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    Historical Utah pension information

    From Ballotpedia - Reading time: 24 min
    Public Policy Logo-one line.pngin Utah

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    The historical Utah 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 Utah's pension system, click here.

    As published 2016[edit]

    Pension Policy Logo on Ballotpedia.png
    Utah information (2015)
    Total contributions:
    $1,043,961,000
    Employee contributions:
    $38,776,000
    Government contributions:
    $1,005,185,000
    Total payments:
    $1,352,099,000
    Total cash and investment holdings:
    $27,107,869,000
    Number of state and local pension systems:
    10
    Active membership:
    102,552
    Inactive membership:
    43,431

    Public Policy Logo-one line.png

    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.

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

    According to the United States Census Bureau, there were 10 public pension systems in Utah as of 2015. Of these, eight were state-level programs, while the remaining two were administered at the local level. As of fiscal year 2015, membership in Utah's various pension systems totaled 145,983. Of these, 102,552 were active members.[1]

    HIGHLIGHTS
  • In fiscal year 2015, the most recent year for which information is available, total contributions of $1.0 billion were made to Utah's state and local pension systems. Of this amount, $38.8 million came from employees.
  • In fiscal year 2015, Utah's state and local pension systems made payments totaling $1.4 billion.
  • As of fiscal year 2015, Utah's state and local pension systems held $27.1 billion in total cash and investment holdings.

    • 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, Utah had eight state pension plans as of 2015:[3]

    1. Utah Contributory Retirement System
    2. Utah Noncontributory Retirement System
    3. Utah Firefighters Retirement System
    4. Utah Public Safety Retirement System
    5. Utah Judges Retirement System
    6. Utah Governors and Legislators Retirement Plan
    7. Utah Tier 2 Public Employees Retirement System
    8. Utah Tier 2 Public Safety and Fire Retirement System

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

    The table below provides general pension system information for Utah 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
    Utah 8 2 145,983 102,552 70.25% 43,431 29.75%
    Arizona 4 99 497,227 260,773 52.45% 236,454 47.55%
    Colorado 10 65 464,608 239,123 51.47% 225,485 48.53%
    Idaho 3 3 78,924 67,062 84.97% 11,862 15.03%
    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 $1.0 billion were made to Utah's state and local pension systems. Of this amount, $38.8 million came from employees. The remainder came from state and local governments. The table below provides information about pension contributions in Utah 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
    Utah $1,043,961 $38,776 3.71% $1,005,185 96.29% $1,828,778
    Arizona $3,056,358 $1,282,587 41.96% $1,773,771 58.04% $1,689,414
    Colorado $2,255,088 $781,756 34.67% $1,473,331 65.33% $3,609,957
    Idaho $556,660 $212,104 38.10% $344,556 61.90% $433,234
    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, Utah's state and local pension systems made payments totaling $1.4 billion. The table below provides pension payment information for Utah 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
    Utah $1,352,099 $1,335,738 $5,129 $11,232
    Arizona $4,531,178 $3,870,714 $303,532 $356,932
    Colorado $5,096,999 $4,643,046 $193,205 $260,747
    Idaho $853,107 $797,883 $0 $55,224
    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. Utah was reported to have about $267 million in unfunded liabilities for OPEBs. This was equal to about 0.05 percent of the country's total unfunded liabilities for these other services.

    The chart below displays the unfunded liabilities for Utah 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
    Utah $267 0.05%
    Arizona $220 0.04%
    Colorado $1,325 0.27%
    Idaho $55 0.01%
    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.[4][5][6]

    As of fiscal year 2015, Utah's state and local pension systems held $27.1 billion in total cash and investment holdings. The table below summarizes pension system cash and investment holdings for Utah 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
    Utah $27,107,869 $1,581,487 $13,932,332 $11,594,050
    Arizona $47,117,029 $1,872,009 $39,913,642 $5,331,378
    Colorado $53,522,332 $1,529,287 $46,893,100 $5,099,946
    Idaho $14,452,536 $351,473 $13,594,462 $506,601
    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.[7]

    The table below presents the information collected by MPPI for Utah 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. Compared to surrounding states, Utah had the second highest total net assets and total management fees.

