Update on Municipal Pension
Plans & OPEBs
David Matkin, PhD
Assistant Professor
Askew School of Public
Administration & Policy
Florida State University
Research Fellow
LeRoy Collins Institute
October 27, 2011
Reports in Process
• Status of Pension Plans in FY2009
– Target: November
• “Best Practices” in Municipal Pensions
– Target: End of Year
• Status of County and Municipal OPEBs
– Target: Early 2012
• Trends in Municipal Pension Plans
– Target: Early 2012
1.2 1.4 1.6 1.8
1
.8
.6
.4
.2
0
Percent Funded
2
Trends in Pension Funding
1996
1998
2000
2002
Year
2004
2006
2008
FY2009 Status Report
• Florida Local Governments
– Largest 100 Cities (populations > 20,000)
– 208 Unique Defined Benefit Plans
• Comprehensive Annual Financial Reports
– Fiscal Year 2009
Pension Plan Grades
TABLE 1: GRADING SUMMARY
GRADE
PERCENT FUNDED
NUMBER OF
CITIES
RECEIVING
PERCENTAGE OF
CITIES RECEIVING
A
B
C
D
F
More than 90% funded
80 to 90% funded
70 to 80% funded
60 to 70% funded
Less than 60% funded
30
48
63
36
31
14%
23%
30%
17%
15%
Grades & Participant Type
Plan Costs by Grades
TABLE 4: ANNUAL COSTS OF PLANS BY GRADE
GRADE
A
B
C
D
F
MEDIAN COST PER PARTICIPANT
$ 5,784
$ 12,666
$ 12,410
$ 18,886
$ 26,305
Plan Costs by Participant Type
TABLE 5: ANNUAL COSTS OF PLANS BY PARTICIPANT
Elected Officials
Police & Firefighters
Firefighters Only
Police Only
General Only
MEDIAN COST PER PARTICIPANT
$ 50,773
$ 21,738
$ 17,819
$ 15,245
$ 9,297
COUNTY AND CITY OPEB PLANS
The OPEB Concept
• Other Post-Employment Benefits
– Retirement insurance subsidies (primarily healthcare)
• Explicit and Implicit Benefits
• Actuarial Liabilities
– Benefit policies (qualifications & subsidy calculation)
– Actuarial method
– Assumptions (e.g., discount rate, payroll trends, trends in
healthcare costs)
Accounting Standards
• Governmental Accounting Standards Board
(GASB)
• Statements No. 43 & 45
• Timeline:
– Exposure Drafts in 1989, 2003 & 2004
– Statements issued in 2004
– Implemented in three phases (~FY’s 2008 – 2010)
Data
• Florida Local Governments
– All 67 Counties
– Largest 100 Cities (populations > 20,000)
• Comprehensive Annual Financial Reports
– Fiscal years 2008 – 2010
– Basic Financial Statements
– Notes to the Financial Statements
– Required Supplemental Information
What Explains Liability Size?
• Consistent and Substantive Effects
–
–
–
–
Explicit v. Implicit benefits
Payroll Size
Actuarial Method
Household Income Levels
• Inconsistent Effects
–
–
–
–
–
Actuarial Assumptions
Form of Government
Public Safety Spending Per Capita
Republican/Democrat
Labor Unions
What did governments do?
Increase Benefits?
What did governments do?
Decrease Benefits
What did governments do?
• Fund the Liability
– Explicit Benefits (n=67)
• Pay-as-you-go = 45
• Prefund (Non-GAAP qualified) = 4
• Prefund (GAAP qualified) = 18
– Implicit Benefits (n=83)
• Pay-as-you-go = 76
• Prefund (Non-GAAP qualified) = 2
• Prefund (GAAP qualified) = 5
What did governments do?
• Explicit Benefits, FY2010
What did governments do?
• Implicit Benefits, FY2010
Thank You & Questions