Public pensions in Maine
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|Maine public pensions|
|Number of pension systems||1|
|State pension systems:||Maine Public Employees Retirement System|
|System type:||Defined benefit plan|
|Pension Health (2012)|
|Unfunded liabilities :||$2,935,200,000|
|Percent funded change:||1.1%|
|Percent funded rank:||15|
|Pension Fund Members (2012)|
|Other State Pension Information|
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According to the United States Census Bureau, the state has no locally-administered pension systems.
A 2012 report from the Pew Center on the States noted that Maine's pension system was funded at 70 percent at the close of fiscal year 2010, below the 80 precent funding level experts recommend. Consequently, Pew designated the state's pension system as cause for "serious concern."
The funding ratio for the state's pension system decreased from 79.7 percent in fiscal year 2007 to 79.1 percent in fiscal year 2012, a decrease of 0.6 percentage point, or 0.75 percent. Meanwhile, unfunded liabilities increased from over $2.6 billion in fiscal year 2007 to more than $2.9 billion in fiscal year 2012.
In fiscal year 2012, according to the system's Comprehensive Annual Financial Report, Maine had a total of 50,394 active members in its retirement plans. Our membership figures divide plan participants into two broad categories: active and other. Active members are current employees contributing to the pension system. Other members include retirees, beneficiaries and other inactive plan participants (usually terminated employees entitled to benefits but not yet receiving them).
The following data was collected from the system's Comprehensive Annual Financial Report. The "percentage funded" is calculated by taking the current value of the fund and dividing by the estimated amount of total liabilities. The assumed rate of return used to calculate fund value was 7.25 percent in fiscal year 2012. The Government Accountability Office (GAO) and Pew Research Centers cite a percent funded ratio of 80 percent as the minimum threshold for a healthy fund, though the American Academy of Actuaries suggests that all pension systems "have a strategy in place to attain or maintain a funded status of 100 percent or greater." The column labeled "SBS figure" refers to a market liability calculation of the fund by the nonprofit organization State Budget Solutions. This analysis uses a rate of return of 3.225 percent, which is based upon the 15-year Treasury bond yield. The organization calls this a "risk-free" rate of return that would make it easier for states to achieve their pension funding requirements in the future. Since 2006, all private sector corporate pension plans have incorporated market costs into their funding schemes.
|Basic Pension Plan Information -- Maine|
|Current value||Percentage funded||Unfunded liabilities||Membership|
|State figure||SBS figure||State figure||SBS figure|
|$11,076,400,000||79.1%||45%||$2,935,200,000||$13,685,324,000||50,394 active members|
Annual Required Contribution
Annual Required Contributions (ARC) are calculated annually and are a sum of two different costs. The first component is the "normal cost," or what the employer owes to the system in order to support the liabilities gained in the previous year of service. The second component is an additional payment in order to make up for previous liabilities that have not yet been paid for. According to a report by the Pew Center on the States, in 2010 Maine paid 103 percent of its annual required contribution.
On June 25, 2012, the Government Accounting Standards Board (GASB) approved a plan to reform the accounting rules for state and local pension funds. These revised standards were set to take effect in fiscal years 2013 and 2014. As a result, ARCs were removed as a reporting requirement. Instead, plan administrators and accountants will use an actuarially determined contribution or a statutory contribution for reporting purposes.
|ARC historical data|
|Annual Required Contribution (ARC)||Percentage contributed|
Historical funding levels
|Historical pension plan data - MainePERS|
|Year||Value of assets||Accrued liability||Unfunded liability||Funded ratio|
|Change from 2007-2011||$477,600,000||$513,400,000||$35,800,000||0.5%|
Rate of return
| Percent Funded Status of Pension Plans |
in the 50 States as of November 2013
|Note: The data in this map was compiled from state CAFR reports and Actuarial Valuation documents. Figures reflect a combination of all of the state pension plans.|
According to a 2012 analysis by the Pew Center for the States, most state pension plans assume an 8 percent rate of return on investments. Critics assert that this assumption is unrealistic, citing changing market conditions and significantly lower investment returns across the board over the past several years. When states lower the rate of return in an effort to accurately predict investment earnings, it increases the current plan liabilities, thereby lowering the percent funded ratio and causing the ARC to increase. This is because future plan liabilities are discounted based on the rate of return, so smaller expected investment returns result in larger actuarially accrued liabilities. For example, on September 21, 2012, the Illinois Teachers Retirement System voted to lower its rate of return from 8.5 percent to 8.0 percent. This change increased the state's fiscal year 2014 ARC from $3.07 billion to $3.36 billion. Similarly, when California's CalPERS reduced its projected annual rate of return from 7.75 percent to 7.5 percent in March 2012, it cost the state an additional $303 million for fiscal year 2013.
