How’s the County’s Pension System?

Earlier this year we issued a report on Allegheny County’s retirement system. Measured by the ratio of current employees to those receiving a pension, the County is in the opposite position of places like Pittsburgh or the Port Authority: there are more actives than retirees in the County system.

The report detailed the funding progress of the plan back to the mid-1980s. The funded ratio, which takes the plans actuarial assets divided by the actuarial liabilities, is a strong indicator of how healthy the pension plan is. The County’s most recent audit covers 2011 and 2010 and shows that the funded ratio was 58.7% in 2011. Note that in 2005 it was 84.9%. Last year’s ratio was low, but it still beats 2009 and 2010 and the lowest ratio in our available data, 53.3% in 1986.

Two important considerations to keep in mind. First, the County has increased the percentage of pay employees have to put in to the pension system the last two years. At the end of 2011, effective for January 1, 2012, the level was 8%. The Retirement Board will make a determination at the end of this year whether the contribution rate increases by a vote at a public meeting. Under the law that created the pension system, the County has to match what the employees put in. So when the Board tells the employee it is 8%, the County has to come up with money that equals the aggregate employee contributions. In 2011, the audit shows $23 million coming from both.

Second, though the employees and the County have been putting in a sizable amount of money, the County is not coming close to what it should be putting in under its Annual Required Contribution, or ARC, which makes the "R" looks more like "recommended" than "required". In 2005 the ARC was $22.5 million and the County put in 73%; last year it was $59.4 million and the audit shows the County put in 39% (the aforementioned $23 million).