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Public Pensions

Government pensions have become a hot topic of discussion. Today, serious challenges exist for many state and local government pensions. How exactly will they cover substantial unfunded retirement liabilities such as municipal pension funds and retiree health care benefits. MuniNet Guide provides informative commentary on current issues, as well as Top Articles that address common concerns, assess the potential for a pension crisis and provide alternative approaches to resolve issues.

Trends and Evolution of Government Pension Funding

City Pension Funding Ratios Take a Bounce Back in 2015 for Most Cities

Quick Points:
  • Based on audited results from 701 cities received to date by Merritt Research Services, City single/agent pension funding ratios showed a marked improvement in FY 2015 compared to the previous year. As of July 15, 2016 the median city pension funding ratio for FY 2015 stands at 76.6% compared to only 72.7% in 2014. That’s the best pension median for cities since 2008, the first year of the Credit Crisis.
  • The more upbeat pension 2015 funding numbers are particularly significant because they are based on the new GASB 67 and 68 pension rules which were implemented for the first time by most cities. Among the many changes in pension accounting rules, the concept of smoothing asset valuations was eliminated by most governments so that better overall market returns from 2013 to 2015 were reflected in the numbers.
  • Pension reforms that have occurred in many cities over the last several years, which probably accounts for a portion of the improvement in the funding ratio.
  • The GASB rule change that had the most potential to negatively impact funding ratios was the requirement that a lower discount rate at a 20-year tax exempt rate (under 4%) would be required for the portion of any government’s liability that exceeded the expected assets available to pay benefits. However, very few cities projected results that placed them in that position. The city of Chicago reported that two of its four plans triggered the lower blended discount rate.  Its 2015 aggregate city funding ratio reported by Merritt Research was 22.95%, which is one of the weakest of all cities in the nation.

Pension Funding Ratio Trend For Cities - 2015

Public Pensions - City Breakdown

Government Pensions

Government Pensions

MuniNet Guide Top Articles on Public Pensions

Top Picks
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