in Maryland

Fiscal Budgets Maryland state budget and finances Tax policy in Maryland Finance Financial regulation in Maryland Pensions Public pensions in Maryland Pension health in Maryland Civil liberties Affirmative action in Maryland Campaign finance requirements in Maryland Campaign finance requirements for Maryland ballot measures Nonprofit regulation in Maryland Education Charter schools in Maryland Higher education in Maryland Public education in Maryland School choice in Maryland Elections Ballot access Ballot access requirements for political candidates in Maryland Ballot access requirements for political parties in Maryland Political parties in Maryland Ballot access requirements for presidential candidates in Maryland Redistricting in Maryland Voting in Maryland Energy and Environment Energy policy in Maryland Fracking in Maryland Oil and gas extraction on federal land in Maryland Endangered species in Maryland Environmental policy in Maryland Healthcare Healthcare policy in Maryland Medicaid spending in Maryland Effect of the Affordable Care Act in Maryland Immigration Immigration in Maryland

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The historical Maryland pension information below applies to prior calendar years. The tabs below may contain information from several different fiscal years; for example, the tab labeled "As published 2015" contains information from fiscal years 2013 and 2012 (the most recent data available at the time of initial publication). For more current information regarding Maryland's pension system, click here.

As published 2016[edit]

Maryland information (2015)

Total contributions: $3,555,737,000

Employee contributions: $920,168,000

Government contributions: $2,635,569,000

Total payments: $5,029,705,000

Total cash and investment holdings: $65,916,354,000

Number of state and local pension systems: 79

Active membership: 238,652

Inactive membership: 56,347

Key terms

Actuarial value of assets (AVA) • Unfunded actuarial accrued liability (UAAL) • Annual required contribution (ARC) • Discount rate • Funded ratio • Rate of return • Active member • Inactive member • OPEB

Hover over the above terms for definitions.

Note: This page utilizes information from a variety of sources. The information presented on this page reflects the most recent data available as of August 2016.

Maryland public pensions are the state mechanism by which state and many local government employees in Maryland receive retirement benefits.

According to the United States Census Bureau, there were 79 public pension systems in Maryland as of 2015. Of these, seven were state-level programs, while the remaining 72 were administered at the local level. As of fiscal year 2015, membership in Maryland's various pension systems totaled 295,000. Of these, 238,652 were active members.^[1]

According to a 2013 report by Morningstar, an independent financial research group, most states' pension plans continued to be funded below the 80 percent level considered necessary for a healthy fund. Decreased funding and increasing liabilities since the 2008 recession continued to put pressure on local and state budgets, in some cases leading to bankruptcy. Higher pension costs can have the following consequences:^[2]

• higher taxes
• less intergovernmental aid for services
• lower credit ratings
• higher interest rates on state borrowing

State pension systems can vary in their organization, management, and accounting principles, making them difficult to compare. The basic information on this page comes from the U.S. Census Bureau, as reported by the states and pension funds themselves for fiscal year 2015.

General information[edit]

See also: Pension data, U.S. Census

According to the U.S. Census Bureau, Maryland had seven state pension plans as of 2015:

1. Maryland Employees' Retirement and Pension Systems
2. Maryland Teachers' Retirement and Pension Systems
3. Maryland State Police Retirement System
4. Maryland Judges' Retirement System
5. Maryland Law Enforcement Officers' Pension System
6. Maryland Correctional Officers' Retirement System
7. Maryland Transit Admin (MTA) Pension Plan

In addition to the aforementioned state-level pension systems, there were 72 locally administered pension systems in Maryland.^[1]

The table below provides general pension system information for Maryland and surrounding states.

General pension system information, 2015
State	Systems		Total members	Active members		Inactive members
	State	Local		Members	Percent of total	Members	Percent of total
Maryland	7	72	295,000	238,652	80.90%	56,347	19.10%
Delaware	8	17	49,675	45,852	92.30%	3,822	7.69%
Pennsylvania	3	2,257	669,873	504,444	75.30%	165,429	24.70%
Virginia	4	N/A	556,351	399,708	71.84%	156,643	28.16%
Source: United States Census Bureau, "State- and Locally-Administered Defined Benefit Pension Systems - All Data by State and Level of Government: 2015"

Contributions[edit]

See also: Pension contribution and payment data, U.S. Census

Pension contributions are the funds paid into pension systems. These contributions come from the employer (in the case of public pensions, the government) and employees. Investment earnings are the main source of increases in the fund and are listed separately in the rightmost column in the below table.

In fiscal year 2015, the most recent year for which information is available, total contributions of $3.6 billion were made to Maryland's state and local pension systems. Of this amount, $920.2 million came from employees. The remainder came from state and local governments. The table below provides information about pension contributions in Maryland and surrounding states in fiscal year 2015.^[1]

Pension contributions, fiscal year 2015 (dollars in thousands)
State	Total contributions from employees and employers	Employee contributions		Government contributions		Earnings on investments
		Contributions	Percentage of total	Contributions	Percentage of total
Maryland	$3,555,737	$920,168	25.88%	$2,635,569	74.12%	$2,386,964
Delaware	$360,435	$77,074	21.38%	$283,361	78.62%	$437,355
Pennsylvania	$7,020,836	$1,840,962	26.22%	$5,179,874	73.78%	$7,535,422
Virginia	$3,925,359	$890,692	22.69%	$3,034,668	77.31%	$3,708,276
Source: United States Census Bureau, "State- and Locally-Administered Defined Benefit Pension Systems - All Data by State and Level of Government: 2015"

Payments[edit]

See also: Pension contribution and payment data, U.S. Census

Payments are the amounts paid to pension recipients by their pension plans. Pension payments include benefits and withdrawals. Benefits are the regular payments made by a pension plan to the plan's recipients. Pension beneficiaries may also withdraw funds before they are due to receive regular benefits.

