Fitch: Pension Fund “Depletion Dates” Raise Red Flags


Under new GASB accounting standards, public pension funds are required to calculate their “depletion date” – or, the date where benefit payouts become larger than assets.

The dates help give context to the funding situations at the pension funds, says Fitch Ratings. For some of the country’s most underfunded plans, the depletion dates are startlingly close.

From Reuters:

New accounting rules for public pensions are exposing the damage done by U.S. states, including New Jersey, that have failed to adequately fund their retirement systems, according to a report to be released by Fitch Ratings on Friday.

With the first wave of pensions beginning to issue financial statements under the new rules, the impact of underfunding becomes clearer, the Fitch report shows.


Some retirement systems already known for their fiscal struggles reported depletion dates.

Six of New Jersey’s seven funds, for example, disclosed depletion dates as of their June 30, 2014 valuations. The two largest – covering retired state employees and teachers – said their tipping points would come in 2024 and 2027, respectively.

Under the previous actuarial methods, those plans were funded at 49.1 percent and 51.5 percent, a distressed level far off the minimum 80 percent generally considered healthy. Under the new calculations, which included a lower blended rate of return, those levels look even worse, at 27.9 percent and 28.5 percent.

Even Illinois, with among the worst-funded state retirement systems in the U.S., doesn’t have depletion dates until 2065 for two of its three biggest funds and is able to use higher blended rates. It has no depletion date for the third fund, Fitch Senior Director Douglas Offerman told Reuters in an email.

The nation’s most underfunded plan –the Kentucky Employee Retirement System – did not report a depletion date because recent reforms complicated the calculation.


Photo by  Paul Becker via Flickr CC License

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