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Public pensions in Delaware

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Delaware public pensions
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Pension system
Number of pension systems 1
State pension systems: Delaware Public Employees' Retirement System (DPERS)
System type: Defined benefit plan
Pension health (2012)[1]
Fund value: $7,862,654,000
Estimated liabilities: $8,900,049,000
Unfunded liabilities : $1,037,395,000
Percent funded: 88.34%
Percent funded change: Decrease.svg2.31%[2]
Percent funded rank: 6[3]
Pension fund members (2012)
Total members: 71,219
Active members: 42,832
Other members: 28,387
Other state pension information
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Public pensions
State public pension plans
Public pension health by state
Delaware public pensions are the state mechanism by which state and many local government employees in Delaware receive retirement benefits. The Delaware Public Employees' Retirement System (DPERS) administers nine separate retirement plans for state and local employees, all of which are defined benefit plans.[4][5]

According to the U.S. Census Bureau, the state also has five locally-administered pension systems.[6]

A 2012 report from the Pew Center on the States noted that Delaware's pension system was funded at 92 percent at the close of fiscal year 2010, above the 80 percent funding level experts recommend. Consequently, Pew designated the state's pension system as a "solid performer."[7]

Taken together, the funding ratio for the state's pension systems decreased from 98.61 percent in fiscal year 2007 to 88.34 percent in fiscal year 2012, a drop of 10.27 percentage points. Likewise, unfunded liabilities increased from approximately $95.6 million in fiscal year 2007 to more than $1 billion in fiscal year 2012.


Pension plans

In fiscal year 2012, according to the system's Comprehensive Annual Financial Report, Delaware had a total of 42,832 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).[8]

The following data was collected from the system's 2012 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 7.5 percent for fiscal year 2012, down from 8 percent in prior years. 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."[9][10] 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.[11]

Basic pension plan information -- Delaware[12]
Plans Current value Percentage funded Unfunded liabilities Membership
State figure SBS figure[13] State figure SBS figure[13]
State Employees $7,270,430,000 91.5% N/A[14] $679,425,000 N/A[14] 35,427 active members
Special $366,000 138.6% ($102,000) 0 active members
New State Police $292,262,000 90.0% $32,636,000 671 active members
Judiciary $59,279,000 89.9% $6,667,000 55 active members
County and Municipal Police and Firefighters $179,816,000 96.2% $7,085,000 1,059 active members
County and Municipal Other Employees $23,851,000 94.7% $1,338,000 483 active members
Diamond State Port $18,930,000 82.2% $4,109,000 265 active members
Closed State Police $$2,748,000 0.9% $291,060,000 1 active member
Delaware Volunteer Firefighters $14,972,000 49.7% $15,177,000 4,871 active members
TOTALS $7,862,654,000 88.34% 48% $1,037,395,000 $8,424,792,000 42,832 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 Delaware paid 97 percent of its annual required contribution.[7][15]

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.[16] 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.[17]

ARC historical data[12]
Fiscal year State Employees Special New State Police Judiciary County and Municipal Police and Firefighters
Annual Required Contribution (ARC) Percentage contributed Annual Required Contribution (ARC) Percentage contributed Annual Required Contribution (ARC) Percentage contributed Annual Required Contribution (ARC) Percentage contributed Annual Required Contribution (ARC) Percentage contributed
2012 $147,464,000 100% N/A N/A $8,309,000 100% $2,674,000 100% $9,265,000 100%
2011 $128,019,000 100% N/A N/A $7,810,000 100% $2,557,000 100% $7,569,000 100%
2010 $101,457,000 100% N/A N/A $6,562,000 100% $2,473,000 100% $7,307,000 100%
2009 $96,576,000 100% N/A N/A $6,791,000 100% $2,549,000 100% $12,007,000 100%
2008 $101,660,000 100% N/A N/A $6,643,000 100% $2,644,000 100% $6,246,000 100%
ARC historical data[12]
Fiscal year County and Municipal Other Employees Delaware Volunteer Firemen's Diamond State Port Closed State Police
Annual Required Contribution (ARC) Percentage contributed Annual Required Contribution (ARC) Percentage contributed Annual Required Contribution (ARC) Percentage contributed Annual Required Contribution (ARC) Percentage contributed
2012 $1,362,000 100% $1,896,000 69.1% $814,000 100% $24,678,000 93.5%
2011 $1,186,000 100% $1,762,000 69.2% $704,000 100% $26,638,000 87.7%
2010 $1,276,000 100% $1,703,000 69.9% $594,000 100% $27,214,000 85.9%
2009 $2,293,000 100% $1,604,000 69.1% $694,000 100% $26,423,000 82.4%
2008 $1,492,000 100% $1,553,000 67.3% $715,000 100% $25,337,000 83.9%