In fiscal year 2015, Maryland's state and local pension systems made payments totaling $5.0 billion. The table below provides pension payment information for Maryland and surrounding states in fiscal year 2015. The columns labeled "Benefits," "Withdrawals," and "Other" are subsets of total payments. All dollar amounts displayed should be multiplied by 1,000 ($240,000 is equal to $240,000,000).^[1]

Pension payments, fiscal year 2015 (dollars in thousands)
State	Total payments	Benefits	Withdrawals	Other
Maryland	$5,029,705	$4,803,697	$82,315	$143,692
Delaware	$647,320	$625,630	$6,832	$14,858
Pennsylvania	$11,697,488	$10,759,005	$129,768	$808,721
Virginia	$5,719,004	$5,096,834	$122,382	$499,789
Source: United States Census Bureau, "State- and Locally-Administered Defined Benefit Pension Systems - All Data by State and Level of Government: 2015"

Other post-employment benefits[edit]

See also: Other post-employment benefits, data

In addition to standard pension payments, some plans may offer pensioners additional benefits. These benefits, sometimes referred to as "other post-employment benefits," or "OPEBs," consist of health insurance, life insurance or other benefits that the pensioner may have received while employed. The cost of these benefits can prove complicated for actuaries to calculate because of the changes in fields like medicine. This, coupled with the normal challenges in calculating and meeting pension requirements, can result in funding shortages for pension plans.

Unfunded liabilities totaled nearly $500 billion throughout the country for OPEBs. Maryland was reported to have about $8.8 billion in unfunded liabilities for OPEBs. This was equal to about 1.77 percent of the country's total unfunded liabilities for these other services.

The chart below displays the unfunded liabilities for Maryland and its surrounding states. All dollar amounts displayed should be multiplied by 1,000,000. For instance, $300 translates to $300,000,000.

Unfunded actuarial accrued liabilities for other post-employment benefits, fiscal year 2013 (dollars in millions)
State	Unfunded liabilities	Percent of total
Maryland	$8,792	1.77%
Delaware	$5,766	1.16%
Pennsylvania	$13,151	2.64%
Public pensions in Virginia	$2,128	0.43%
U.S. total	$497,693	100%
Source: National Association of State Retirement Administrators, "Retiree Health Care Benefits for State and Local Employees in 2014," accessed April 30, 2015. Note: Although this article was dated for 2014, all figures were reported to have come from fiscal year 2013 reports.

Cash and investment holdings[edit]

See also: Pension data, U.S. Census

Investments are a crucial part of the pension process. The goal is that, by investing pension contributions, the pensioner will receive more money when he or she retires than he or she and the employer were able to contribute. These investments can come in the form of cash investments, short-term investments, securities, or other investments. Cash investments are usually low-risk, short-term investments that have a lower rate of return than other types of investments. Other short-term investments are riskier than cash investments, but have the potential for greater returns. Securities can refer to stocks, bonds, or other types of financial certificates that hold some sort of financial value. As the values of these securities change, they can be traded to make a profit. While there are other applications of securities investments, this represents one of the most common practices.^[3][4][5]

As of fiscal year 2015, Maryland's state and local pension systems held $65.9 billion in total cash and investment holdings. The table below summarizes pension system cash and investment holdings for Maryland and surrounding states. The columns labeled "Total cash and short-term investments," "Total securities," and "Total other investments" are subsets of the grand total. All dollar amounts displayed should be multiplied by 1,000 ($240,000 is equal to $240,000,000).^[1]

Total cash and investment holdings, fiscal year 2015 (dollars in thousands)
State	Grand total	Total cash and short-term investments	Total securities	Total other investments
Maryland	$65,916,354	$2,128,521	$61,780,589	$2,007,244
Delaware	$10,002,364	$674,279	$7,213,819	$2,114,266
Pennsylvania	$102,821,065	$7,969,959	$80,877,398	$13,973,708
Virginia	$81,351,587	$1,218,674	$68,268,962	$11,863,951
Source: United States Census Bureau, "State- and Locally-Administered Defined Benefit Pension Systems - All Data by State and Level of Government: 2015"

Pension fund management fees[edit]

See also: Public pension fund management fees

In July 2013, the Maryland Public Policy Institute (MPPI) and the Maryland Tax Education Foundation released a report detailing the fees paid for the management of state pension systems. According to MPPI, the 10 state pension funds that paid the most in management fees relative to net assets experienced lower returns over a five-year period than the 10 state pension funds that paid the least in management fees. For example, in fiscal year 2012, South Carolina's pension system paid approximately $296.1 million in total management fees (1.31 percent of total net assets at the beginning of the fiscal year) and its five-year rate of return was 1.46 percent. By contrast, Alabama's pension system paid roughly $13.3 million in management fees (0.05 percent of total net assets) and its five-year rate of return was 7.53 percent.^[6]

The table below presents the information collected by MPPI for Maryland and surrounding states. For each state's pension system, total net assets are listed (both for the beginning and end of the fiscal year in question), as well as the total amount paid in management fees. In addition, the rates of return for the pension systems are presented. Maryland had much lower total net assets when compared to all neighboring states except Delaware.

