“By relying on outdated actuarial tables, making only minimum payments, and failing to limit benefits as the number of active workers paying into the plans fell, Pittsburgh has accumulated a $700 million unfunded liability, and its 29.5% funding level is among the lowest in the U.S.
Officials narrowly met an end-of-year deadline set by the state to present a plan for reaching a 50% funding level, which they hope will avert a possible state takeover of its three pension plans for city workers.”
While the article provides some cover to the city noting that things like state-mandated laws, the growth of non-profits and the 2008 stock market crash were beyond the city’s control, they do pick up on some key errors. These include decades of ignoring our unfunded liability and the continued use of 1984 life-expectancy tables all the way into the last decade.
The article does note some recent changes which will help including reducing the assumed rate of return to 8% and cutting the period in which liabilities must be paid to 30 years — or in other words, taking a more conservative, responsible approach. However, the article identifies the need for a change in the benefits themselves in order to provide a real fix for the system — something which necessitates state intervention.
You can read the entire article here.
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