Forensic Analysis of Pension Funding: A Tool for Policymakers

April 2022 - Center for Retirement Research

by Jean-Pierre Aubry

The brief’s key findings are:

State and local policymakers face a growing pension cost burden, but often lack understanding of the root causes.
One underappreciated cause is “legacy debt” ・unfunded liabilities accumulated long ago, before plans adopted modern funding practices.
Legacy debt still exists today because historical unfunded liabilities were ultimately paid in full using some of the money intended to fund later benefits.
In a sample of plans with particularly low funded ratios, legacy debt averaged more than 40 percent of unfunded liabilities.
A failure to recognize the legacy debt has provided misleading information about benefit generosity, hindering progress toward effective solutions.