by Aliya Wong

The Center for Retirement Research recently issued a brief praising the funding levels of state and local pension plans - particularly given the fact that they are not subject to national legislation as private plans are.  The implication is that state and local pension plans are doing on their own what employers with private pension plans will do only when forced by national legislation.  However, there are certain differences that were left out of the brief.

First, state and local plans have improved their funding not by cutting benefits (as private employers are generally forced to do) but by raising taxes.  Therefore, private employers and their employees paying for these benefits twice – through tax increases and through cuts in their own benefits.

Second, although state and local plans are not subject to national legislation, they are subject to national reporting requirements on their funded status.  It was not until being forced by public outcry concerning chronic underfunding that the funding levels improved.

Third, the brief praises state and local pension plans for being "reasonably" funded at around 80%.  However, just last year Congress passed legislation forcing private pension plans to increase their funding from 90% to 100%.  Why is 80% reasonable for public plans but not for private plans?