The brief’s key findings are:
- State and local policymakers face a growing pension cost burden, but often lack understanding of the root causes.
- One underappreciated cause is “legacy debt” – unfunded liabilities accumulated long ago, before plans adopted modern funding practices.
- Legacy debt still exists today because historical unfunded liabilities were ultimately paid in full using some of the money intended to fund later benefits.
- In a sample of plans with particularly low funded ratios, legacy debt averaged more than 40 percent of unfunded liabilities.
- A failure to recognize the legacy debt has provided misleading information about benefit generosity, hindering progress toward effective solutions.