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Which Pension Reform Initiatives Have (And Haven’t) Worked?

While funding levels are generally trending up, it's still crucial for plan staff and trustees to stay informed about funding solutions (and threats) to ensure the long-term health of their funds. Understanding the landscape can help us better protect our funds from damaging rhetoric and reform initiatives that are bad for plans, participants, and the public.
Which Pension Reform Initiatives Have (And Haven’t) Worked?
By: Hank Kim, NCPERS

“Public Pension Contributions Reach Record Yet Problems Persist.” “State, Municipal Retirement Systems Remain Stuck in ‘Pension Debt Paralysis.” These are just two of the headlines that appeared in July. Coincidentally, the same week it was quietly reported that state and local pension plans' funded status continued to rise for the third consecutive quarter.

Even when the underlying news is good, the headlines around public pensions are often riddled with negative connotations. The push for so-called pension ‘reforms' remains strong, despite extensive research showing that pensions are indeed sustainable, cost-effective, and critical to recruiting and retaining employees.

The latest research from NCPERS, The Hidden Costs of Pension Reforms: Rising Income Inequality, Lagging Economic Growth, explores the far-reaching effects of pension reforms that reduce benefits or close plans altogether. The study finds that these types of policies—which are usually implemented for the purpose of saving money—may end up costing more due to the dynamic interrelationship between pension reforms, income inequality, the economy, and market returns.

Policymakers are often tempted to make cuts to pensions in the face of tightening budgets, but this approach is rarely an effective tactic in the long run. Unfortunately, there is no one-size-fits-all approach to funding public pensions. But to fend off damaging reforms and to support the long-term health of our funds, we can learn what works—and what doesn't—from case studies, academics, and peer funds. This is how NCPERS Public Pension Funding Forum was developed. 

Now in its eleventh year, the Forum showcases emerging funding solutions and delves into case studies that offer a practical perspective on which pension reform initiatives are most effective. The program provides insights into the fiscal, political, social, and economic forces impacting pension systems across the country.

This year's Forum, held August 18-20 in Boston, has a special focus on funding solutions for plans with a negative cashflow. These plans—often referred to as mature plans—are becoming increasingly common. Looking collectively at state and local plans in the US, all but four states had negative cashflows as of July 2023.

The 2024 program invites discussions on how demographic shifts and AI will likely impact the workforce, exacerbating the challenges already facing mature plans. Public plan trustees, executives, and industry leaders will share innovative investment, policy, and actuarial strategies to address these funding gaps. View the agenda here to see the full lineup of speakers.

While funding levels are generally trending up, it's still crucial for plan staff and trustees to stay informed about funding solutions (and threats) to ensure the long-term health of their funds. Understanding the landscape can help us better protect our funds from damaging rhetoric and reform initiatives that are bad for plans, participants, and the public. Register here to join this important conversation at the 2024 Public Pension Funding Forum.

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