    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
    Utah 2011 $23,012,754,000 $23,218,742,000 $50,105,000 0.22% 1.91%
    Arizona 2012 $28,314,807,000 $27,862,236,000 $137,905,000 0.49% 1.80%
    Colorado 2011 $41,790,120,252 $40,632,740,352 $159,485,643 0.38% 2.10%
    Idaho 2012 $12,102,424,421 $12,071,413,630 $42,461,439 0.35% 2.10%
    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."[7]
    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
    Utah
    Pension Policy Logo on Ballotpedia.png
    General information (2013)
    Total contributions:
    $865,021,000
    Employee contributions:
    $40,841,000
    Government contributions:
    $824,180,000
    Total payments:
    $1,212,794,000
    Total cash and investment holdings:
    $22,991,422,000
    Number of state and local pension systems:
    7 (6 state systems, 1 local system)
    Active membership:
    105,982
    Inactive membership:
    39,683
    Pension health (2012)
    Assets:
    $21,369,935,000
    Actuarial accrued liability (AAL):
    $27,939,108,000
    Unfunded actuarial accrued liability (UAAL):
    $6,569,173,000
    Funded ratio:
    76.5%
    UAAL per capita:
    $2,472
    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 Policy Logo-one line.png
    Public pensions • State public pension plans • Utah 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.


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

    According to the United States Census Bureau, there were seven public pension systems in Utah as of 2013. Of these, six were state-level programs, while the remaining system was administered at the local level. As of 2013, membership in Utah's various pension systems totaled 145,665. Of these, 105,982 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
    HIGHLIGHTS
  • Between fiscal years 2008 and 2012, the funded ratio of Utah's state-administered pension plans decreased from 86.5 percent to 76.5 percent. The state paid 100 percent of its annual required contribution, and for fiscal year 2012 the pension system's unfunded accrued liability totaled $6.6 billion. This amounted to $2,472 in unfunded liabilities per capita.[2][8]

    • 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, Utah had six state pension plans as of 2013:

    1. Utah Contributory Retirement System
    2. Utah Noncontributory Retirement System
    3. Utah Firefighters Retirement System
    4. Utah Public Safety Retirement System
    5. Utah Judges Retirement System
    6. Utah Governors and Legislative Pension Plan[9]

    In addition to the aforementioned state-level pension systems, there was one locally administered pension system in Utah.[1]

    The table below provides general pension system information for Utah 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
    Utah 6 1 145,665 105,982 72.76% 39,683 27.24%
    Colorado 2 65 428,478 223,683 52.2% 204,795 47.8%
    Idaho 2 2 92,698 65,585 70.75% 27,113 29.25%
    Montana 9 0 76,880 52,570 68.38% 24,310 31.62%
    Wyoming 6 0 47,871 42,224 88.2% 5,647 11.8%
    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 $865 million were made to Utah's state and local pension systems. Of this amount, $40.8 million came from employees. The remainder came from state and local governments. The table below provides information about pension contributions in Utah 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
    Utah $865,021 $40,841 4.72% $824,180 95.28% $2,562,940
    Colorado $2,017,672 $789,801 39.14% $1,227,871 60.86% $5,488,339
    Idaho $471,757 $185,102 39.24% $286,655 60.76% $1,027,754
    Montana $392,484 $164,007 41.79% $228,477 58.21% $1,520,578
    Wyoming $296,335 $141,254 47.67% $155,081 52.33% $893,652
    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, Utah's state and local pension systems made payments totaling $1.2 billion. The table below provides pension payment information for Utah 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
    Utah $1,212,794 $1,164,229 $5,263 $43,302
    Colorado $4,443,341 $4,028,173 $210,111 $205,059
    Idaho $743,101 $694,441 $8 $48,653
    Montana $674,954 $608,545 $19,180 $47,229
    Wyoming $444,818 $416,026 $21,416 $7,376
    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, Utah's state and local pension systems held nearly $23 billion in total cash and investment holdings. The table below summarizes pension system cash and investment holdings for Utah 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
    Utah $22,991,422 $1,349,766 $12,476,598 $9,165,058
    Colorado $46,530,078 $1,145,150 $39,846,658 $5,538,270
    Idaho $12,272,952 $415,519 $11,391,816 $465,617
    Montana $9,060,965 $358,479 $8,124,094 $578,392
    Wyoming $6,851,026 $309,727 $5,505,110 $1,036,189
    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 Utah and neighboring states. They found the following:

    • According to the Pew Charitable Trusts, Utah paid 100 percent of its required contribution and its funded ratio was only 76 percent in fiscal year 2012.
    • According to Morningstar, the state had a per capita pension debt of $2,472 and a funded ratio of 76.5 percent in fiscal year 2012.
    • According to State Budget Solutions, which assumed a lower rate of return, Utah had a per capita pension debt of $16,350 and a funded ratio of 41 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.”[10]

    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
    Utah $27,939 $6,569 $813 82% 78% 76% 100% 100% 100%
    Colorado $61,791 $22,711 $1,174 66% 61% 63% 66% 87% 85%
    Idaho $13,782 $2,078 $339 79% 90% 85% 113% 87% 86%
    Montana $11,908 $4,303 $282 70% 66% 64% 81% 75% 69%
    Wyoming $8,300 $1,691 $164 86% 83% 80% 82% 96% 89%
    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, Utah's state pension system was funded at a rate of 76.5 percent in fiscal year 2012. The table below provides state pension system health metrics for Utah 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
    Utah $21,369,935 $27,939,108 $6,569,173 76.5% $2,472
    Colorado $12,538,675 $21,191,405 $8,652,730 59.2% $1,771
    Idaho $11,366,899 $13,470,356 $2,103,457 84.4% $1,378
    Montana $7,631,717 $11,942,461 $4,310,744 63.9% $4,427
    Wyoming $6,609,064 $8,300,258 $1,691,194 79.6% $3,100
    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."[11] 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."[12][13]

    According to the State Budget Solutions report, Utah's pension plans were funded at a rate of 41 percent. To read the full report, click here.

    Note that all dollar amounts displayed (excluding those under the "Unfunded liability per capita" column) should be multiplied by 1,000 (e.g., $240,000 is equal to $240,000,000).

    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
    Utah $23,405,396 $57,593,531 41% $34,188,135 $16,350 24%
    Colorado $43,148,568 $136,245,697 32% $93,097,129 $17,672 32%
    Idaho $12,427,219 $28,764,344 43% $16,337,125 $10,135 26%
    Montana $8,285,745 $23,115,583 36% $14,829,838 $14,611 34%
    Wyoming $7,186,844 $18,670,574 38% $11,483,730 $19,698 25%
    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.[14][15]

    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.[16] 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.[17] 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.[18]

    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.".[19][20][21][22][23]

    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."[24]

    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.[25]

    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.[7]

    The table below presents the information collected by MPPI for Utah 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 a percentage of total net assets Five-year rate of return
    Utah 2011 $23,012,754,000 $23,218,742,000 $50,105,000 0.22% 1.91%
    Colorado 2011 $41,790,120,252 $40,632,740,352 $159,485,643 0.38% 2.10%
    Idaho 2012 $12,102,424,421 $12,071,413,630 $42,461,439 0.35% 2.10%
    Montana 2012 $8,305,942,274 $8,304,899,027 $43,312,842 0.52% 1.22%
    Wyoming 2011 $6,665,574,760 $6,492,787,154 $30,207,289 0.45% NA
    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."[7]
    Source: Maryland Public Policy Institute, "Wall Street Fees, Investment Returns, Maryland 49 Other State Pension Funds," accessed July 1, 2013

    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. Utah was reported to have about $267 million in unfunded liabilities for OPEBs. This was equal to about 0.05 percent of the country's total unfunded liabilities for these other services.

