PLANSPONSOR - November/December 2024 - 13

'The U.S.
Still Needs
Pensions'
THE continuing decline in the number
and quality of defined benefit pension
plans in the U.S. is not only disproportionately
hurting lower-income employees but
also stunting U.S. economic growth, says a
recent study from the National Conference
on Public Employee Retirement Systems.
The study also found that public
policies aimed at cutting public costs by
reducing pension benefits or switching to
defined contribution plans may actually
increase the need for public spending due
to " the dynamic interrelationship between
pension reforms, income inequality, the
economy and market return. "
The report cites the shift, over " many
years, " to DC plans from DB plans, mainly
in the private sector, while state and local
public pension plans have been raising
employee contributions, cutting benefits
and closing to new hires. These " negative
pension changes " " exacerbate income
inequality, " which slows economic growth
and widens the income gap-a fact policymakers
often overlook, the study says.
" Our analysis shows that, at the
national level, ... the lower the percentage
of the workforce in DB plans, the higher
the rate of income inequality, and vice
versa. " The report added that policymakers
" should think twice before they make
changes that undermine public sector
pensions or support policies " urging
pensions' elimination in the private sector.
The report cites a misconception that
the only beneficiaries of public DB plans
are their participants and that taxpayers
must pay the associated costs. That " incomplete
picture ... overlooks how ... the investment
of trillions of dollars of pension fund
assets grows local economies and generates
billions in tax revenues. "
Better public education and more
union membership would also reduce the
gap, the report says. -Michael Katz
TIDBITS
Funded Status up for Public DBs ...
s 15.1
The aggregate funded status of 241 state pension
plans increased by 5.4 percentage points to 89.1%
in the third quarter.
The increase was due to 7.2% growth in the value
of plan assets, which was only slightly offset by a
0.7% increase in liabilities.
Over the trailing 12 months, the funded status of these
plans grew by 15.1 percentage points, up from
74.0% in September 2023. Year to date, the funded
status of these plans had risen by 9.2%.
Source: Wilshire Advisors LLC
... And for Corporate DBs Too
Nearly half of the 100 public U.S. companies with the largest defined benefit pension
plan assets, per available March annual reports, reached fully funded levels in 2023.
Sixty-nine plans reached between 95% and 140%-plus. Three bested 140%; one
achieved 135% through 140%; and two plans each were within funding ratios of
130% through 135%, 125% through 130%, and 120% through 125%, respectively.
FUNDED RATIO TOP 100 U.S. PENSION PLANS
>140%
135% - 140%
130% - 135%
125% - 130%
120% - 125%
115% - 120%
110% - 115%
105% - 110%
100% - 105%
95% - 100%
90% - 95%
85% - 90%
80% - 95%
75% - 80%
<75%
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2 ll
2 ll
2 ll
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10 lllll lllll
10 lllll lllll
13 lllll lllll lll
21 lllll lllll lllll lllll l
8 lllll lll
16 lllll lllll lllll l
5 lllll
2 ll
Source: Milliman, " 2024 Corporate Pension Funding Study "
PLANSPONSOR.COM November - December 2024 13
74.0%
89.1%
Q3 2023 Q3 2024
http://www.PLANSPONSOR.COM
PLANSPONSOR - November/December 2024

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