State and local pension plans attract and retain well-qualified public employees. They further the effective and efficient delivery of public services by serving as a workforce management tool and providing financial security in retirement.
Understanding Public Pensions: A Guide for Elected Officials, just released by the Center for State and Local Government Excellence and AARP, gives elected officials (and anyone else) the information they need to understand how public pension plans operate and the role they can play in meeting the needs of employees, employers, and taxpayers.
Readers will learn that since 2009 all states have made modifications to their retirement plans to help ensure their long-term sustainability. Every pension plan has a unique history, legal framework, and financial condition. As a result, there are no one-size-fits-all solutions from state to state or even from plan to plan to ensure that pension plans are properly financed and effectively managed to pay benefits for the long-term. Finally, not all changes are solutions--any modifications to a pension plan should be carefully considered to avoid unintended consequences or costs.
The guide notes that a pension funding policy should incorporate certain general objectives to:
* Base the employer's annual contribution on an actuarially determined contribution calculated at least every two years.
* Commit to funding the full actuarially determined contribution each year. If a plan is significantly underfunded, this may require a transition period for some government employers to achieve.
* Provide clear reporting to show how and when pension plans are projected to reach full funding.
Every state and local pension plan has its own history, legal framework, and characteristics. That's why solutions to pension funding and other challenges must be tailored to the...