ICMA / Priorities / Public Policy / Policy Priorities / Pension Funding

Public Pension Funding


The importance of making adequate contributions to public pension plans has never been greater. Not only does this ensure that benefits can be paid, but having a well-funded pension also signals to credit rating agencies that the government has strong financial management practices.

State and local government leaders know that retirement benefits are important in attracting and retaining talented workers. Having access to reliable data about pension plans informs the debate around retirement security issues.

Public Plans Data (PPD) is a free, comprehensive database of state and local public pension plans. PPD includes data on employee and employer contributions, benefits, investment income and fees, plan membership, and plan provisions.

Read the brochure to learn out more about PPD's new and improved features.  

The Pension Funding Taskforce, which includes ICMA and the other major national government associations, recommends that local and state governments adopt a pension funding policy that is based on an actuarially determined annual required contribution. The policy should address three core elements: 

  1. Actuarial cost method
  2. Asset smoothing
  3. Amortization policy.

It also should address the following general policy objectives:

  • Ensure pension funding plans are based on actuarially determined contributions.
  • Build funding discipline into the policy to ensure promised benefits can be paid.
  • Maintain intergenerational equity so the cost of employee benefits is paid by the generation of taxpayers who receives services.
  • Make employer costs a consistent percentage of payroll.
  • Require clear reporting to show how and when pension plans will be adequately funded.

Check out Pension Funding: A Guide for Elected Officials for more details.

Because the Governmental Accounting Standards Board has issued new standards (GASB 67/68, effective for governments as of June 2014), there is likely to be confusion over pension calculations. There now are three types of calculations that will be produced regarding state and local government pensions. Each figure is calculated differently and used for a distinct purpose:

  • Budgets - determining the appropriate annual contribution to the retirement system for sound funding.
  • Books  - computing an annual financial position for pensions to report on the balance sheet.
  • Bonds – calculating how pension obligations affect a government’s credit worthiness.

For more information, see: 

GASB CHAIRMAN SUGGESTS FIVE KEY AREAS FOR SUCCESS

PUBLIC PENSION FUNDING: EXAMPLES AND RESOURCES

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