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Update on Municipal Pension Plans & OPEBs

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

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Update on Municipal Pension Plans & OPEBs

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  1. 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

  2. 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

  3. Trends in Pension Funding

  4. FY2009 Status Report • Florida Local Governments • Largest 100 Cities (populations > 20,000) • 208 Unique Defined Benefit Plans • Comprehensive Annual Financial Reports • Fiscal Year 2009

  5. Pension Plan Grades

  6. Grades & Participant Type

  7. Plan Costs by Grades

  8. Plan Costs by Participant Type

  9. County and city OPeb plans

  10. 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)

  11. 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)

  12. 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

  13. 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

  14. What did governments do? Increase Benefits?

  15. What did governments do? Decrease Benefits

  16. 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

  17. What did governments do? • Explicit Benefits, FY2010

  18. What did governments do? • Implicit Benefits, FY2010

  19. Thank You & Questions

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