DB plans in good shape

The nation's Defined Benefit public pension plans face funding challenges, but are not in a crisis. This is the conclusion of a study published by NASRA official Keith Brainard.

With some exceptions... public pensions remain in reasonably good condition, thanks to diversified and professionally managed portfolios, an improving stock market, and a near cessation of benefit enhancements during the past few years. Assuming investment markets continue their return to historic norms, the current public pension funding level is projected to mark the low point and will begin to rise.

***Seventy percent of public pension plans are funded at 80 percent or higher, a threshold considered by many actuaries to indicate actuarial health. Of course, that leaves 30 percent funded at lower levels, with a higher unfunded liability to overcome.

Most plans with poor funding levels got that way through the chronic failure of legislatures (or city councils) to make required contributions.

Nationwide, taxpayer contributions make up one-fourth of all public pension revenue; investment earnings and worker contributions make up the rest. Generating investment earnings first requires contributions, and states and cities that failed to make required contributions have lost out on billions of dollars of potential earnings, thereby worsening their pension plan's funding level.