Pew Pension Report Flawed?

(June 22, 2012) — A report by the Pew Center on the States pegging the unfunded pension liability facing the plans of American states at $1.38 trillion is not an accurate gauge of the situation, critics have asserted.

The National Conference on Public Employee Retirement Systems (NCPERS), the largest trade association for public sector funds that represents more than 500 plans throughout North America, blasted the report, calling it “crippled” by “out-of-date data and faulty assumptions.”

The Pew Report “relies on Fiscal Year 2010 data — meaning much of the data is actually from calendar 2009 — when institutions of every kind were still struggling up from the low point of the Great Recession,” said Hank Kim, executive director and counsel of NCPERS. “So much has changed in the ensuing months that Pew’s analysis is virtually without value.”

“Pew’s The Widening Gap Update comes to misguided conclusions that dramatically overstate the challenges facing public pensions,” Kim concluded. NCPERS released its own study last week that, despite showing a sizeable drop in the average funding level of US public plans, was trumpeted by the group as evidence that “state and local pension funds remain solidly funded.”

Others have cited Pew’s data as too stale to provide a good understanding of the funding challenges of public pension plans, although that reflects the reality that public funds are not required to disclose their funded status in a timely manner, said Chris Tobe, a former trustee of the Kentucky Retirement Systems. Tobe told aiCIO that the latest data being two years old is “inexcusable” and that states should release that information as soon as they receive it. In a white paper released this month, Tobe blamed ratings agencies and the Securities and Exchange Commission for not requiring prompter disclosures from the funds, contending that such delays hurt municipal bond holders.