Public pension fund management fees, 2011-2012
State	Fiscal year	Total net assets at the beginning of the year	Total net assets at the end of the year	Total management fees	Management fees as % of total net assets	Five-year rate of return
Maryland	2012	$37,592,752,000	$37,178,726,000	$241,489,000	0.64%	0.78%
Delaware	2012	$7,648,780,000	$7,536,367,000	$47,318,000	0.62%	3.90%
Pennsylvania	2012; 2011	$77,319,283,000	$73,140,758,000	$682,878,000	0.88%	1.00%
Virginia	2012	$54,562,257,000	$53,309,180,000	$307,706,000	0.56%	0.80%
1"Three states— Hawaii, Nevada and Rhode Island—were excluded because they hadn’t published CAFRs for fiscal years ending December 31, 2011 or later. West Virginia was excluded because its June 30, 2012 CAFR lacked sufficient disclosure."[6] Source: Maryland Public Policy Institute, "Wall Street Fees, Investment Returns, Maryland 49 Other State Pension Funds," accessed April 23, 2015. Note: To access this data, navigate to the list of links below the article and click "Exhibit A."

As published 2015[edit]

Public pensions in Maryland

General information (2013)

Total contributions: $3,343,878,000

Employee contributions: $831,633,000

Government contributions: $2,512,245,000

Total payments: $4,526,892,000

Total cash and investment holdings: $54,432,962,000

Number of state and local pension systems: 19 (2 state systems, 17 local systems)

Active membership: 243,926

Inactive membership: 54,780

Pension health (2012)

Assets: $37,248,401,000

Actuarial accrued liability (AAL): $57,869,145,000

Unfunded actuarial accrued liability (UAAL): $20,620,744,000

Funded ratio: 64.4%

UAAL per capita: $3,620

Public pensions in the states

Alabama • Alaska • Arizona • Arkansas • California • Colorado • Connecticut • Delaware • Florida • Georgia • Hawaii • Idaho • Illinois • Indiana • Iowa • Kansas • Kentucky • Louisiana • Maine • Maryland • Massachusetts • Michigan • Minnesota • Mississippi • Missouri • Montana • Nebraska • Nevada • New Hampshire • New Jersey • New Mexico • New York • North Carolina • North Dakota • Ohio • Oklahoma • Oregon • Pennsylvania • Rhode Island • South Carolina • South Dakota • Tennessee • Texas • Utah • Vermont • Virginia • Washington • West Virginia • Wisconsin • Wyoming

Public pensions • State public pension plans • Maryland state budget and finances

Note: This page utilizes information from a variety of sources. As such, the currency of the information varies somewhat. The information presented on this page reflects the most recent data available as of March 2015.

Maryland public pensions are the state mechanism by which state and many local government employees in Maryland receive retirement benefits.

According to the United States Census Bureau, there were 19 public pension systems in Maryland as of 2013. Of these, two were state-level programs, while the remaining 17 were administered at the local level. As of 2013, membership in Maryland's various pension systems totaled 298,706. Of these, 243,926 were active members.^[1]

According to a 2013 report by Morningstar, an independent financial research group, most states' pension plans continued to be funded below the 80 percent level considered necessary for a healthy fund. Decreased funding and increasing liabilities since the 2008 recession continued to put pressure on local and state budgets, in some cases leading to bankruptcy. Higher pension costs can have the following consequences:^[2]

• higher taxes
• less intergovernmental aid for services
• lower credit ratings
• higher interest rates on state borrowing

Background[edit]

The basic information on this page comes from the U.S. Census Bureau, as reported by the states and pension funds themselves for fiscal year 2013. Also included are comparative data from three different reports, which looked at the states' Comprehensive Annual Financial Reports (CAFRs).

General information[edit]

See also: Pension data, U.S. Census

According to the U.S. Census, Maryland had two state pension plans as of 2013:

1. Maryland State Retirement and Pension System - All Systems
2. Maryland Transit Authority Pension Plan^[8]

In addition to the aforementioned state-level pension systems, there were 17 locally administered pension systems in Maryland.^[1]

The table below provides general pension system information for Maryland and surrounding states.

General pension system information, 2013
State	Systems		Total members	Active members		Inactive members
	State	Local		Members	Percent of total	Members	Percent of total
Maryland	2	17	298,706	243,926	81.66%	54,780	18.34%
Delaware	1	7	48,136	44,632	92.72%	3,504	7.28%
New Jersey	7	3	557,704	418,062	74.96%	139,642	25.04%
New York	2	6	1,384,297	1,179,849	85.23%	204,448	14.77%
Pennsylvania	3	1577	697,230	540,795	77.56%	156,435	22.44%
Source: United States Census Bureau, "State- and Locally-Administered Defined Benefit Pension Systems - All Data by State and Level of Government: 2013"

Contributions[edit]

See also: Pension contribution and payment data, U.S. Census

Pension contributions are the funds paid into pension systems. These contributions come from the employer (in the case of public pensions, the government) and employees. Investment earnings are the main source of increases in the fund and are listed separately in the rightmost column in the below table.

