How will longer lifespans affect state and local pension funding?

Abstract

The brief’s key findings are: (1) Rising life expectancy makes defined benefit pension plans more expensive. (2) The question is the extent to which state and local plans have already incorporated rising life expectancy into their cost estimates. (3) The analysis explores how plan liabilities and funded ratios would be affected by using (a) RP-2014, a new mortality table designed for private plans; and (b) a stricter standard that fully incorporates future mortality improvements. (4) Under the first scenario, liabilities and funding would barely change. Under the second, the average funded ratio would drop from 73 to 67 percent. (5) Since not even the private sector fully incorporates future improvements, public plans seem to be making a serious effort to keep their assumptions up to date.