Montana’s public employee pension plan is only 71 percent funded. That places the state in better position than about half the states, ranking 25th in a survey conducted by The Tax Foundation.
Wisconsin, with its program funded at 99 percent ranks at the top. Kentucky and New Jersey are tied in last place with only 31 percent of their programs funded.
The Tax Foundation’s report is based upon recently released data from The Pew Charitable Trusts. They calculated the market value of state pension plan assets in proportion to each state’s accrued pension liabilities.
The results show the strain on state retirement systems across the nation as state pension funds strive to keep pace with pensions owed to public employees.
As of fiscal year (FY) 2016 (the most recent data available), states reported a combined $1.4 trillion in state pension plan funding deficits. Below-expected returns on investment and insufficient state allocations contributed to widening shortfalls in numerous states since the Foundation’s last report based on FY 2014 data.
More than half the states have pension plans that are less than two-thirds funded, and five states have pension plans that are less than 50 percent funded.
Pension plan structures vary from state to state, but historically, most states have provided some form of defined benefit plan that promises retirees a lifetime annuity. In recent years, some states have transitioned to a defined contribution plan for new employees, with employees controlling their own accounts and employer contributions funded by the state. Other states have shifted to a hybrid plan that combines elements of a defined benefit and a defined contribution plan. The shift from defined benefit plans toward more fiscally responsible alternatives can help states better manage future liability, but many states still face years of underfunded obligations that will need to be fulfilled.