State Plan Depletion Ratios

Which state plan is likely to be the second to go pay-as-you go (the Minnesota Legislators Retirement Fund is already there)?

You can compare Funded Ratios (here) but the Accrued Liability values in the actuarial reports are not to be trusted.  A better metric, less susceptible to manipulation, is the Depletion Ratio:

(Payouts – Deposits) / Market Value of Assets

Of the 154 plans in our study, 131 have negative Depletion Ratios with one state (not Illinois) having 5 of the 13 plans with the worst Depletion Ratios:

New Jersey

10 responses to this post.

  1. Once NJ jettisons the PW health benefits, that should free up enough capital to fund the pensions a bit longer.


    • Posted by Anonymous on August 3, 2016 at 3:36 pm

      Maybe BUT that’s assuming the PW health benefits “savings” found its way into the pension funds?


  2. Posted by George on August 3, 2016 at 8:12 pm

    Am I interpreting things wrong, or is most of NJ’s pension problem teachers pensions?


    • You are interpreting wrong. Teachers are near the bottom (with judges) because the state is totally responsible for making the gov. portion of the payments. PERS and PFRS get a little more gov. money from the municipalities and actuaries manipulate that little extra (like in a fun-house mirror) to fatten up the funded ratio. In actuality all these plans are bankrupt with less than half the money now available (after taking out employee contributions) to annuitize current retirees alone. 7 years of Christie doing nothing (except stealing COLAs which in the current low-interest environment didn’t come to much anyway) have set the stage for massive defaults very soon.


      • Posted by boscoe on August 4, 2016 at 10:51 am

        When you use the word default, what are you referring to – failure to contribute or failure to pay current pension benefits?


        • Posted by Anonymous on August 4, 2016 at 10:58 am

          They kind of go hand in hand so my guess is both.


        • Failure to pay part to some and all to others. There will be variations by state but we are entering the Feinberg stage where it’s no longer who gets what and how much but who get what and how much taken from them.


          • Posted by Anonymous on August 4, 2016 at 11:32 am

            Fungible pension assets? NJSC will be busy but who’ll serve when their pension fund runs dry on appeal?


  3. Posted by Anonymous on August 4, 2016 at 11:04 am

    Forgot to ask the more sticky question. How can one interpolate the “remaining” years – SLM no assumption changes, year end assets divided by net depletion. Again, assumes no gains/losses, no change in total contributions, no attrition, no additional retirees – totally unrealistic but “what ifs” would one use?


    • Fairly basic. If you are running through 13% of your assets annually (NJ judges plan) then you will be broke in the eighth year. But, in reality, other factors will intervene: reducing benefits, another dedicated source of revenue like court fees or higher contributions, or in NJ’s case, moving money around from plans that aren’t as close to pay-go.


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