Unfunded Liabilities for State Pension Plans in 2022 (2024)

FAQs

Unfunded Liabilities for State Pension Plans in 2022? ›

Doing so greatly increases the present value of existing pension promises and increases total unfunded liabilities from $1.6 trillion to $5.1 trillion. The resulting market-value funding ratios vary widely among plans. In 2022, Wisconsin's plan was 74 percent funded; New York's was nearly 65 percent funded.

Once all public pension plans release their 2023 data, we estimate that unfunded liabilities will be $1.44 trillion. The combined funded status for the top state and local retirement systems will be 78.1%, based on available data through December 31, 2023. This is up from the 74.9% funded ratio during fiscal year 2022.

The Best and Worst Funded Pension Plans in the U.S.

But nationally, the U.S. has only set aside $5.1 trillion to pay those benefits. This means there is a national public pension funding shortfall of around $1.49 trillion, as of June 30, 2023 (formally this shortfall is called unfunded liabilities.

The other 48 states are projected to have public pension debt after their 2023 fiscal years. California has the largest amount of unfunded public pension liabilities, estimated at $245 billion after the 2023 fiscal year.

Illinois' unfunded pension liability was the largest of any state at 212.3% of its own-source revenue, followed by New Jersey (168.5%), Connecticut (136%), and Kentucky (133.2%). Illinois' liability has also risen the fastest since fiscal 2007.

New Jersey's unfunded pension liability was the largest of any state at 20.2% of its total personal income.

Figuring out whether a company has an underfunded pension plan can be as simple as comparing the fair value of plan assets to the accumulated benefit obligation, which includes the current and future amounts owed to retirees.

Exacerbating the problem are rising government debt ratios in the wake of the global financial crisis, as well as poor investment returns which have negatively impacted funding. In practice, countries differ widely in how efficiently and effectively they've managed their retirement programs.

What are examples of unfunded liabilities? ›

The unfunded liabilities of Social Security, Medicare, and Medicaid are often omitted from discussions about the large size of US public debt. Once these are taken into consideration, it becomes clear that the US government is already bankrupt.

Four decades ago, Forbes called the Central States Pension Fund “the most abused, misused pension fund in America.” It's easy to see why. Throughout the 1950s and '60s, it was a personal slush fund for Teamsters boss Jimmy Hoffa and his pals.

Unfunded pension liabilities

are calculated as the difference between actuarial accrued liabilities and market value of assets. of a plan's assets weighed against its accrued liabilities.

In 2023 and beyond, public pensions in the United States are entering an era of new threats and more uncertainty than ever before. The stagnant funding trend that followed the global financial crisis of 2008-09 has persisted for a decade and a half.

Your benefit might be reduced if you get a pension from a government employer who wasn't required to withhold Social Security taxes. This reduction is called the “Government Pension Offset” (GPO). Learn more about this reduction (PDF).

Under the Employee Retirement Income Security Act (ERISA), creditors are generally not able to seize funds from pensions and employer-sponsored retirement accounts. Creditors may target funds in traditional and Roth IRAs and certain 403(b) plans, which are typically not protected under ERISA.

Note: Well-funded states with stable costs are Idaho, Nebraska, South Dakota, Tennessee, and Wisconsin. All five states' pension plans had stable contributions from 2008 to 2021 and were fully funded in 2021. Other well-funded states are Delaware, Iowa, New York, Utah, and Washington.

Finland is the best country for pensions

The beautiful Nordic state of Finland is the best spot for pensions. With a famously happy population, retirees in Finland can enjoy stunning landscapes and picturesque cities, but also the best global state pension.

After this year's financial losses, CalPERS reported that its funded ratio plummeted from 81% in 2021 to 72% as of June 30, 2022, which means the pension system now has just 72 cents of each dollar needed to provide the pension benefits that have already been promised to current workers and retirees.

Overfunded plan asset status will always be reported as a noncurrent asset on the balance sheet. Underfunded status: If the fair value of the plan's assets are less than the projected benefit obligation, the funded status will be listed as “underfunded”.