Center President/CEO Elizabeth Kellar told mayors attending the U.S. Conference of Mayors Winter meeting on January 19 that while most state and local pensions were more than 80 percent funded in 2008, by 2010, only 33 percent of plans were funded at that level.
Kellar urged cities with underfunded pensions to be consistent in making annual required contributions and to make other plan design changes that can reduce costs over time.
She emphasized that there are no instant solutions to underfunded pension plans but that well-funded pension plans offer valuable lessons. These plans have:
- Appropriate full-retirement ages
- Realistic investment assumptions
- Independent, competent experts to evaluate plan assumptions
- No extraordinary income (e.g., overtime) included in pension formulas
- Pension boards are inclusive and have needed expertise
- Fiscal discipline over the years; no contribution “holidays” in good times.
Kellar said it is important to take a long view when examining employee compensation and benefits. City officials need to be attentive to changes in their workforce and to competition for talent. Is their compensation package attractive in recruiting and retaining well-qualified employees? Does their city have a workforce plan that examines current and future talent gaps and needs?
After Kellar’s presentation, Louisville Metro Mayor Greg Fischer asked the audience how many were concerned about their city’s pensions; 60 percent of the mayors raised their hands.