Historical funding levels

Historical pension plan data - all systems[12]
Year Value of assets Accrued liability Unfunded liability Funded ratio
2007 $6,798,649,000 $6,894,248,000 $95,599,000 98.61%
2008 $7,158,524,000 $7,279,114,000 $120,590,000 98.34%
2009 $7,186,166,000 $7,615,565,000 $429,399,000 94.36%
2010 $7,290,068,000 $7,922,507,000 $632,439,000 92.02%
2011 $7,630,685,000 $8,417,384,000 $786,699,000 90.65%
Change from 2007-2011 $832,036,000 $1,523,136,000 $691,100,000 -7.96%

Rate of return

Delaware has presumed a 7.5 percent return rate on its pension investments since 2012.[12]


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.[18] Critics assert that this assumption is unrealistic, citing changing market conditions and significantly lower investment returns across the board over the past several years.[19] When states lower the rate of return in an effort to predict investment earnings accurately, 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.[20] 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.[21] 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.[22]

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."[23] 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.[24][25][26][27][28]

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."[23]

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.[29]

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 in 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, Delaware's public pension plans were 48% funded, making it the 6th most funded state.[30]

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 Delaware) instead of the state-reported assumed rates of return (7.50 percent for Delaware's largest pension plan).[31]

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.[31]

The adjusted net pension liability for Delaware's three largest pension plans (State Employees, Closed State Police and New State Police) in fiscal year 2011 was ranked the 43rd highest in the nation.[31] 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 - Delaware
Governmental revenue* Personal income State GDP Per capita
State findings 48.2% 7.5% 4.3% $3,105
National ranking 25th 21st 28th 21st
*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.[31]

Pension fund management fees

See also: Public pension fund management fees

In July 2013, the Maryland Public Policy Institute (MPPI) and the Maryland Tax Education Foundation released a report detailing the fees paid for the management of state pension systems. According to MPPI, the 10 state pension funds that paid the most in management fees relative to net assets experienced lower returns over a five-year period than the 10 state pension funds that paid the least in management fees. For example, in fiscal year 2012 South Carolina's pension system paid approximately $296.1 million in total management fees (1.31 percent of total net assets at the beginning of the fiscal year) and its five-year rate of return was 1.46 percent. By contrast, Alabama's pension system paid roughly $13.3 million in management fees (0.05 percent of total net assets) and its five-year rate of return was 7.53 percent.[32]

The table below presents the information collected by MPPI for Delaware and surrounding states. For each state's pension system, total net assets are listed (both for the beginning and end of the fiscal year in question), as well as the total amount paid in management fees. In addition, the rates of return for the pension systems are presented. Compared to surrounding states, Delaware had significantly lower total net assets and a higher five-year rate of return for the pension fund.

Public pension fund management fees, 2011-2012
State Fiscal year Total net assets at the beginning of the year Total net assets at the end of the year Total management fees Management fees as a percentage of total net assets at the beginning of the year Five-year rate of return for the pension fund
Delaware 2012 $7,648,780,000 $7,536,367,000 $47,318,000 0.62% 3.90%
Maryland 2012 $37,592,752,000 $37,178,726,000 $241,489,000 0.64% 0.78%
New Jersey 2012 $81,067,610,282 $77,883,990,040 $224,200,000 0.28% 2.46%
New York 2012 $315,448,861,000 $316,880,795,000 $874,147,529 0.28% 2.91%
Pennsylvania 2012; 2011 $77,319,283,000 $73,140,758,000 $682,878,000 0.88% 1.00%
1"Three states— Hawaii, Nevada and Rhode Island—were excluded because they hadn’t published CAFRs for fiscal years ending December 31, 2011 or later. West Virginia was excluded because its June 30, 2012 CAFR lacked sufficient disclosure."[32]
Source: Maryland Public Policy Institute, "Wall Street Fees, Investment Returns, Maryland 49 Other State Pension Funds," July 1, 2013


Enacted reforms


S.B. 107

Sponsored by Senator Nicole Poore, S.B. 107 revised the definition of "employee" under the state pension system, exempting individuals appointed by the governor to a board, council or commission after June 30, 2013 from classification as "regular part-time" employees. The bill passed the Senate on June 19, 2013, then moved to the House, where it was passed on June 30, 2013. Governor Jack Markell signed S.B. 107 into law on July 24, 2013.[33]

H.B. 207

Sponsored by Representative James Johnson, H.B. 207 permitted employees in positions classified as Hazardous Duty Level A-1 to retire at 25 years without reduction in benefits. The bill passed both the House and Senate, on June 27, 2013 and June 30, 2013 respectively. Governor Markell signed H.B. 207 into law on August 27, 2013.[34]

Proposed reforms


S.B. 21

S.B. 21, sponsored by Senator Margaret Rose Henry, proposed to alter the composition of the State Employees Benefits Committee, providing public employees with representation on the committee. The bill passed the Senate on April 30, 2013, but was never brought to a vote in the House.[35]

H.B. 148

Sponsored by Representative W. Charles Paradee, H.B. 148 proposed the addition of a Roth option to state-sponsored 403(b) and 457(b) savings plans that are offered to eligible teachers and state employees. The bill passed the House on June 11, 2013, but was not brought to a vote in the Senate.[36]


Although two bills relevant to state pension administration were proposed in 2012, neither made it past committee.[37]