The 2008 financial crisis had a devastating effect on pension plans nationwide and has resulted in slower economic growth and increased market volatility. In light of this, some market strategists find the 8 percent assumption to be overly ambitious. Stanford University Finance Professor Joshua Rauh stated that using past investment performance in this economic climate was "dangerously optimistic." Advocates for a lower assumed rate of return argue that the standard assumptions could cause pension fund managers to engage in more risky investments and imprudent stewardship of public funds. Further, if pension plans were using more conservative assumptions, such as the 3 or 4 percent assumed rate of return used in the private sector, and the plans grew more quickly than expected, the fund would have a surplus and smaller future ARCs, which would be preferable to using optimistic assumptions and potentially being caught with larger-than-expected deficits.
On the other hand, traditional public pension plan advocates argue that the dip observed in recent years is not sufficient proof of a long-term, downward trend in investment returns. According to Chris Hoene, executive director at the California Budget Project, "The problem with [the market rate] argument is there isn’t significant evidence other than the short term blip during the economic crisis that there’s been that shift. It’s a speculative argument coming out of a very deep recession."
The National Association of State Retirement Administrators compiled data on the median annualized rate of return for public pensions for the 1-, 3-, 5-, 10-, 20-, and 25-year periods ending in 2013. While the median annualized rate of return failed to meet the 8 percent assumption that most public pensions assume over the 5- and 10-year periods, it was just shy (7.9 percent) over the 20-year period, and it exceeded 8 percent for the 1-, 3-, and 25-year periods. It is important to note that the NASRA data is reporting the median returns, indicating that even though median annualized returns exceeded 8 percent in the 25-year period, the investment portfolios for half of the examined public pension funds failed to meet an 8 percent assumed rate of return.
In September 2013, the nonprofit organization State Budget Solutions published an analysis of state pension funding levels. In its calculations, State Budget Solutions used a 3.2 percent rate of return, the 15-year Treasury bond yield as of August 21, 2013, to discount plan liabilities.
The research found that, all states combined, state public employee pension plans have only 39 percent of the assets they need to cover their promised payments—a $4.1 trillion gap. According to the report, Maine's public pension plans were 45% funded, making it the 11th most funded state.
Moody's report on adjusted pension liabilities
On June 27, 2013, Moody's Investor Service released its report on adjusted pension liabilities in the states. The Moody's report ranked states "based on ratios measuring the size of their adjusted net pension liabilities (ANPL) relative to several measures of economic capacity." In its calculations of net pension liabilities, Moody's employed market-determined discount rates (5.67 percent for Maine) instead of the state-reported assumed rates of return (7.25 percent for Maine as of July 1, 2011).
The report's authors found that adjusted net pension liabilities varied dramatically from state to state, from 6.8 percent (Nebraska) to 241 percent (Illinois) of governmental revenues in fiscal year 2011.
The adjusted net pension liability for MainePERS in fiscal year 2011 was ranked the 32nd highest in the nation. The following table presents key state-specific findings from the Moody's report, as well as the state's national rank with respect to each indicator.
|Adjusted net pension liabilities (ANPL) relative to key economic indicators - Maine|
|Governmental revenue*||Personal income||State GDP||Per capita|
|*Moody's uses governmental revenues as reported in each state's consolidated annual financial reports; this includes not only state-generated revenue, but federal funds, as well.|
Sponsored by Representative Margaret Rotundo, H.P. 1034 proposed to amend defined benefit plan provisions for members of the Participating Local District Consolidated Retirement Plan administered by MainePERS. The bill sought to allow the Board of Trustees of MainePERS to establish by rule the rate at which plan members would contribute to the plan.
Local public pensions
- See also: Local government public pensions
According to the United States Census Bureau, the state has no locally-administered pension plans.
- Annual reports, investment performance data, FOIA applicability and more are available on the MainePERS website.
- Unfunded liabilities are posted in each year's Comprehensive Annual Financial Report.
