STUMP » Articles » Let's Make 80% Fundedness Great Again! » 2 April 2017, 13:18

Where Stu & MP spout off about everything.

Let's Make 80% Fundedness Great Again!  


2 April 2017, 13:18

It’s time for the first quarter of 2017 round up of our 80% pension funding heroes, villains, and just… meh.

But first, thanks to my referrers!

Thanks to joe on this post.

Quick work by US Default in linking to my Calpers Myths v. Facts web fiasco. Thanks for linking!


Well, these are new hero entries, but not necessarily new heroes….

Dustin Hurst at Idaho Reporter:

“An audit released in October 2016 revealed the fund was 75.3 percent funded, below the 80 percent threshold some regard as the low bar for a healthy pension fund. The American Academy of Actuaries disputes the 80 percent figure, though, and says no single figure at a singular point in time can accurately describe a pension fund’s health.

“All plans should have the objective of accumulating assets equal to 100% of a relevant pension obligation, unless reasons for a different target have been clearly identified and the consequences of that target are well understood,” the 17,000-member group wrote in a 2012 policy memo.”

Dustin hits all the elements: he quotes his source accurately, and recognizes his source, as opposed to the “they say” or “experts say” formulation. Dustin has appeared before on the list.

Next, this is a bit sub rosa: Michelle Rindels, the Nevada Independent:

There’s a general understanding that a public pension plan that’s at least 80 percent funded is healthy, although the American Academy of Actuaries has cautioned against leaning too much on that figure and recommended everyone aim to attain and maintain a funded ratio of at least 100 percent over a reasonable period of time.

My understanding is a little birdie pointed Rindels towards the Academy brief (no, it wasn’t me). Still, yay for Michelle to name her source and appropriately communicated their message.

San Diego Taxpayers Educational Foundation:

While UAAL and NPL paint a portrait of numerical value of the current liability that unfunded pension benefits create for public employers, a plan’s funded ratio gives a better idea of the status of a pension plan’s funds. The funded ratio compares the value of the plan’s assets to the present value of future benefits owed to employees, retirees, and beneficiaries. A 100% funded ratio is the ideal target funding level for pension plans. However, a plan may not be sustainable at any funded ratio if required contributions are not made, if investments are overly risky, or if the size of the pension liability is disproportionate compared to the financial resources of the plan’s sponsor. [links to Academy paper]


Finally, this isn’t in text, but was a radio interview. I partly transcribed it for my own use, but I don’t have time to finish the transcript.

Liz Farmer from Governing Magazine in a radio interview:

[my transcript]

Liz Farmer: ….there’s this myth out there that having a pension fund that has 80% funded level is healthy and actuaries will quickly point out that’s not true.

Because you need to have all of the money, not just a portion of it.

If you wonder, I use oTranscribe when I transcribe audio & video. That was at about the 3:45 mark in the audio file in the linked page.

I try not to do these transcriptions too often – it takes a lot more time than you assume, and then spoken language is not equivalent to writing. I do not want to do a verbatim transcript, because I know that’s not fair.


I wonder if some people get tired of the old copy/paste.

Anyway, let’s dig in:

Frequent flier Keith Phaneuf in CT:

Fund analysts typically cite 80 percent as a healthy ratio.

This is Phaneuf’s SEVENTH appearance. That’s quite the accomplishment, Keith. I’m withholding my high-fives; I hope you don’t mind, Keith, if I may call you Keith.

Another CT entry from Christine Stuart:

Most experts agree that a fiscally sustainable system should be at least 80 percent funded.

And yet another person in CT: Nadrina Ebrahimi at Yale Daily News:

In order for a state’s pension to be considered fully funded, 80 percent of the unfunded liabilities need to be paid.

Peggy Heinkel-Wolfe,

Actuaries prefer a pension be 100 percent funded but, as a general rule, a pension fund is considered sound if it is at least 80 percent funded.

Okay, let’s stop this one for a minute.

Heinkel-Wolfe was so close.

She mentioned that actuaries prefer a pension to be 100% funded (I assume she saw the Academy brief). And then she goes for a passive construction not indicating who exactly is satisfied with only 80%.

I swear, this sort of grade inflation/lowered expectations is about as destructive as giving As to students who are total washouts.

Let’s hear it for unnamed Virginia state officials:

State officials say 80 percent funded is a relatively healthy place to be in.

Would you like to name those state officials?

Are journalists so lazy that they won’t actually write people’s names down?

People who are firm in their opinions tend to be extremely happy to see their names in the media. Heck, I’ve been pleased every damn time I’ve been quoted in the NY Times (well, I remember only one time, but still) — because it reflected my opinion exactly as I stated it.

If people aren’t willing to have their names on the opinion, journalists, you should be suspicious. You must be very young if you can’t understand why this is.

Claudia Vargas at

The Kenney administration implemented new pension changes last year that are expected to accelerate the pension fund reaching a healthy 80 percent funding rate. If all goes according to plan, the fund is expected to reach 80 percent funding by 2031.

The bit that damned the journalist was the use of the “healthy” adjective. Look below for more.

Luke Adelson from the New Orleans Advocate:

Few systems in the country are fully funded, and 80 percent funding, a threshold private plans are required to meet, has long been used as a benchmark for a healthy plan.

Again, notice the passive construction. Crimes were committed, indeed.

