Other cities have larger underfunded pension plans than Detroit
By Paula Aven Gladych
Detroit may have filed for bankruptcy because of its underfunded pension liability, but compared to other major metropolitan areas, its 91.4 percent funded status seems pretty positive, according to new data by Morningstar.
Morningstar examined the pension plans of the 25 largest cities in the United States, many of which are so large that the underfunded liability falls squarely on the residents of those cities, the report found.
Chicago had the smallest funded ratio at 35.2 percent, followed by Philadelphia with 48.1 percent and Jacksonville, Fla., at 56 percent. And even though New York City’s funded ratio was 60.1 percent, slightly higher than the top three on the list, its net outstanding debt of $77.3 billion dwarfed the outstanding debt held by the rest of the list, taking up more than half of the aggregate net outstanding debt of $132.5 billion.
Washington, D.C. and Chicago had the next highest net outstanding direct debt at $8.1 billion and $7.9 billion respectively.
According to Morningstar, pension contributions accounted for an average of 12 percent of general fund spending among the nation’s largest cities in fiscal 2012. Annual pension contributions accounted for less than 10 percent of spending for nine cities, including Memphis, Tenn., at 3.1 percent, and Washington, D.C., at 3.8 percent.
San Jose, Calif., and San Diego each made fiscal 2012 pension contributions equal to at least 20 percent of general fund spending, with San Jose’s contributions reaching 29.7 percent. Pension contributions by city are influenced by how high funding levels are to begin with. Philadelphia undercut its annual required pension contributions by $150 million in 2010 and $80 million in 2011. The city must pay this money back by 2014, Morningstar found.
Chicago contributed an amount equal to 14.2 percent of general fund spending for fiscal 2012, despite having a funded ratio of 35 percent. The city has always contributed the minimum amount that it is required to contribute by law, but it is well below the actuarially determined annual required contribution, which has contributed to the city’s low funded level, Morningstar said.
Originally published on BenefitsPro.com