    The chart below displays the unfunded liabilities for Utah 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
    Utah $267 0.05%
    Colorado $1,325 0.27%
    Idaho $55 0.01%
    Montana $447 0.09%
    Wyoming $219 0.04%
    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]

    The funding ratio for Utah's pension system decreased from 95.80 percent in fiscal year 2007 to 76.49 percent in fiscal year 2012, a decrease of 19.31 percentage points, or 20.2 percent. Likewise, unfunded liabilities increased from under $1 billion in fiscal year 2007 to more than $6.5 billion in fiscal year 2012.[26]

    A 2012 report from the Pew Center on the States noted that Utah's pension system was funded at 82 percent at the close of fiscal year 2010, just above the 80 percent funding level experts recommend. Pew designated the state's pension system as needing "improvement."[27]

    In fiscal year 2012, according to the system's Comprehensive Annual Financial Report (CAFR), Utah had a total of 104,450 active members in its retirement plans.[26] 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).[28]

    The following information was collected from the system's Comprehensive Annual Financial Report. The "percentage funded" was calculated by taking the current value of the fund and dividing by the estimated amount of total liabilities. The assumed rate of return used to calculate fund value was 7.50 percent in fiscal year 2012.[26] 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."[29][30] The column labeled "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 that would make it easier for states to achieve their pension funding requirements in the future. Beginning in 2006, all private sector corporate pension plans incorporated market costs into their funding schemes.[31]

    Basic pension plan information -- Utah*[26]
    Plans Current value Percentage funded Unfunded liabilities Membership
    State figure SBS figure[32] State figure SBS figure[32]
    Noncontributory Retirement System $17,007,940,000 76.1% N/A[33] $5,353,257,000 N/A[33] 82,259 active members
    Contributory Retirement System $1,094,885,000 85.1% $191,087,000 1,937 active members
    Public Safety Retirement System $2,283,777,000 73.0% $845,307,000 7,313 active members
    Firefighters Retirement System $824,060,000 86.2% $131,608,000 1,884 active members
    Judges Retirement System $131,217,000 74.6% $44,600,000 111 active members
    Utah Governors and Legislators Retirement Plan $9,077,000 73.7% $3,246,000 113 active members
    Tier 2 Public Employees Retirement System** $17,818,000 99.6% $72,000 10,356 active members
    Tier 2 Public Safety and Firefighters Retirement System** $1,161,000 100.3% $(4,000) 477 active members
    TOTALS $21,369,935,000 76.49% 42% $6,569,173,000 $29,759,752,000 104,450 active members
    *Two valuations were conducted in 2012, one in January and one in December. Because they are the most recent, December 2012 figures are included here.
    **Because the Tier 2 systems are relatively new, valuation data is only available for 2012.

    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 had not yet been paid for. According to a report by the Pew Center on the States, in 2010 Utah paid 100 percent of its annual required contribution.[27][34]

    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.[35] 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.[36]

    ARC historical data[26]
    Fiscal year NRS CRS PSRS FRS
    Annual Required Contribution (ARC) Percentage contributed Annual Required Contribution (ARC) Percentage contributed Annual Required Contribution (ARC) Percentage contributed Annual Required Contribution (ARC) Percentage contributed
    2012 $644,907,000 100% $11,705,000 100% $117,975,000 100% $17,321,000 100%
    2011 $610,270,000 100% $11,125,000 100% $110,829,000 100% $13,005,000 100%
    2010 $564,154,000 100% $11,851,000 100% $103,586,000 100% $10,915,000 100%
    2009 $535,298,000 100% $10,865,000 100% $98,729,000 100% $16,159,000 100%
    2008 $522,733,000 100% $11,037,000 100% $93,899,000 100% $10,219,000 100%
    ARC historical data[26]
    Fiscal year JRS UGLRS Tier 2 PERS Tier 2 PSFRS
    Annual Required Contribution (ARC) Percentage contributed Annual Required Contribution (ARC) Percentage contributed Annual Required Contribution (ARC) Percentage contributed Annual Required Contribution (ARC) Percentage contributed
    2012 $5,898,000 100% $214,000 100% $14,208,000 100% $1,031,000 100%
    2011 $5,403,000 100% $153,000 100% $2,790,000 100% $89,000 100%
    2010 $4,715,000 100% $0 100% N/A N/A N/A N/A
    2009 $4,184,000 100% $0 100% N/A N/A N/A N/A
    2008 $3,802,000 100% $0 100% N/A N/A N/A N/A

    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.[7]

    The table below presents the information collected by MPPI for Utah 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. Compared to surrounding states, Utah had the second highest total net assets and total management fees.

