How Did State/Local Plans Become Underfunded?

Source: Alicia H. Munnell, Jean-Pierre Aubry and Mark Cafarelli, Center for Retirement Research at Boston College (CRR), SLP#42, January 2015

The brief’s key findings are:
– A new analytical tool tells a clear story of why unfunded liabilities rose during 2001-2013.
– The primary factor was investment returns that fell short of expectations due to the two financial crises.
– A secondary factor was that many plans failed to make adequate contributions, a more serious problem among the worst-funded plans.
– This type of analysis should be added to every plan’s annual actuarial valuation.