In fiscal year 2013, total contributions of $3.3 billion were made to Maryland's state and local pension systems. Of this amount, $831 million came from employees. The remainder came from state and local governments. The table below provides information about pension contributions in Maryland and surrounding states in fiscal year 2013.^[1]

Pension contributions, fiscal year 2013 (dollars in thousands)
State	Total contributions from employees and employers	Employee contributions		Government contributions		Earnings on investments
		Contributions	Percentage of total	Contributions	Percentage of total
Maryland	$3,343,878	$831,633	24.87%	$2,512,245	75.13%	$5,634,022
Delaware	$370,881	$70,874	19.11%	$300,007	80.89%	$916,759
New Jersey	$4,897,733	$1,950,096	39.82%	$2,947,637	60.18%	$7,158,430
New York	$18,058,509	$1,368,115	7.58%	$16,690,394	92.42%	$42,810,586
Pennsylvania	$5,237,533	$1,786,446	34.11%	$3,451,087	65.89%	$10,004,140
Source: United States Census Bureau, "State- and Locally-Administered Defined Benefit Pension Systems - All Data by State and Level of Government: 2013"

Payments[edit]

See also: Pension contribution and payment data, U.S. Census

Payments are the amounts paid to pension recipients by their pension plans. Pension payments include benefits and withdrawals. Benefits are the regular payments made by a pension plan to the plan's recipients. Pension beneficiaries may also withdraw funds before they are due to receive regular benefits.

In fiscal year 2013, Maryland's state and local pension systems made payments totaling $4.5 billion. The table below provides pension payment information for Maryland and surrounding states in fiscal year 2013. The columns labeled "Benefits," "Withdrawals," and "Other" are subsets of total payments. All dollar amounts displayed should be multiplied by 1,000 ($240,000 is equal to $240,000,000).

Pension payments, fiscal year 2013 (dollars in thousands)
State	Total payments	Benefits	Withdrawals	Other
Maryland	$4,526,892	$4,080,980	$66,476	$379,436
Delaware	$611,487	$574,107	$7,362	$30,018
New Jersey	$9,076,177	$8,847,363	$172,479	$56,335
New York	$28,692,433	$27,155,776	$93,614	$1,443,043
Pennsylvania	$11,825,014	$10,808,886	$105,793	$910,353
Source: United States Census Bureau, "State- and Locally-Administered Defined Benefit Pension Systems - All Data by State and Level of Government: 2013"

Cash and investment holdings[edit]

See also: Pension data, U.S. Census

As of fiscal year 2013, Maryland's state and local pension systems held $54.4 billion in total cash and investment holdings. The table below summarizes pension system cash and investment holdings for Maryland and surrounding states. The columns labeled "Total cash and short-term investments," "Total securities," and "Total other investments" are subsets of the grand total. All dollar amounts displayed should be multiplied by 1,000 ($240,000 is equal to $240,000,000).^[1]

Total cash and investment holdings, fiscal year 2013 (dollars in thousands)
State	Grand total	Total cash and short-term investments	Total securities	Total other investments
Maryland	$54,432,962	$2,904,012	$37,627,743	$13,901,207
Delaware	$8,642,790	$449,791	$6,661,408	$1,531,591
New Jersey	$74,449,190	$13,512	$54,475,303	$19,960,375
New York	$382,206,781	$13,165,690	$338,216,433	$30,824,658
Pennsylvania	$95,888,331	$4,802,332	$67,261,866	$23,824,133
Source: United States Census Bureau, "State- and Locally-Administered Defined Benefit Pension Systems - All Data by State and Level of Government: 2013"

Pension health[edit]

Pension health is a term used to describe the overall state of pension systems. It can be difficult to gauge pension health in each state, but many studies use calculations to determine the average liabilities, unfunded liabilities, funded ratio and other data. Most experts believe that pension systems need to be funded at least 80 percent to be considered healthy. This information is then used to provide a snapshot of the state's overall pension health. This section provides information from three studies regarding the health of pensions in Maryland and neighboring states. They found the following:

• According to the Pew Charitable Trusts, Maryland paid 70 percent of its annual required contribution and its funded ratio was only 64 percent in fiscal year 2012.
• According to Morningstar, the state had a per capita pension debt of $3,620 and a funded ratio of 64.4 percent in fiscal year 2012.
• According to State Budget Solutions, which assumed a lower rate of return, Maryland had a per capita pension debt of $14,062 and a funded ratio of 32 percent in fiscal year 2013.

