I recently attended a National Public Pension Funding Forum hosted by the National Conference of Public Employee Retirement Systems, and had the opportunity to hear from many pension fund administrators and experts about the pension funding successes and challenges in the United States. As funds from across the county continue to work to ensure long term financial stability, one of my biggest takeaways from the event was that even though there are often no easy answers when it comes to pension funding, LAGERS is getting a lot of things right.
With nearly 14.5 million Americans participating in public pension plans, these conversations are paramount to the retirement security of so many Americans. The evidence that pension plans add huge value to public employers is pretty convincing. But the challenges for funding these benefits are real: lowering of investment assumptions, slower than expected payroll growth, increasing life expectancy, and plan maturation can all increase the financial burden of funding these plans, especially if a plan is already underfunded.
There is some good news in all of this too, however. Improving long-term investment returns, implementation of more aggressive liability pay down strategies, improvements to benefit designs, upticks in hiring and salary growth, and perhaps most importantly, increasing commitment from plan sponsors and policy makers to fully fund plans are all trends that bode well for the future of public pension plans.
So where does LAGERS fit into this picture? I’ve always marveled at how forward-thinking our predecessors and current leadership are here at LAGERS. Even in the 90’s when times were good, LAGERS remained committed to fully funding benefits and positioning the system to be able to weather a market downturn in the future. More recently, LAGERS continues to be forward thinking in our funding practices including reductions to our assumed rate of return (following an experience study), the closing and shortening of amortization periods, updates to our mortality assumptions, and our continued commitment to fully funding all accrued benefits. This commitment and planning has helped LAGERS climb to 95.6% pre-funded ratio this year, and will continue to position the system well for years to come.
As we look across the nation, the funding challenges vary widely, but I am encouraged that there is a sharp focus by many plans on doing the right thing long-term. And LAGERS members can rest assured that our funding practices are always top of mind as we continue to strive to position LAGERS to perform well for generations to come.