STUMP » Articles » 80 Percent Pension Funding Hall of Shame: Experts Say.... » 11 December 2014, 06:35

Two more reportorial additions to the 80% Pension Funding Hall of Shame.

First, a reporter at Reuters:

Under new pension accounting standards, issued by the Government Accounting Standards Board (GASB), the New Jersey system’s overall funded level stands at 44 percent for fiscal 2014, compared to the 63 percent previously determined by standard actuarial methods. Eighty percent or more is generally considered healthy.

And then somebody at a Connecticut news site:

The most recent actuarial valuation of the pension funds showed that as of June 30, 2012, the State Employees’ Retirement System was funded at 42.3 percent. But by 2014 it was funded at 41.5 percent. That means the State Employees’ Retirement System has about $10.5 billion worth of assets, which is enough to cover 41.5 percent of the $21 billion in liabilities. Experts say an 80 percent funding level is considered healthy.

Checking my publicly accessible record, I was not able to contact the first reporter, and I tried contacting the second (but never got a response).

I want to highlight that both reporters used a “they say…” construction. One thing I’ve learned from my own run-in in reporters (and being misunderstood, misquoted, etc.), is that if they do not name a specific source for a “fact” that needs to be pointed out to readers, it’s probably bullshit.

What experts say? Who decides what is generally healthy?

Might I humbly suggest that these people are the experts?

This is what these experts say:

The health of defined-benefit pension plans is a key issue to the tens of millions of Americans who are receiving or expecting to collect pension benefits. Some have said that the level of funding – specifically an 80% funded level – should be used as a general benchmark to determine whether pension plans are financially healthy. In reality, however, no single level of funding distinguishes a healthy plan from an unhealthy plan. In fact, plans should have as their objective accumulating assets equal to 100% of relevant pension obligations.

And even 100% in any given year is no guarantee of fund health.

I mean, if a plan can go from a surplus to a deep deep hole in less than a decade, I would say that the snapshot isn’t really telling you much about the long haul.