Pew research[edit]

See also: Pew Charitable Trusts pensions study, 2014

According to a 2014 report by the Pew Charitable Trusts, “Many states are seeing their pension debt continue to increase, despite reform efforts, because of missed contributions and the continued impact of investment losses.” The funding gap between what state pension systems have promised in benefits (liabilities) and current funding (assets) increased by $158 billion from 2010 to 2012 (14 percent), leaving state-run retirement systems with $915 billion in unfunded liabilities. Only 15 states made at least 95 percent of the annual required contributions (ARCs) for their pensions between 2010 and 2012; the aggregate shortfall in funding for all state plans was $21 billion. Data on these state pensions come from the Comprehensive Annual Financial Reports (CAFRs) that each state’s pension plan prepared for fiscal year 2012; these reports include actuarial valuations based on “the expected rate of return on investments and estimates of employee life spans, retirement ages, salary growth, retention rates, and other demographic characteristics.”^[9]

All dollar amounts displayed should be multiplied by 1,000,000 (e.g., $240,000 is equal to $240,000,000,000).

Pension health metrics from the Pew Charitable Trusts report, 2010-2012 (dollars in millions)
State	2012			Funded ratio			Percent of ARC paid
	Liability	Unfunded	ARC	2010	2011	2012	2010	2011	2012
Maryland	$58,305	$20,868	$2,054	64%	65%	64%	87%	73%	70%
Delaware	$8,900	$1,037	$196	92%	91%	88%	97%	98%	99%
New Jersey	$133,148	$47,209	$5,546	71%	68%	65%	32%	32%	39%
New York	$169,266	$21,457	$4,585	94%	90%	87%	100%	100%	100%
Pennsylvania	$130,817	$47,286	$3,674	75%	68%	64%	29%	31%	43%
Totals in the U.S.	$3,298,643	$914,653	$87,213	75%	74%	72%	78%	77%	77%
Source: The Pew Charitable Trusts, "The Fiscal Health of State Pension Plans: Funding Gap Continues to Grow"

Morningstar report[edit]

See also: Pension data, 2013 Morningstar report

In 2013, independent investment research firm Morningstar released "The State of State Pension Plans 2013," a report detailing various metrics of pension system health in all 50 states. Morningstar found a $1.2 trillion gap in 2012 for the largest 100 U.S. public pension plans (according to the actuarial firm Milliman). Based on two key drivers in Morningstar’s analysis—the funded ratio and the unfunded actuarial accrued liability (UAAL) per capita—the fiscal solvency and management of these plans varied greatly. Overall, the firm found that "more than half of all states fall below Morningstar’s fiscally sound threshold of a 70 percent funded ratio" and all state plans combined were "72.6 percent funded with a UAAL per capita of roughly $2,600.”^[2]

According to Morningstar's research, Maryland's state pension plans were funded at a rate of 64.4 percent in fiscal year 2012. The table below provides state pension system health metrics for Maryland and surrounding states in fiscal year 2012. Figures in the columns labeled "Assets," "AAL," and "UAAL" are rendered in thousands of dollars (for example, $2,400,000 translates to $2,400,000,000). Figures in the remaining columns have not been abbreviated. To view the full report, click here.

Pension health metrics from the Morningstar report, fiscal year 2012
State	Assets	Liabilities (AAL)	Unfunded liabilities (UAAL)	Funded ratio	Unfunded liabilities per capita
Maryland	$37,248,401	$57,869,145	$20,620,744	64.4%	$3,620
Delaware	$7,644,014	$8,657,810	$1,013,796	88.3%	$1,150
New Jersey	$86,219,406	$131,915,760	$45,696,354	65.4%	$5,239
New York	$148,599,000	$164,256,000	$15,657,000	90.5%	$814
Pennsylvania	$83,530,310	$130,816,224	$47,285,914	63.9%	$3,749
Totals in the U.S.	$2,157,578,916	$2,979,267,860	$821,688,945	72.40%	N/A
Source: Morningstar, "The State of State Pension Plans 2013: A Deep Dive Into Shortfalls and Surpluses," accessed September 16, 2013

State Budget Solutions report[edit]

See also: Pension data, State Budget Solutions report

State Budget Solutions is "a nonpartisan, nonprofit, national public policy organization with the mission to change the way state and local governments do business."^[10] It should be noted that although the organization is technically nonpartisan, its ideology and mission have conservative leanings. In November 2014, the organization released a research report that used a fair market valuation based on a discount rate of 2.743 percent to determine the unfunded liabilities of public pension plans. The group concluded that "state public pension plans were underfunded by $4.7 trillion in 2014, up from $4.1 trillion in 2013. Overall, the combined plans' funded status ... dipped 3 percentage points to 36 percent. Split among all Americans, the unfunded liability [was] over $15,000 per person."^[11][12]

According to the State Budget Solutions report, Maryland's pension plans were funded at a rate of 32 percent.

To read the full report, click here.