    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
    Utah 2011 $23,012,754,000 $23,218,742,000 $50,105,000 0.22% 1.91%
    Colorado 2011 $41,790,120,252 $40,632,740,352 $159,485,643 0.38% 2.10%
    Idaho 2012 $12,102,424,421 $12,071,413,630 $42,461,439 0.35% 2.10%
    Montana 2012 $8,305,942,274 $8,304,899,027 $43,312,842 0.52% 1.22%
    Wyoming 2011 $6,665,574,760 $6,492,787,154 $30,207,289 0.45% NA
    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."[7]
    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."

    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 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, the Moody report employed market-determined discount rates (5.54 percent for Utah) instead of the state-reported assumed rates of return (7.50 percent for Utah as of January 1, 2011).[37]

    The report's authors found that adjusted net pension liabilities varied dramatically from state to state, from 6.8 percent (Nebraska) to 241 percent (Illinois) of governmental revenues in fiscal year 2011.[37]

    The adjusted net pension liability for Utah in fiscal year 2011 was ranked the 40th highest in the nation.[37] The following table presents key state-specific findings from the Moody report, as well as the state's national rank with respect to each indicator.

    Adjusted net pension liabilities (ANPL) relative to key economic indicators - Utah
    Governmental revenue* Personal income State GDP Per capita
    State findings 30.8% 3.4% 2.5% $1,124
    National ranking 35th 35th 38th 37th
    *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.[37]

    Historical data[edit]

    Historical pension plan data - all systems**[26]
    Year Value of assets Accrued liability Unfunded liability Funded ratio
    2007 $18,093,491,000 $18,886,114,000 $792,623,000 95.80%
    2008 $20,269,043,000 $21,321,332,000 $1,052,289,000 95.06%
    2009 $19,857,580,000 $22,932,398,000 $3,074,818,000 86.59%
    2010 $20,818,430,000 $24,274,639,000 $3,456,209,000 85.76%
    2011 $21,131,650,000 $25,535,499,000 $4,403,849,000 82.75%
    Change from 2007-2011 $3,038,159,000 $6,649,385,000 $3,611,226,000 -13.05%
    **Because the Tier 2 systems are relatively new, valuation data is only available for 2012.

    Reforms[edit]

    2010[edit]

    Senate Bill 63

    Sponsored by Senator Dan Liljenquist, S.B. 63 sought to close the state's defined benefit pension plan to employees hired after July 1, 2011. In its stead, employees would choose between a defined contribution plan or a hybrid plan combining elements of a defined benefit plan and a defined contribution plan. The governor signed the bill into law on March 29, 2010.[38][39]

    See also[edit]

    External links[edit]

    Footnotes[edit]

