New research from the Center for Retirement Research at Boston College finds that strains on state and local government revenue due to COVID-19 will likely hamper governments’ ability in the near term to make required contributions to employee pension plans.
While local governments strive to fully fund public pensions at or near 100 percent each year, the aggregate funded ratio for local plans was 72.1 percent in 2019 – slightly lower than the 73 percent for state plans.
“Plans will close 2020 with virtually no change in their average funded ratio,” according to the authors of the research. “Projections beyond 2020 suggest that the finances for all public plans will deteriorate further, with local plans slightly worse off than states. Still, most local plans will maintain sufficient assets from which to pay benefits indefinitely.”
The authors conclude that a few of the worst-funded local plans face the real threat of trust fund exhaustion thereafter and will require extraordinary contributions by their government sponsors. Read the full report.
Local Government Pensions Sustainable Despite COVID-19
