Researchers at Boston College’s Center for Retirement Research analyzed the current status of State and Local government defined-benefit (i.e., “traditional”) pension plans across the nation. What they found was a bit disturbing. Despite an assumption that the plans would earn an average return of 7.6% per year, the 170 plans reviewed by analysts actually had an average return of just 0.6% in 2016. This has dropped the average plan funding percentage to just 67.9%. Given the underperformance with regard to investments, there remain only two viable options—increasing contributions (from governments, their workers, and/or taxpayers), or reducing pension benefits, or both. Most observers believe that, in the end, it is taxpayers who will once again get the bill.