Pension health metrics from the State Budget Solutions report, fiscal year 2013 (dollars in thousands)
State	Assets	Market liability*	Funding ratio	Unfunded liability	Unfunded liability per capita	Unfunded liability as % of 2013 gross state product
Maryland	$39,561,707	$122,934,555	32%	$83,372,848	$14,062	24%
Delaware	$8,172,154	$18,287,400	45%	$10,115,246	$10,924	16%
New Jersey	$86,122,541	$286,272,593	30%	$200,150,052	$22,491	37%
New York	$238,027,500	$545,959,988	44%	$307,932,488	$15,670	23%
Pennsylvania	$85,215,151	$267,049,559	32%	$181,834,408	$14,235	28%
Totals in the U.S.	$2,679,831,466	$7,416,319,293	36%	$4,736,487,827	$15,052	29%
Source: State Budget Solutions, "Promises Made', Promises Broken 2014: Unfunded Liabilities Hit $4.7 Trillion"

Other factors[edit]

Rate of return[edit]

According to a 2012 analysis by the Pew Center for the States, most state pension plans assumed an 8 percent rate of return on investments at that time. Proponents argued that an 8 percent rate of return would bear out over the long-term (15-30 years). Critics asserted that this assumption was unrealistic, citing changing market conditions and lower investment returns across the board in preceding years.^[13][14]

Assuming a lower rate of return to predict investment earnings increases current plan liabilities, thereby lowering the percent funded ratio and requiring increased employer contributions (ARCs). This is because future plan liabilities are discounted based on the rate of return, so smaller expected investment returns result in larger actuarially accrued liabilities.^[15] For example, on September 21, 2012, the Illinois Teachers Retirement System voted to lower its rate of return from 8.5 percent to 8.0 percent. This change increased the state's fiscal year 2014 ARC from $3.07 billion to $3.36 billion.^[16] Similarly, when California's CalPERS reduced its projected annual rate of return from 7.75 percent to 7.5 percent in March 2012, it cost the state an additional $303 million for fiscal year 2013.^[17]

Financial crisis[edit]

In the wake of the 2008 recession, proponents of a lower assumed rate of return argued that the standard 8 percent assumptions could cause pension fund managers to engage in more risky investments and imprudent stewardship of public funds. Jeffrey Friedman, a senior market strategist at MF Global, said, "To target 8 percent means some aggressive trading. Ten-year Treasury [bonds] are yielding around 2 percent, economists say we are headed for a double-dip, and house prices aren't getting back to 2007 levels for the next decade, maybe.".^{[18][19][20][21][22]}

Advocates of the 8 percent return rate argued that the dip following the 2008 financial crisis did not prove that there was a long-term downward trend in investment returns. According to Chris Hoene, executive director of the California Budget Project, "The problem with [the market rate] argument is there isn’t significant evidence other than the short term blip during the economic crisis that there’s been that shift. It’s a speculative argument coming out of a very deep recession."^[23]

The National Association of State Retirement Administrators researched the median annualized rate of return for public pensions for the 1-, 3-, 5-, 10-, 20- and 25-year periods ending in 2013 and found it was 7.9 percent over the 20-year period, and exceeded 8 percent for the 1-, 3- and 25-year periods. It is important to note that the NASRA data reported the median returns, which means that median annualized returns of investment portfolios for half of the examined public pension funds failed to meet an 8 percent assumed rate of return.^[24]

Studies and reports[edit]

Pension fund management fees[edit]

See also: Public pension fund management fees

In July 2013, the Maryland Public Policy Institute (MPPI) and the Maryland Tax Education Foundation released a report detailing the fees paid for the management of state pension systems. According to MPPI, the 10 state pension funds that paid the most in management fees relative to net assets experienced lower returns over a five-year period than the 10 state pension funds that paid the least in management fees. For example, in fiscal year 2012, South Carolina's pension system paid approximately $296.1 million in total management fees (1.31 percent of total net assets at the beginning of the fiscal year) and its five-year rate of return was 1.46 percent. By contrast, Alabama's pension system paid roughly $13.3 million in management fees (0.05 percent of total net assets) and its five-year rate of return was 7.53 percent.^[6]

The table below presents the information collected by MPPI for Maryland and surrounding states. For each state's pension system, total net assets are listed (both for the beginning and end of the fiscal year in question), as well as the total amount paid in management fees. In addition, the rates of return for the pension systems are presented.

Public pension fund management fees, 2011-2012
State	Fiscal year	Total net assets at the beginning of the year	Total net assets at the end of the year	Total management fees	Management fees as % of total net assets	Five-year rate of return
Maryland	2012	$37,592,752,000	$37,178,726,000	$241,489,000	0.64%	0.78%
Delaware	2012	$7,648,780,000	$7,536,367,000	$47,318,000	0.62%	3.90%
New Jersey	2012	$81,067,610,282	$77,883,990,040	$224,200,000	0.28%	2.46%
New York	2012	$315,448,861,000	$316,880,795,000	$874,147,529	0.28%	2.91%
Pennsylvania	2012; 2011	$77,319,283,000	$73,140,758,000	$682,878,000	0.88%	1.00%
1"Three states— Hawaii, Nevada and Rhode Island—were excluded because they hadn’t published CAFRs for fiscal years ending December 31, 2011 or later. West Virginia was excluded because its June 30, 2012 CAFR lacked sufficient disclosure."[6] Source: Maryland Public Policy Institute, "Wall Street Fees, Investment Returns, Maryland 49 Other State Pension Funds," accessed April 23, 2015. Note: To access this data, navigate to the list of links below the article and click "Exhibit A."

Other post-employment benefits[edit]

See also: Other post-employment benefits, data

In addition to standard pension payments, some plans may offer pensioners additional benefits. These benefits, sometimes referred to as "other post-employment benefits," or "OPEBs," consist of health insurance, life insurance or other benefits that the pensioner may have received while employed. The cost of these benefits can prove complicated for actuaries to calculate because of the changes in fields like medicine. This, coupled with the normal challenges in calculating and meeting pension requirements, can result in funding shortages for pension plans.

