MN liabilities "too high"
US - Unfunded liabilities for Minnesota's seven largest pension plans have remained "unacceptably high" at US$1.7bn, due to increased contributions being paid out as benefits instead of being reinvested in the funds, said Pat Anderson, state auditor.
Anderson released a report on the pension plans which revealed they had a combined liability of $1.7bn, or 42.5% of their $4bn net assets.
She added that six out of the seven plans were less than 100% funded and five of them saw their funded ratio hold or worsen over 2005.
“Contributions to the public pension plans by the state and local taxpayers have increased significantly over the past years, yet the funding shortfalls remain a serious problem,” Anderson declared.
She noted the increased contributions were being paid out to beneficiaries instead of being put towards improve the plans’ funding and shore up their overall solvency.
The Saint Paul Teachers pension plan had the highest unfunded liability with a funded ratio of 69.65%. This could force the fund to consolidate, as the Minneapolis Teachers’ fund did with the Teachers Retirement Association last summer.
Although the outlook was grim, Anderson did not lose faith in the schemes.
“I believe there is a continuing, valuable role for large defined benefit public pensions plans as long as they are stringently managed,” she concluded.
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