The Center for Retirement Research at Boston College has released a new Issue in Brief:
“How Will Longer Lifespans Affect State and Local Pension Funding?”
by Alicia H. Munnell, Jean-Pierre Aubry, and Mark Cafarelli
The brief’s key findings are:
- Rising life expectancy makes defined benefit pension plans more expensive.
- The question is the extent to which state and local plans have already incorporated rising life expectancy into their cost estimates.
- The analysis explores how plan liabilities and funded ratios would be affected by using:
- RP-2014, a new mortality table designed for private plans; and
- a stricter standard that fully incorporates future mortality improvements.
- Under the first scenario, liabilities and funding would barely change. Under the second, the average funded ratio would drop from 73 to 67 percent.
- Since not even the private sector fully incorporates future improvements, public plans seem to be making a serious effort to keep their assumptions up to date