Most state pension funds made benefit cuts in years following financial crisis — report

By Rob Kozlowski - Pensions & Investments
January 3, 2017 3:32 pm, Updated 3:39 pm

More state plans than local plans passed some kind of public pension reform in the five years following the financial crisis, according to a brief from the Center for Retirement Research at Boston College.

Of the 114 state plans whose data from 2009 to 2014 was sampled, 74% made some kind of benefit reductions, compared to 57% of the 132 local plans from 2009 to 2014. Overall, about 65% of plans made benefit reductions.

Of those state plans that made cuts, 65% made reductions affecting only new employees compared to 35% that made changes affecting both new and current employees. Of local plans, 60% made reductions affecting new employees, while 40% made changes affecting both.

Of state and local plans that made benefit changes for current employees, the most common types of changes were increased employee contributions and changes in the cost-of-living adjustment calculations. The brief said that COLAs in particular are “not viewed as core benefits and have less protection under the law.”

Of state plans that made changes of this kind, 17% made employee contribution changes and 9% made COLA changes, while 13% of local plans made COLA changes and 12% made employee contribution changes.

For benefit changes for new employees, those kind of “core” benefit changes are far more common, according to the brief. For example, 60% of state plans that made benefit changes for new employees changed retirement age and tenure rules, compared to 4% of state plans that made benefit changes for current employees.

The data were taken from plan actuarial valuations and comprehensive financial annual reports for plan years 2009 to 2014.

The brief is available on the center's website.