How healthy is your public employee pension plan?
October 7, 2013
by Brian Wolf

With all the media attention surrounding the financial collapse of Detroit, it naturally makes sense to wonder how safe your pension is from any city or state. MarketWatch – The Wall Street Journal helps us out a bit by reporting on the condition of state pension plans throughout the US.

• “The gap between the promises states have made for public employees’ retirement benefits and the money they have set aside is now a staggering $4.1 trillion, or $13,145 per capita, according to a recent research report. And combined, state public pension plans are just 39 percent funded, according to State Budget Solutions.” Source: http://www.marketwatch.com/story/10-most-threatened-state-pension-plans-2013-09-13

If you’re like me, you want to know who’s the best, who’s the worst, and where does Minnesota place on the list. Well, the most underfunded state pension plan is Illinois.

• “Illinois is the most poorly funded state in the US. It has assets of $91.5 billion, liabilities of $378.5 billion, and an unfunded liability of $287 billion.”

When you look at the numbers in Illinois and do a little math, you quickly discover that they have only put in a bit less than 25 percent of what they need to in order, to pay off all the retirees benefits in the plan. Given the state of the economy, one would be wise to assume some changes are coming for State of Illinois retirees!

By the way, Illinois is not alone. Here are the top 10 worst; 1. Illinois 2. Connecticut 3.Kentucky 4. Kansas 5. Alaska 6. Mississippi 7. New Hampshire 8. Hawaii 9. Louisiana 10. North Dakota

And now the best funded state pension plan is . . . drum roll, please . . . Wisconsin!

But before any of you cheese-headed Packer fans get too excited, let me point out that your program is still only 57 percent funded! I guess state governments are a lot better with a checkbook than our federal government!

Ok, I know you’re still reading this column because you want to know where Minnesota ranked. Well, we are smack dab in the middle of the pack, tied at number 26; with actuarial assets of $47,954,571 – market liability $127,349,655 – unfunded ratio of 62 percent – unfunded liability $79,395,084 (all numbers in thousands).

State and local government workers with traditional pension plans might want to revisit their retirement-income plans in the wake of Detroit’s filing for bankruptcy.

As many know by now, workers and retirees for that troubled city, which has an underfunded pension liability of some $3.5 billion, face the possibility that their pensions could be reduced drastically in a worst-case scenario.

A hearing to determine whether a lawsuit by the city’s 20,000-plus retired public employees can block the bankruptcy is scheduled. But no matter what happens, experts say that now would be a good time for public-sector workers and retirees – especially those whose employers have underfunded pensions – to revisit their retirement plan, crunch out a few what-if scenarios, and adjust their current or planned lifestyle according to. MarketWatch

I would also agree with whoever those “experts” are that MarketWatch is referring to. Now is a very good time to review your public employee pension plans with a qualified advisor.

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