Category: The Scholar

The latest academic pension studies, research, and journal articles.

The Funding of State and Local Pensions: 2013-2017

The researchers at the Center for Retirement Research at Boston College released a brand new brief today detailing the funding levels of 150 pension funds across the country. There are some surprises, and, as always, plenty of insights. From the CRR:
  • Despite a strong stock market, the funded status of public plans in 2013 remained unchanged at 72 percent for two reasons:
    • actuarially smoothed assets grew modestly; and
    • CalPERS, one of the nation’s largest plans, significantly revised its reported funded ratio.
  • An encouraging sign is that sponsors appear to be paying a larger share of their annual required contribution.
  • Going forward, the funded ratio is projected to gradually move above 80 percent, assuming historical stock market returns.

 

Be sure to read the full report here.

 

Photo by Eric Fischer via Flickr CC

A Global Perspective on Pension Fund Investments in Real Estate

A lack of research into the cost, investment approach and performance of pension fund real estate investments globally has led to an incomplete understanding of the true performance of real estate investments. Previous studies have focused only on property indices, specific buildings and REITs.

Components of Pension Expense as Earnings Management Tools

We examine the use of pension expense as an earnings management tool by examining each of the individual components that make up pension expense. Given the complexity and numerous required assumptions and estimations needed to arrive at pension expense, and the difficulty in verifying these items, pensions are a logical area in which one would expect to find earnings management.

COLA Cuts in State/Local Pensions

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The Center for Retirement Research at Boston College released a report today detailing Cost-of-Living-Adjustments. What states have reduced them? What states have eliminated them altogether? And what is the legal basis for such cuts? From the CRR:

 

The brief’s key findings are:

  • Since the financial crisis, 17 states have reduced, suspended, or eliminated cost-of-living-adjustments (COLAs) for public employee pensions.
  • This response was surprising as current employees and retirees tend to be legally shielded from benefit cuts.
  • But the COLA cuts have largely been upheld in the courts under the rationale that – unlike core benefits – they are not part of a contractual right.
  • In short, defined benefit promises in the public sector are not as secure as many thought.

 

Read the full report here.

 

Photo by TaxRebate.org.uk

Public Pensions: Reconciling Fiscal Sustainability with Intergenerational Equity

ABSTRACT: In many developed countries around the world, public pension schemes have become fiscally unsustainable with rising life expectancies and declining birth rates (i.e., a decreasing old age support ratio). Reforming public pension systems to render them fiscally sustainable in the long-run could in theory entail cuts in benefits, increases in contributions, or increases in the eligibility age

Curbing the Incentive for Pension Padding: Correcting the Employer Contribution Mismatch

ABSTRACT: An often overlooked issue in the debate over New York‘s runaway pension costs is the practice of pension―padding or spiking, whereby a public employee works overtime during his final years of employment, inflating his total compensation during his peak earning years and, more significantly, distorting his pension calculation.


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