Who is Severely Distressed?

Who is Severely Distressed?

Act 44 of 2009 addressed public sector pensions at the local level in Pennsylvania and came up with a typology of distress based on the funding ratio (assets/liabilities) of the plan to determine if there was no distress (90% or above), minimal distress (70 to 89%), moderate distress (50 to 69%), and severe distress (49% or lower). Pittsburgh was at the severe distress level for some time until the 2010 "revenue infusion" plan moved it, by PERC’s measurement, to moderate distress.

The latest PERC status report looks at this typology. In 2010, with 1,439 municipalities scored, 27 (less than 2%) had a designation of severe distress. In 2012, with 1,449 municipalities scored, 26 (1.8%) had a designation of severe distress. One can see the impact of plans in Pittsburgh, as well as Philadelphia, moving out of this level of distress: in 2010, the class of "cities" reported 32,524 active members in the severe distress level, and by 2012 "cities" had 782 active members in the severe distress group.

PERC notes that many of the severely distressed plans are newer plans (less than ten years old) and gave past service credit to employees, raising the liability of the plan. Makes one wonder how many plans are severely distressed because of mismanagement or underfunding and if officials view the local pension system as one in need of inclusion in statewide reform (like the systems for state workers or school teachers) or if there are enough plans in good shape that should be left alone.