Local public pensions

See also: Local government public pensions

According to the United States Census Bureau, the state has five locally-administered pension systems.[6]


See also: Public pension disclosure and Governmental Accounting Standards Board
  • The names of recipients and amounts disbursed to recipients are available upon request, provided the release of information does not constitute a violation of the right to privacy.[38]
  • Pension fund investment performance data is available.[12] The Board of Pension Trustees publishes an annual report containing information on plan assets, as well as analyses that combine asset and liability performance and projections. The report also discloses employer contribution levels and contains disclosures as required by the Governmental Accounting Standards Board Statement #25.
  • Although the Board of Trustees releases actuarial valuation reports annually, and the Office of Pensions publishes a comprehensive annual fiscal report on the status of the pension funds, there is no external oversight of the funds.
  • Pension lobbying information is unavailable.
  • Pay to play (the practice of investment managers contributing to officials with influence over public pension fund decisions) information is unavailable.

Recent news

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See also

Additional reading

External links


  1. Figures below are compiled by adding up all state pension plans
  2. 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.
  3. 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.
  4. State of Delaware, "Pension Plans," accessed November 4, 2013
  5. State of Delaware, "Message from Pension Administrator," accessed November 4, 2013
  6. 6.0 6.1 “Public Employee Retirement Systems State- and Locally-Administered Pensions Summary Report: 2010,” United States Census Bureau, April 30, 2012
  7. 7.0 7.1 Pew Center on the States "The Widening Gap Update: Delaware," June 18, 2012
  8. Organisation for Economic Co-operation and Development, "Pensions Glossary," accessed November 27, 2013
  9. 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
  10. American Academy of Actuaries, "Issue Brief: The 80% Pension Funding Standard Myth," July 2012. accessed October 23, 2013
  11. Governing Magazine, " Is There a Plot Against Pensions?" October 14, 2013
  12. 12.00 12.01 12.02 12.03 12.04 12.05 12.06 12.07 12.08 12.09 12.10 12.11 12.12 12.13 12.14 Delaware Public Employees' Retirement System "Forty-first Comprehensive Annual Financial Report," accessed November 4, 2013
  13. 13.0 13.1 State Budget Solutions, "Promises Made, Promises Broken - The Betrayal of Pensioners and Taxpayers," accessed September 20, 2013
  14. 14.0 14.1 Analysis only available for system totals and not individual funds.
  15. Government Accounting Standards Board, "Annual Required Contribution (ARC)," accessed October 17, 2013
  16. Reuters, "Little-known U.S. board stokes hot pension debate," July 10, 2012
  17. State Budget Solutions, "GASB's ineffective public pension reporting standards set to take effect," June 5, 2013
  18. "The Widening Gap Update,” Pew Center on the States, accessed October 17, 2013
  19. The New York Times "Public Pensions Faulted for Bets on Rosy Returns," May 27, 2012
  20. Benefits Magazine "Public Pension Funding 101: Key Terms and Concepts," April 2013. accessed October 23, 2013
  21. Crain's Chicago Business "State teachers pension board lowers expected rate of return," September 21, 2013. accessed October 23, 2013
  22. Huffington Post "California Pension Funds Expect Lower Investment Return," March 14, 2012. accessed October 23, 2013
  23. 23.0 23.1 Governing "Expert: Governments Are Masking Their Pension Liabilities ," October 25, 2013. accessed October 25, 2013
  24. The Washington Post "Kansas’s pension funding gap just grew by $1 billion," September 6, 2013. accessed October 25, 2013
  25. Topeka Capital-Journal "KPERS' unfunded liability rises to $10.2B," September 4, 2013. accessed October 25, 2013
  26. Wall Street Journal "Pensions Wrestle With Return Rates," October 10, 2011. accessed October 23, 2013
  27. The Courant "Promising Too Much On Public Pensions," August 10, 2012. accessed October 23, 2013
  28. Business Wire "NCPERS 2013 Survey: Public Pension Plans Report Increasing Confidence, Lower Costs, Growing Returns," October 22, 2013. accessed October 25, 2013
  29. National Association of State Retirement Administrators "Issue Brief: Public Pension Plan Investment Return Assumptions," October 2013. accessed October 23, 2013
  30. State Budget Solutions, "Promises Made, Promises Broken - The Betrayal of Pensioners and Taxpayers," accessed September 20, 2013
  31. 31.0 31.1 31.2 31.3 Moody's Investor Service, "Adjusted Pension Liability Medians for US States," June 27, 2013
  32. Cite error: Invalid <ref> tag; no text was provided for refs named report
  33. Delaware General Assembly "Senate Bill #107," accessed November 4, 2013
  34. Delaware General Assembly "House Bill #207," accessed November 4, 2013
  35. Delaware General Assembly "Senate Bill #21," accessed November 4, 2013
  36. Delaware General Assembly "House Bill #148," accessed November 4, 2013
  37. National Conference of State Legislature "Pensions and Retirement State Legislation Database - Delaware 2012," accessed November 4, 2013
  38. Delaware Code, "Data availability," accessed November 4, 2013