Unfunded liabilities totaled nearly $500 billion throughout the country for OPEBs. Maryland was reported to have about $8.8 billion in unfunded liabilities for OPEBs. This was equal to about 1.77 percent of the country's total unfunded liabilities for these other services.

The chart below displays the unfunded liabilities for Maryland and its surrounding states. All dollar amounts displayed should be multiplied by 1,000,000. For instance, $300 translates to $300,000,000.

Unfunded actuarial accrued liabilities for other post-employment benefits, fiscal year 2013 (dollars in millions)
State	Unfunded liabilities	Percent of total
Maryland	$8,792	1.77%
Delaware	$5,766	1.16%
New Jersey	$63,881	12.84%
New York	$67,714	13.61%
Pennsylvania	$13,151	2.64%
U.S. total	$497,693	100%
Source: National Association of State Retirement Administrators, "Retiree Health Care Benefits for State and Local Employees in 2014," accessed April 30, 2015. Note: Although this article was dated for 2014, all figures were reported to have come from fiscal year 2013 reports.

Public pensions in 2012[edit]

In fiscal year 2012, according to the Maryland State Retirement and Pension System (MSRPS) Actuarial Valuation Report, the state had a total of 192,994 active members in its retirement plans.^[25] Membership figures divide plan participants into two broad categories: active and other. Active members are current employees contributing to the pension system. Other members include retirees, beneficiaries, and other inactive plan participants (usually terminated employees entitled to benefits but not yet receiving them).^[26]

The following information was collected from the MSRPS 2012 Actuarial Valuation Report, which measured fund status as of June 30, 2012. Valuation reports are annual reports produced by outside consultants, using unaudited data provided by the pension systems themselves, in order to determine what employers in the system should contribute in the coming year to maintain or improve the fiscal health of the pension funds.

The Government Accountability Office (GAO) and Pew Research Centers cited a percent funded ratio of 80 percent as the minimum threshold for a healthy fund, though the American Academy of Actuaries suggested that all pension systems "have a strategy in place to attain or maintain a funded status of 100 percent or greater."^[27][28] The column "SBS figure" refers to a market liability calculation of the fund by the nonprofit organization State Budget Solutions. This analysis used a rate of return of 3.225 percent, which was based upon the 15-year Treasury bond yield. The organization called this a "risk-free" rate of return, which would make it easier for states to hit their pension requirements in the future. Beginning in 2006, all private sector corporate pension plans incorporated market costs into their funding schemes.^[29]

Basic pension plan information -- Maryland State Retirement and Pension System
Plans	Current value	Percentage funded		Unfunded liabilities		Membership
		State figure	SBS figure[30]	State figure	SBS figure[30]
Teachers' Retirement System[25]	$22,523,978,000	65.76%	N/A[31]	$11,728,737,000	N/A[31]	103,694 active members
State Employees' Retirement System[25]	$12,667,592,000	62.45%		$7,615,436,000		85,174 active members
State Police Retirement System[25]	$1,134,511,000	62.1%		$692,035,000		1,332 active members
Judges' Retirement System[25]	$330,154,000	78.4%		$91,132,000		294 active members
State Law Enforcement Officers' Pension System[25]	$580,826,000	54.28%		$489,261,000		2,410 active members
State Law Enforcement Officers' Pension System[25]	$11,341,000	73.24%		$4,143,000		90 active members
TOTALS	$37,248,402,000	64.37%	34%	$20,620,744,000	$73,064,387,000	192,994 active members

Annual Required Contribution[edit]

Annual Required Contributions (ARC) are calculated annually and are a sum of two different costs. The first component is the "normal cost," or what the employer owes to the system in order to support the liabilities gained in the previous year of service. The second component is an additional payment in order to make up for previous liabilities that have not yet been paid for.

According to a report by the Pew Center on the States, between 1999 and 2008 Maryland paid 89.18 percent of its annual required contribution.^[32][33]

On June 25, 2012, the Government Accounting Standards Board (GASB) approved a plan to reform the accounting rules for state and local pension funds. These revised standards were set to take effect in fiscal years 2013 and 2014.^[34] As a result, ARCs were removed as a reporting requirement. Instead, plan administrators and accountants were instructed to use an actuarially determined contribution or a statutory contribution for reporting purposes.^[35]

ARC historical data[25]
Fiscal year	Teachers		Employees		State Police
	Annual Required Contribution (ARC)	Percentage contributed	Annual Required Contribution (ARC)	Percentage contributed	Annual Required Contribution (ARC)	Percentage contributed
2012	$1,288,886,000	71%	$721,776,000	66%	$54,452,000	87%
2011	$1,224,606,000	75%	$677,783,000	69%	$51,292,000	88%
2010	$889,605,000	92%	$524,797,000	75%	$37,114,000	69%
2009	$753,475,000	89%	$464,633,000	76%	$31,040,000	55%

