Surveying the Pension Landscape in Allegheny County

Surveying the Pension Landscape in Allegheny County

Allegheny County is home to nearly 300 pension plans that cover the gamut of local government employees: from police officers and firefighters to bus drivers, clerks and garbage collectors, from elected and appointed officials to various white- and blue-collar classifications.  Not counting school employees (who are part of a statewide pension plan), the local government pension “system” in the County covers more than 18,000 active workers and pays out benefits to over 14,000 retirees and/or their beneficiaries.

 

 

Every two years the state’s Public Employee Retirement Commission (PERC) collects and publishes data on the Commonwealth’s more than 3,000 local government plans and shows their financial health based on the funded ratio, which is the plan’s assets divided by the plan’s liabilities, expressed as a percentage.  The recent legislation known as Act 44 tied levels of stress  to funded ratios: plans funded at 70 percent or greater are classified as being in good shape (no or minimal distress) while those under 70 percent are not (moderate to severe distress). 

 

PERC’s data on the plans in Allegheny County served as the basis for our most recent report.  We examined all the plans, from the County’s 7,000 employee plan to the handful that cover a single employee.  Municipalities, authorities, and associations were included, and we sorted plans according to employee type (police, fire, and non-uniformed) as well as by level of government (plans attributed to or associated with Allegheny County, the City of Pittsburgh, etc.). 

 

The data reflected the actuarial picture as of January 1, 2009, and will be considered current until the next PERC report is released two years from now.  Here are some of the highlights for the pension plans in Allegheny County:

 

  • The majority of pension plans are in good shape:  267 plans (a shade under 90 percent) had a funded ratio of 70 percent or better.  Over half (172 plans, or 57 percent) had a funded ratio of 90 percent or better.
  • A handful are in a state of severe distress: Included in this group where plans have a funded ratio of 49 percent or less are the three plans administered by the City of Pittsburgh, which spent much of 2010 debating how to get an up-front payment or a long-term dedicated revenue stream to bring the pensions up to 50 percent funded.
  • Most of the plans are defined benefit type: In all 244 plans (82%) are defined benefit plans in which a specific retirement benefit payment is promised by the employer.
  • Of the three employee classes (non-uniformed, police, and fire) non-uniformed had the best funded ratio for the group: But at 68 percent funded, this group would be considered in bad shape as a plan.
  • Not all plans related to Pittsburgh are in dire straits: Plans for the Parking, Redevelopment, and Housing Authorities are all funded at 95 percent or better.  The latter two are defined contribution plans as well.
  • Allegheny County’s plan is moderately distressed: With a funded ratio of 55 percent, the County’s plan is in better shape than the City’s plans but worse than the three plans administered by the Port Authority. 

 

Pensions and retirement benefits are under a lot of scrutiny as state and local governments wrestle with financial issues.  As local contracts expire and are renegotiated more pressure will likely be exerted on benefit plans.  To be sure, when PERC issues its next report we may see a very different pension landscape in the County.

 

For starters, it will be known later this year whether Pittsburgh’s New Years Eve bailout plan worked and achieved the 50 percent threshold set out by Act 44.  If it did, then administration of the plans stays with the City.  If it did not, then the Pennsylvania Municipal Retirement System will take over direction of the plans.  Negotiations with the City’s unions will remain local, but the assumptions and investment strategy of the plans could be quite different.

 

And there might be some indication as to the state’s appetite for real pension reform legislation.   But tackling that issue raises as many questions as it does opportunities.  Would the state move to a defined contribution plan for new hires?  Would this apply to just the state workers’ and school employees’ systems or would the myriad of local plans be involved as well?  Would new hires of local governments become members of a new unified plan?  Will pension reform be restricted to asking for higher contributions and lengthening the time to retire and collect a pension? All of these would represent major steps toward reining in the seemingly never ending buildup of unaffordable retirement benefits.

 

Allegheny County’s 300 pension plans offer a glimpse at the myriad issues facing the Commonwealth and its taxpayers in regards to pensions.