth in defined contribution plans at the local level in the next few years? To date Harrisburg has been reluctant to make a wholesale change like it did for new state and school hires so at this point it may be largely voluntary on the part of local governments.