The Financial Crisis and State/Local Defined Benefit Plans

Source: Alicia H. Munnell, Jean-Pierre Aubry, and Dan Muldoon, Center for Retirement Research at Boston College, Issue in Brief, IB #8-19, November 2008

The brief’s key findings are:
• Prior to the financial crisis, most public pension plans were on a path to full funding.
• But the crisis has pushed the aggregate funding ratio below 80 percent.
• Without action, in five years the funding ratio could be as low as 59 percent or as high as 75 percent.
• The ability to smooth pension asset values provides a buffer against the need for imminent hikes in pension contribution rates.

But, eventually, taxpayers will have to pay for any permanent damage done by the financial crisis.

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