ARC historical data[25]
Fiscal year	Judges		Law Enforcement		Correctional Officers
	Annual Required Contribution (ARC)	Percentage contributed	Annual Required Contribution (ARC)	Percentage contributed	Annual Required Contribution (ARC)	Percentage contributed
2012	$24,077,000	100%	$56,624,000	100%	$809,000	100%
2011	$23,854,000	100%	$57,070,000	100%	$796,000	100%
2010	$19,955,000	100%	$47,756,000	100%	$753,000	100%
2009	$17,520,000	100%	$46,140,000	100%	$752,000	100%

Public pensions in 2011[edit]

On June 27, 2013, Moody's Investor Service released its report on adjusted pension liabilities in the states. The Moody's report ranked states "based on ratios measuring the size of their adjusted net pension liabilities (ANPL) relative to several measures of economic capacity." In its calculations of net pension liabilities, Moody's employed market-determined discount rates (5.67 percent for Maryland) instead of the state reported assumed rates of return (7.75 percent for Maryland).^[36]

The report's authors found that adjusted net pension liabilities varied dramatically from state to state, from 6.8 (Nebraska) percent to 241 (Illinois) percent of governmental revenues in fiscal year 2011.^[36]

The adjusted net pension liability for Maryland's pension system in fiscal year 2011 was ranked ninth.^[36] The following table presents key state-specific findings from the Moody's report, as well as the state's national rank with respect to each indicator.

Adjusted net pension liabilities (ANPL) relative to key economic indicators - Maryland
	Governmental revenue*	Personal income	State GDP	Per capita
State findings	99.5 percent	9.7 percent	9.5 percent	$4,908
National ranking	10th	14th	13th	12th
*Moody's uses governmental revenues as reported in each state's consolidated annual financial reports; this includes not only state-generated revenue, but federal funds, as well.[36]

Historical pension plan data[edit]

Historical pension plan data
Year	Value of assets	Accrued liability	Unfunded liability	Funded ratio
2007	$37,886,936,000	$47,144,354,000	$9,257,418,000	80.36%
2008	$39,504,284,000	$50,244,047,000	$10,739,763,000	78.62%
2009	$34,284,569,000	$52,729,171,000	$18,444,603,000	65.02%
2010	$34,688,346,000	$54,085,081,000	$19,396,735,000	64.14%
2011	$36,177,656,000	$55,917,543,000	$19,739,887,000	64.70%
Change from 2007-2011	-$1,709,280,000	$8,773,189,000	$10,482,469,000	-15.66 percent

Reforms[edit]

Enacted reforms[edit]

2013[edit]

SB 813

Signed into law on May 16, 2013, this bill altered eligibility for certain benefits in the Maryland State Retirement and Pension System. This bill made members of the State Retirement and Pension System eligible to receive creditable service at retirement for the total amount of unused sick leave accrued by the member in certain systems in the State Retirement and Pension System. It also provided for the calculation of the creditable service for unused sick leave accrued by a member in certain systems and required the Department of Legislative Services and the State Retirement Agency to provide a report on or before a certain date.^[37]

2012[edit]

SB 335

Signed into law on May 22, 2012, this bill changed eligibility for the Judges’ Retirement System. It altered the rate of member contributions for members of the Judges' Retirement System and required individuals who became members of the Judges' Retirement System on or after a specified date to earn a specified amount of eligibility service before becoming eligible to receive specified retirement allowances. It also altered the calculation of a normal service retirement allowance for certain members of the system.^[38]

HB 72

The Budget Reconciliation and Financing Act was signed into law on May 19, 2011. The Act included extensive changes to Maryland retirement plans, including increasing employee contribution requirements for most current and future members of state plans. Members of the Employees’ Pension System and Teachers’ Pension System saw member contribution rates increase from 5 percent to 7 percent. The Law Enforcement Officers’ Pension System rates were increased from 4 percent to 6 percent in FY 2012 and to 7 percent in FY 2013 and thereafter.

The legislation also establishes the goal of reaching 80 percent actuarial funding within 10 years by reinvesting a portion of the savings generated by the benefit restructuring into the pension system in the form of increased state contributions above the contribution required by statute. In fiscal years 2012 and 2013, all but $120 million of the savings generated by the benefit restructuring were intended to be reinvested, with the $120 million dedicated to budget relief each year. Beginning in FY 2014, the amount reinvested in the pension fund will be subject to a $300 million cap, with any savings over that amount dedicated to budget relief.^[39]

Proposed reforms[edit]

2013[edit]

HB 780

This bill, which died in the House on March 20, 2013, would have altered participation in the state retirement system. It provided that specified employee would not be considered members of the Employees' Pension System or the Teachers' Pension System of the State Retirement and Pension System if the employees made an election to join the optional retirement program of the State Retirement and Pension System. It also would have required that specified participating employers provide specified employees with the opportunity to participate in the optional retirement program.^[40]

2012[edit]

HB 661

This bill, introduced in the Maryland House of Delegates on February 8, 2012, would have required counties to pay a portion of employer contributions for local school board employees and community college employees who are members of the Teachers' Retirement System or the Teachers' Pension System. It was withdrawn from further consideration on April 9, 2012.^[41]

See also[edit]

• Public pensions in the United States
• Maryland state budget and finances
• Tax policy in Maryland
• Pension statistics
• Public pension health by state
• Public pensions

External links[edit]

• Pension Tsunami
• Pension Calculator from Public Sector Inc.
• Maryland 2012 CAFR

Footnotes[edit]

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