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Study Downplays Longevity’s Effect on State/Local Plan Funding

  1. Many states and local government pension plans face funding challenges. At the same time, average longevity is increasing. Seems logical that retirees living longer would exacerbate those funding woes, but a recent study by the Center for State and Local Government Excellence, “How Will Longer Lifespans Affect State and Local Pension Funding?” suggests that it may not have as severe an effect as you might think.

    The study examines the impact that incorporating longevity improvements into pension plan cost estimates would have on the funded status of state and local plans. To do so, it considers the effect of two scenarios on state and local plan liabilities and funded ratios:

    1. public plans being required to use the new mortality tables designed for private sector plans; and

    2. public plans being required to fully incorporate expected future mortality improvements.


    The center found that:

    • Using the private sector standard, public pension plans underestimate life expectancy by only 0.5 years, reducing the overall 2013 funded status of state and local plans by only 1% — from 73% to 72%.
    • Incorporating future mortality improvements would increase life expectancy by 2.3 years and reduce the aggregate funded ratio of public plans by 6%, from 73% to 67%.
    • Public sector plans appear to be making a serious effort to keep their life expectancy assumptions up to date.
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    The center says that the results indicate that “public sector plans seem to be making a serious effort to keep their life expectancy assumptions up to date.” Center for State and Local Government Excellence President and CEO Elizabeth K. Kellar in her remarks in the study’s introduction said, “State and local governments have been making changes to their pension plans over the last decade to address funding challenges. Adjusting demographic and other assumptions is often necessary to ensure that pension obligations can be met.”