Another Alarm Bell Sounded on State Pension Plans

The American Legislative Exchange Council (ALEC) has taken a look at state pension plans and the picture is not pretty: on average, these pension plans were 81 percent funded and carried a total of $359 billion in unfunded liabilities. Pennsylvania-reflecting the SERS, or state workers pension plan-reported a funded ratio of 84 percent and $14 billion in unfunded liabilities. Some states (DE, NY, OR) eliminated any unfunded liabilities while others (IL, LA, OK) were among those with low funded ratios.

With public pension plans assuming a high rate of return and being heavily slanted toward defined benefit type plans, the study notes that the solution lies in "fundamental reform". This would mean looking at the level of benefits and phasing in new defined contribution (401k) type plans for new hires.

This would be sound advice as the state inches closer to the date when huge rate spikes for its state workers pension plan and the teachers’ pension plan as well as the multitude of local pension plans that are in trouble.