A Government Accounting Office (GAO) report claiming that 33 percent of state and local government pension plans are underfunded drew quick fire from the Government Finance Officers Association (GFOA), which develops and administers surveys of public pension plans for the Public Pension Coordinating Council (PPCC).
The GAO report, released April 11, and based on 1990 and 1992 PPCC surveys, claims that one-third of public pension plans are both underfunded and not receiving the actuarially required employer contribution.
GFOA took issue with the report’s definition of “undercontributing,” says GFOA Pension and Benefits Project Director Jennifer Harris.
“The GAO definition of undercontributing assumes that 100 percent or more of the actuarial required contribution should be made,” Harris explained. “It’s an overly stringent definition given that actuarial analyses are often completed a year or more before the contribution needs to be made.”
In other words, an employer could be following the actuarial methodology for determining the contribution, yet in reality be contributing 10 percent more or less than originally determined because of the time differential.
GFOA says an actuarial contribution of 90 percent or less should be flagged, instead of GAO’s 100 percent criteria. Using that level as a base, the 1990 and 1992 surveys show that only nine percent of state and local government plans are both underfunded and undercontributed, Harris pointed out.
For a copy of the GFOA analysis, call 202/429-2750.