    1. ↑ 1.0 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 United States Census Bureau, "State- and Locally-Administered Defined Benefit Pension Systems - All Data by State and Level of Government: 2015," accessed August 26, 2016 Cite error: Invalid <ref> tag; name "census" defined multiple times with different content
    2. ↑ 2.0 2.1 2.2 2.3 Morningstar, "The State of State Pension Plans 2013: A Deep Dive Into Shortfalls and Surpluses," accessed September 16, 2013
    3. ↑ United States Census Bureau, "2015 Annual Survey of Public Pensions: Unit ID File," accessed August 30, 2016
    4. ↑ Investopedia, "Cash investment definition," accessed April 6, 2015
    5. ↑ Investopedia, "Short-term investments definition," accessed April 6, 2015
    6. ↑ Investopedia, "Securities," accessed April 6, 2015
    7. ↑ 7.0 7.1 7.2 7.3 7.4 7.5 Maryland Public Policy Institute, "Wall Street Fees, Investment Returns, Maryland 49 Other State Pension Funds," accessed July 1, 2013 Cite error: Invalid <ref> tag; name "report" defined multiple times with different content Cite error: Invalid <ref> tag; name "report" defined multiple times with different content Cite error: Invalid <ref> tag; name "report" defined multiple times with different content Cite error: Invalid <ref> tag; name "report" defined multiple times with different content Cite error: Invalid <ref> tag; name "report" defined multiple times with different content
    8. ↑ The Pew Charitable Trusts, “The Fiscal Health of State Pension Plans: Funding Gap Continues to Grow,” accessed April 16, 2015
    9. ↑ U.S. Census, "2013 Survey of Public Pensions: State Data," accessed April 16, 2015. Note: To access this data, navigate to the bottom of the page and click "Unit ID file."
    10. ↑ The Pew Charitable Trusts, “The Fiscal Health of State Pension Plans: Funding Gap Continues to Grow,” accessed April 16, 2015
    11. ↑ State Budget Solutions, "About SBS," archived January 20, 2016
    12. ↑ State Budget Solutions, "Promises Made, Promises Broken 2014: Unfunded Liabilities Hit $4.7 Trillion," accessed November 12, 2014
    13. ↑ As of 2016, it appeared that State Budget Solutions had been absorbed by the American Legislative Exchange Council.
    14. ↑ The Widening Gap Update, "Pew Center on the States," accessed October 17, 2013
    15. ↑ The New York Times, "Public Pensions Faulted for Bets on Rosy Returns," accessed May 27, 2012
    16. ↑ Benefits Magazine, "Public Pension Funding 101: Key Terms and Concepts," accessed October 23, 2013
    17. ↑ Crain's Chicago Business, "State teachers pension board lowers expected rate of return," accessed September 21, 2013
    18. ↑ Huffington Post, "California Pension Funds Expect Lower Investment Return," accessed March 14, 2012
    19. ↑ The Washington Post, "Kansas’s pension funding gap just grew by $1 billion," accessed September 6, 2013
    20. ↑ Topeka Capital-Journal, "KPERS' unfunded liability rises to $10.2B," accessed September 4, 2013
    21. ↑ Wall Street Journal, "Pensions Wrestle With Return Rates," accessed October 10, 2011
    22. ↑ The Courant, "Promising Too Much On Public Pensions," accessed August 10, 2012
    23. ↑ Business Wire, "NCPERS 2013 Survey: Public Pension Plans Report Increasing Confidence, Lower Costs, Growing Returns," accessed October 22, 2013
    24. ↑ Governing, "Expert: Governments Are Masking Their Pension Liabilities," accessed October 25, 2013
    25. ↑ National Association of State Retirement Administrators, "Issue Brief: Public Pension Plan Investment Return Assumptions," accessed October 23, 2013
    26. ↑ 26.00 26.01 26.02 26.03 26.04 26.05 26.06 26.07 26.08 26.09 26.10 26.11 26.12 Utah Retirement Systems, "2012 Comprehensive Annual Financial Report," accessed November 26, 2013
    27. ↑ 27.0 27.1 Pew Center on the States, "Widening Gap Update: Utah," accessed June 18, 2012
    28. ↑ Organisation for Economic Co-operation and Development, "Pensions Glossary," accessed November 27, 2013
    29. ↑ United States Government Accountability Office Report to the Committee on Finance, U.S. Senate, "State and Local Government Retiree Benefits: Current Status of Benefit Structures, Protections, and Fiscal Outlook for Funding Future Costs," September 2007, accessed October 23, 2013
    30. ↑ American Academy of Actuaries, "Issue Brief: The 80% Pension Funding Standard Myth," July 2012, accessed October 23, 2013
    31. ↑ Governing Magazine, " Is There a Plot Against Pensions?" accessed October 14, 2013
    32. ↑ 32.0 32.1 State Budget Solutions, "Promises Made, Promises Broken - The Betrayal of Pensioners and Taxpayers," accessed September 20, 2013
    33. ↑ 33.0 33.1 Analysis only available for system totals and not individual funds.
    34. ↑ Government Accounting Standards Board, "Annual Required Contribution (ARC)," accessed October 17, 2013
    35. ↑ Reuters, "Little-known U.S. board stokes hot pension debate," accessed July 10, 2012
    36. ↑ State Budget Solutions, "GASB's ineffective public pension reporting standards set to take effect," accessed June 5, 2013
    37. ↑ 37.0 37.1 37.2 37.3 Moody's Investor Service, "Adjusted Pension Liability Medians for US States," accessed June 27, 2013
    38. ↑ Utah State Legislature, "SB 63," accessed November 26, 2013
    39. ↑ The Salt Lake Tribune, "State pension plan gets overhaul," accessed March 11, 2013
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