- State law prohibits pension fund managers, board members and all public officials from giving or receiving gifts or contributions with the intention of pecuniary benefit.
- An independent auditor's report is included in each year's Comprehensive Annual Financial Report.
This section displays the most recent stories in a Google news search for the term "Maine + public + pensions"
- All stories may not be relevant to this page due to the nature of the search engine.
- Maine state budget
- Maine state government salary
- Maine Heritage Policy Center
- Maine Center for Open Government- Maine Heritage Policy Center
- Pension Tsunami
- Pension Calculator from Public Sector Inc.
- Maine Open Gov - Pension information
- Maine State Pension Fund Management - State Integrity Investigation
- The Pew Center on the States: "Kentucky’s Pension Challenges: Opportunities for Real Reform," August 2012
- "US Census Annual Survey of Public Pensions: State-Administered Defined Benefit Data Summary Report: 2011," August 2012
- Figures below are compiled by adding up all state pension plans
- This figure is derived by calculating the percent difference between the current year's funding level and the system's percent funded from the prior year.
- Rank is relative to the 50 state pension programs. "1" refers to the healthiest pension plan while "50" would be the least well-funded plan.
- Maine Public Employees Retirement System, "Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2012," accessed November 12, 2013
- United States Census Bureau, "Public Employee Retirement Systems State- and Locally-Administered Pensions Summary Report: 2010," April 30, 2012
- Pew Center on the States, "Widening Gap Update: Maine," June 18, 2012
- Organisation for Economic Co-operation and Development, "Pensions Glossary," accessed November 27, 2013
- United States Government Accountability Office Report to the Committee on Finance, U.S. Senate, "State and Local Government Retiree Benefits: Current Status of Benefit Structures, Protections, and Fiscal Outlook for Funding Future Costs," September 2007. Accessed October 23, 2013
- American Academy of Actuaries, "Issue Brief: The 80% Pension Funding Standard Myth," July 2012. Accessed October 23, 2013
- Governing Magazine, " Is There a Plot Against Pensions?" October 14, 2013
- State Budget Solutions, "Promises Made, Promises Broken - The Betrayal of Pensioners and Taxpayers," accessed September 20, 2013
- Government Accounting Standards Board, "Annual Required Contribution (ARC)," accessed October 17, 2013
- Reuters, "Little-known U.S. board stokes hot pension debate," July 10, 2012
- State Budget Solutions, "GASB's ineffective public pension reporting standards set to take effect," June 5, 2013
- "The Widening Gap Update,” Pew Center on the States, accessed October 17, 2013
- The New York Times "Public Pensions Faulted for Bets on Rosy Returns," May 27, 2012
- Benefits Magazine "Public Pension Funding 101: Key Terms and Concepts," April 2013. accessed October 23, 2013
- Crain's Chicago Business "State teachers pension board lowers expected rate of return," September 21, 2013. accessed October 23, 2013
- Huffington Post "California Pension Funds Expect Lower Investment Return," March 14, 2012. accessed October 23, 2013
- Governing "Expert: Governments Are Masking Their Pension Liabilities ," October 25, 2013. accessed October 25, 2013
- The Washington Post "Kansas’s pension funding gap just grew by $1 billion," September 6, 2013. accessed October 25, 2013
- Topeka Capital-Journal "KPERS' unfunded liability rises to $10.2B," September 4, 2013. accessed October 25, 2013
- Wall Street Journal "Pensions Wrestle With Return Rates," October 10, 2011. accessed October 23, 2013
- The Courant "Promising Too Much On Public Pensions," August 10, 2012. accessed October 23, 2013
- Business Wire "NCPERS 2013 Survey: Public Pension Plans Report Increasing Confidence, Lower Costs, Growing Returns," October 22, 2013. accessed October 25, 2013
- National Association of State Retirement Administrators "Issue Brief: Public Pension Plan Investment Return Assumptions," October 2013. accessed October 23, 2013
- State Budget Solutions, "Promises Made, Promises Broken - The Betrayal of Pensioners and Taxpayers," accessed September 20, 2013
- Moody's Investor Service, "Adjusted Pension Liability Medians for US States," June 27, 2013
- State of Maine Legislature, "Summary of LD 1440 (HP 1034)," accessed November 12, 2013
- Maine Public Employees Retirement System, "Home page," accessed November 12, 2013
- State Integrity Investigation, "Maine State Pension Fund Management," accessed November 12, 2013
State of Maine
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