Pension Funding Myths: Why 100% Funded Isn't the Magic Number

State and local pension funds have weathered major economic storms over the past 25 years—including the 2001 recession and the Great Recession. Despite varying funding levels, all pension systems examined continued meeting their obligations.

The secret? It's not about hitting 100% funded status.

The Real Story

Analysis of over 6,000 state and local pension plans from 1993–2016 shows that funding levels don't correlate with a plan's ability to pay benefits. Instead, sustainability depends on two factors:

• Annual contributions and investment income exceeding benefit payments most years
• Building sufficient reserves during good years to weather economic downturns

State and local pension funds currently hold nearly $4 trillion in assets—more than ever before. Even the lowest-funded states successfully paid all benefits throughout the study period.

What This Means

Pension "reforms" that cut benefits, close plans to new hires, or convert to defined-contribution plans aren't just unnecessary—they're damaging. These efforts could cost the national economy $3 trillion or more.

This research reveals what really matters for pension sustainability and why current funding ratios are the wrong benchmark for reform.

Download the full report to see the data behind these findings.