State Pension Plans Borrow to Make Up for Lost Ground

Posted by Tim Hope on 5/1/08 11:25 am

A number of states are adopting controversial strategies in an effort to make up for funding shortfalls in their respective retirement system plans.  At present there are over 100 public retirement plans in the United States with assets of about $2.3 trillion.  However, according to the National Association of State Retirement Administrators, collectively the plans are short roughly $380 billion of the assets needed to cover future benefits over the next 30 years.  In an effort to make up for lost ground, some plans are issuing pension bonds.  They then invest the proceeds in an effort to earn higher returns than the cost of the pension bond interest.  The strategy is controversial and could lead to additional pension funding problems down the road.

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