Locally-administered pension plans

Abstract

The brief's key findings are: (1) 2011 data show that locally-administered pension plans continue to be slightly less funded than state-run plans – 72 percent vs. 76 percent. (2) This result is puzzling because local plan sponsors generally pay a larger share of their annual required contribution than state plan sponsors. (3) The explanation is that state plans have historically earned higher returns because they invest more in risky assets. (4) For mature plans with substantial assets, higher returns more than offset lower contributions. (5) During the financial crisis, though, local plans were able to narrow the funding gap because their less risky portfolios fared better.