STUMP » Articles » 80 Percent Funding Hall of Shame: Oh THOSE Experts Say » 7 January 2015, 07:13

Where Stu & MP spout off about everything.

80 Percent Funding Hall of Shame: Oh THOSE Experts Say  

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7 January 2015, 07:13

In my last post to the 80% funding hall of shame, I pointed out a variety of weasel words re: where this “80% fundedness is healthy” comes from.

Some have learned not to go with the nebulous “they” who always say these things.

Here’s one example:

By contrast, the state’s pension plan is 61.4 percent funded, and that’s considered low. A retirement fund is generally considered healthy if it’s 80 percent funded, according to the National Association of State Retirement Administrators.

I have tried to find something definitive at the NASRA site and came up with this piece from 2012:

Recently, some have challenged the idea that an 80 percent funding level is a healthy level for
public pension plans and have asked about the origins of such statements.1 Based on our
research, the use of 80 percent as a healthy or minimum public pension funding level seems to
have its genesis in corporate plans, for which it was a statutory threshold. This standard was also
applied to private sector multiemployer plans.

Basically, the 80% level is used as a statutory target for private plans for a variety of purposes. The main point was that once plans dipped below 80%, things were in a bad state.

The 80% level is mentioned in a caption in a pic in this article on multiemployer plans. Mind you, there has been statutory doings of late with MEPs, and the 80% mark is a trigger for indicating things are horrible.

I guess an analogy can be the point at which collegiate athletes are put on academic probation — if their GPA is just a hair above that mark, it doesn’t mean they’re “academically healthy”. It just means they don’t suck so bad that corrective action must be taken immediately.

Just because dipping below 80% means really bad things for all sorts of pensions, does not mean being a little above it is okay.

Here’s a different ‘expert’ who decides even 80% is too high:

But Dean Baker, co-director of the liberal Center for Economic Policy Research, says that plans are in decent financial health so long as they’re about 70 percent funded.

Good luck with pushing that line, Baker.

I find it funny that he had to push the bar even lower than 80%, mainly because even after multiple years of a bull market, many public pension plans are still below that mark.

Just wait until the bear roars.


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