Andrew Seidman,

An 80 percent funded ratio is generally considered financially healthy.

John Reitmeyer, NJ Spotlight

In fact, at 70 percent funded, the Police and Firemen’s Retirement System of New Jersey is much closer to the standard of being 80 percent funded than the overall pension system, which is only 56.5 percent funded, according to the latest official actuarial reports.

NJ Assemblyman John Wisniewski:

[my own transcription]

Assemblyman John Wisniewski: In ’96 it was 100% funded, now it’s not. And now it’s gonna take us a long time to get to that point where we can get back to having a fully-funded pension system, which most actuaries say is 70 – 80%, not 100%.



I am not joking about that. I keep seeing references to unnamed actuaries who supposedly say 70 – 80% is “healthy” or “fully-funded”, but I have no documentary evidence of this.

Some people may be surprised, but I have never submitted an official complaint to the ABCD (though I have 1: tried contacting a member with a question, and 2: helped other people with reviewing their complaints before they submitted.)

It’s because I have never been given proof beyond the “they say” formulation.

You use “they say”, “experts say”, or “actuaries say” without pointing me to your source: I’m going to assume this is bullshit. This ain’t national intelligence with top secret classification.

Again, journalists: if a professional says something is a generally accepted professional rule of thumb, and they’re not willing to be quoted by name: ASK WHY THAT WOULD BE.

This is fairly simple.

My assumption is that the “they say“ers are just making crap up. Otherwise, they would name somebody. Dean Baker has no qualms saying that 70% is fine. He has been quoted, by name, by many people.

Of course, Dean Baker isn’t an actuary. There’s nobody to publicly yank his credentials for perpetuating a lie.


These don’t quite make the grade, either way, so I’m just throwing them in to keep track of the use of the myth.

Maybe NASRA as a source:

NASRA says a minimum funding target for states should be 80 percent, though 100 percent is the goal.

I can’t remember if they really said that. But I’m letting it go for now.

Another one blaming NASRA:

Michigan is 61.6 percent funded, which is well under what the National Association of State Retirement Administrators, recommends for states: 80 percent at the least.

Those are from similar sites, so it may just be reusing the error.

Ryan Briggs, Philadelphia Weekly

Katz also took issue with statements from Finance Director Rob Dubow on the city’s larger pension reform projections, which will purportedly realize 80 percent funding in 13 years, if enacted.

Eh, not really saying that 80% is desirable. I just want to note the 80%.

David Coates, Vermont Business Roundtable

A suggestion would be to freeze these benefits until the plans are 80 percent funded, similar to the funding level generally required of the private sector plans.

Hmmm, they’re not exactly wrong here. But 80% is the wrong target, even so.

In a piece by Ed Mendel,, the 80% issue comes up multiple times. Mendel is a straight reporter and quotes his sources, so I don’t really have an issue with him. I just want to note some people keep parrotting this bullshit within the piece itself:

“Many experts and officials to whom we spoke consider a funded ratio of 80 percent to be sufficient for public plans for a couple of reasons,” said the GAO report.

Girard Miller, debunking 12 pension myths, said in a 2012 Governing magazine column the view that 80 percent funding is healthy comes from anonymous GAO and Pew sources and a federal requirement that private pensions take action when funding falls below 80 percent.

Miller said pension funds should be 125 percent funded at the market peak. Based on equity losses in 14 recessions since 1926, a pension plan 100 percent funded at the end of a business expansion is likely to lose 20 percentof its value during an average recession.

“A plan funded at 80 percent going into a recession will likely find itself funded at 65 percent at the cyclical trough — and that’s a toxic recipe calling for huge increases in employer contributions to thereafter pay off the unfunded liabilities,” Miller said.

Now CalPERS is about 65 percent funded and phasing in the fourth in a decade-long series of rate increases ending in 2024. Getting back to 80 percent funding has been mentioned at the last two monthly CalPERS board meetings.

As a five-year strategic plan was adopted in February, board member Dana Hollinger suggested that a goal of 75 to 80 percent funding in five years would be more “attainable” and “realistic” than the goal that was aproved: 100 percent with acceptable risk, beyond five years.

Last week, Al Darby of the Retired Public Employees Association urged the board to reverse a short-term shift last September to lower-yielding investments expected to reduce the risk of funding dropping below 50 percent, another of the goals adopted in February.

“Restoring public equity allocation to pre-2016 levels would contribute a lot to reaching the 80 percent funding status that we are all hoping to restore,” Darby said.

I really like the way Mendel approaches these, because I get to hear from multiple sources, and he always names them. Yay Ed!


Total entries (cumulative since October 2014): [some are on multiple times]

Hall of Shame: 138
Heroes List: 17
Ambiguous: 21

How many entries refer to 80% as “healthy”: 82
How many entries refer to 80% as “ideal”: 5

It gets a bit boring to look at the data this way, so I thought I’d make a few graphs.

Here is my Hall of Shame incidence graph: [one point removed because I couldn’t pin down a date]

Well, that’s okay, but let’s find out how the incidence of reporters referring to “health” being indicated by 80% fundedness: [I exclude the ambiguous entries on this one]

And finally, to see if there was a pattern, I regraphed this as a percentage stacked column graph:

Eh, not really indicative at this point. But still, ya gotta start somewhere.

80% Funding Ratio Spreadsheet

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