Pension Reform Newsletter — July 2018
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Pension Reform Newsletter

Pension Reform Newsletter — July 2018

Michigan's pension reforms are succeeding, examining Colorado's post-reform progress, actuarial market shares, and more.

This newsletter from Reason Foundation’s Pension Integrity Project highlights articles, research, opinion and other information related to public pension challenges and reform efforts across the nation. You can find previous editions here.

In This Issue:

  • Articles, Research & Spotlights 
    • Michigan’s Reform Succeeds with Incremental Change
    • Reason’s Analysis Maps Actuarial Market Shares
    • Update on Colorado’s Post-Reform Progress
  • News in Brief
  • Quotable Quotes on Pension Reform
  • Contact the Pension Reform Help Desk

Articles, Research & Spotlights

 Michigan Enters Phase Two of its Pension Reform

After a major set of reforms designed to improve the solvency of the state’s teacher pension system in 2017, the Michigan House and Senate have been engaged in a follow-up round of legislation with several bills aimed at covering lingering issues not tackled last year. Additionally, pension fund administrators made prudent adjustments to a key assumption that drives pension accounting. The collective set of changes to state retirement systems was recently praised by Standard & Poor’s, which cited pension reform as a key factor in its recent decision increase the state’s credit rating from -AA to AA with a stable outlook. Reason’s Anthony Randazzo and Leonard Gilroy detail the recently adopted legislation and examine how the underlying process and commitment to reform has driven such a successful collective outcome.

GRS Dominates Public Pension Actuarial Consulting

Public pension plans depend on actuarial consulting firms to inform and advise them on contributions rates, assumptions, and a wide range of other factors that are meaningful to the long-term health of a retirement fund. A new Reason Foundation analysis explores the market environment in 2016 for actuarial firms that consult for public pension plans, ranking the plans by market share according to pension liabilities and unfunded liabilities. Using a database of over 500 plans, the report reveals a total pension liability of nearly $5 trillion and an unfunded liability of over $1.4 trillion. The analysis showed that Gabriel, Roeder, Smith & Company (GRS) oversees the largest share of pension plans by far, advising plans that make up nearly one-fourth of the total liabilities. Milliman, Cavanaugh & Macdonald, Segal, and Conduit all follow respectively when ordered by size of the liability for which they are responsible.

More Positive Signs for Colorado’s Pension

 Just two months following the passage of major bipartisan pension reform, Colorado is already seeing signs of a brightening outlook for its public pension system, the Public Employees’ Retirement Association (PERA). S&P Global Ratings improved its credit outlook for the state last month, citing positive changes from the reform. Now, 2017 actuarial reports are showing major improvements in the plan’s amortizations schedules. Reason’s Zachary Christensen briefly details the latest reports.

News in Brief 

New Study Explores Differences in Public Pension Returns: The Center for Retirement Research has released a study analyzing the investment returns of U.S. public pensions. The research focuses on the range of varying returns public plans had from 2001 to 2016 and the most influential factors that affected each fund’s performance. The study identifies two sources of variation: differences in asset allocation and differences in the returns within each asset class. The analysis finds little variance between funds in how assets were allocated, concluding that different returns within each asset class likely play a larger role in achieving higher or lower returns. The full study is available here. 

Report Illustrates Pension Challenges of Connecticut Cities: The Manhattan Institute published a report that details pension costs in the five largest cities of Connecticut: Bridgeport, New Haven, Hartford, Stamford, and Waterbury. The study finds that these cities face similar challenges to those currently plaguing policymakers at the state level in Connecticut. Notably, rising pension costs have outpaced increases in property tax revenues in three of the cities. The report recommends that sweeping reform is necessary for these cities to maintain a public retirement plan that is affordable. These Connecticut cities, in fact, face more urgency to act when compared to the state level. The full report is available here.

Actuarial Pioneer Passes Away: Jeremy Gold, who presciently warned of the current pension crisis, passed away this month at the age of 75. Mr. Gold spent 30 years spreading awareness of flawed standards and assumptions in the actuarial field. He emphasized the important role actuaries have in protecting not just their employers, but the overall fiscal health of the public as a whole. Many of the current developments in actuarial standards can be partly attributed to his principled and outspoken ideas. The New York Times featured a story on his life and contributions here.

Quotable Quotes on Pension Reform

“So here we are with large and underfunded pension obligations starting to come due, cities don’t have money to pay them, constitutional guarantees that benefits can’t be cut, and union bosses who will fight to keep it that way. They tend to resist any kind of pension reform. After all, large delayed compensation is a powerful tool for them. Something has to give, and this puts union members who are counting on their pensions, and gave up pay raises for them, in a tough spot.”

–Allison Schrager, “A Turning Point for Public Sector Pensions?” Allison’s Ode to the Second Movement (e-newsletter), July 2, 2018.

“[I]ncomes increased more for younger retirees, aged 65 to 74, than for the oldest retirees aged 85 and over. This is the opposite of what you would expect if the gradual shift from traditional defined benefit pensions to 401(k)s was…undermining retirement income adequacy.”

—Andrew Biggs, “The Media’s Coverage of Retirement Saving Really is Terrible,” Forbes, July 2, 2018.

“We think it likely that the legislature will need to make additional adjustments to the plans to keep from lagging behind actuarial requirements. The question is: How soon will those adjustments need to be made and will there be the political willingness to do so at that time?”

—S&P report on last month’s reform of Minnesota’s pension system, quoted in Jesse Van Berkel, “Minnesota’s Pension Changes ‘Far From a Cure-all’ Moody’s Warns,” Star Tribune, July 9, 2018.

Contact the Pension Reform Help Desk

Reason Foundation’s Pension Reform Help Desk provides information on Reason’s work on pension reform and resources for those wishing to pursue pension reform in their states, counties and cities. Feel free to contact the Reason Pension Reform Help Desk by e-mail at

Follow the discussion on pensions and other governmental reforms at Reason Foundation’s website or on Twitter @ReasonReform. As we continually strive to improve the publication, please feel free to send your questions, comments and suggestions to

Published by the Pension Integrity Project at Reason Foundation

Edited by Zachary Christensen, Policy Analyst, Reason Foundation

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Reason Foundation’s Pension Integrity Project has helped policymakers in states like Arizona, Colorado, Michigan, and Montana implement substantive pension reforms. Our monthly newsletter highlights the latest actuarial analysis and policy insights from our team.

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