Historical Arkansas pension information

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The historical Arkansas pension information below applies to prior calendar years. The tabs below may contain information from several different fiscal years; for example, the tab labeled "As published 2015" contains information from fiscal years 2013 and 2012 (the most recent data available at the time of initial publication). For more current information regarding Arkansas' pension system, click here.

As published 2016


Pension Policy Logo on Ballotpedia.png
Arkansas information (2015)
Total contributions:
$1,080,954,000
Employee contributions:
$213,965,000
Government contributions:
$866,990,000
Total payments:
$1,733,042,000
Total cash and investment holdings:
$26,501,575,000
Number of state and local pension systems:
195
Active membership:
134,387
Inactive membership:
33,106

Public Policy Logo-one line.png

Key terms
Actuarial value of assets (AVA)Unfunded actuarial accrued liability (UAAL)Annual required contribution (ARC)Discount rateFunded ratioRate of returnActive memberInactive memberOPEB
Hover over the above
terms for definitions.
Note: This page utilizes information from a variety of sources. The information presented on this page reflects the most recent data available as of August 2016.

Arkansas public pensions are the state mechanism by which state and many local government employees in Arkansas receive retirement benefits.

According to the United States Census Bureau, there were 195 public pension systems in Arkansas as of 2015. Of these, seven were state-level programs, while the remaining 188 were administered at the local level. As of fiscal year 2015, membership in Arkansas' various pension systems totaled 167,494. Of these, 134,387 were active members.[1]

HIGHLIGHTS
  • In fiscal year 2015, the most recent year for which information is available, total contributions of $1.1 billion were made to Arkansas' state and local pension systems. Of this amount, $214 million came from employees.
  • In fiscal year 2015, Arkansas' state and local pension systems made payments totaling $1.7 billion.
  • As of fiscal year 2015, Arkansas' state and local pension systems held $26.5 billion in total cash and investment holdings.
  • According to a 2013 report by Morningstar, an independent financial research group, most states' pension plans continued to be funded below the 80 percent level considered necessary for a healthy fund. Decreased funding and increasing liabilities since the 2008 recession continued to put pressure on local and state budgets, in some cases leading to bankruptcy. Higher pension costs can have the following consequences:[2]

    • higher taxes
    • less intergovernmental aid for services
    • lower credit ratings
    • higher interest rates on state borrowing

    State pension systems can vary in their organization, management, and accounting principles, making them difficult to compare. The basic information on this page comes from the U.S. Census Bureau, as reported by the states and pension funds themselves for fiscal year 2015.

    General information

    See also: Pension data, U.S. Census

    According to the U.S. Census Bureau, Arkansas had seven state pension plans as of 2015:

    1. Arkansas Public Employees Retirement System
    2. Arkansas Judicial Retirement Plan
    3. Arkansas State Police Retirement Plan
    4. Arkansas Local Police and Fire Retirement System
    5. Arkansas Teacher Retirement System
    6. Arkansas State Highway Employees Retirement
    7. Arkansas District Judges Retirement

    In addition to the aforementioned state-level pension systems, there were 188 locally administered pension systems in Arkansas.[1]

    The table below provides general pension system information for Arkansas and surrounding states.

    General pension system information, 2015
    State Systems Total members Active members Inactive members
    State Local Members Percent of total Members Percent of total
    Arkansas 7 188 167,494 134,387 80.23% 33,106 19.77%
    Louisiana 14 18 298,986 200,171 66.95% 98,815 33.05%
    Missouri 12 78 388,454 288,204 74.19% 100,250 25.81%
    Oklahoma 7' 14 189,703 160,292 84.50% 29,411 15.50%
    Source: United States Census Bureau, "State- and Locally-Administered Defined Benefit Pension Systems - All Data by State and Level of Government: 2015"

    Contributions

    See also: Pension contribution and payment data, U.S. Census

    Pension contributions are the funds paid into pension systems. These contributions come from the employer (in the case of public pensions, the government) and employees. Investment earnings are the main source of increases in the fund and are listed separately in the rightmost column in the below table.

    In fiscal year 2015, the most recent year for which information is available, total contributions of $1.1 billion were made to Arkansas' state and local pension systems. Of this amount, $214 million came from employees. The remainder came from state and local governments. The table below provides information about pension contributions in Arkansas and surrounding states in fiscal year 2015.[1]

    Pension contributions, fiscal year 2015 (dollars in thousands)
    State Total contributions from employees and employers Employee contributions Government contributions Earnings on investments
    Contributions Percentage of total Contributions Percentage of total
    Arkansas $1,080,954 $213,965 19.79% $866,990 80.21% $1,267,733
    Louisiana $3,790,158 $735,074 19.39% $3,055,085 80.61% $2,688,345
    Missouri $3,049,574 $966,078 31.68% $2,083,496 68.32% $4,090,531
    Oklahoma $1,768,454 $473,684 26.79% $1,294,770 73.21% $1,019,033
    Source: United States Census Bureau, "State- and Locally-Administered Defined Benefit Pension Systems - All Data by State and Level of Government: 2015"

    Payments

    See also: Pension contribution and payment data, U.S. Census

    Payments are the amounts paid to pension recipients by their pension plans. Pension payments include benefits and withdrawals. Benefits are the regular payments made by a pension plan to the plan's recipients. Pension beneficiaries may also withdraw funds before they are due to receive regular benefits.

    In fiscal year 2015, Arkansas' state and local pension systems made payments totaling $1.7 billion. The table below provides pension payment information for Arkansas and surrounding states in fiscal year 2015. The columns labeled "Benefits," "Withdrawals," and "Other" are subsets of total payments. All dollar amounts displayed should be multiplied by 1,000 ($240,000 is equal to $240,000,000).[1]

    Pension payments, fiscal year 2015 (dollars in thousands)
    State Total payments Benefits Withdrawals Other
    Arkansas $1,733,042 $1,599,420 $25,744 $107,880
    Louisiana $4,425,517 $4,188,444 $78,722 $158,353
    Missouri $5,336,873 $4,585,567 $113,833 $637,474
    Oklahoma $2,304,808 $2,172,346 $56,459 $76,004
    Source: United States Census Bureau, "State- and Locally-Administered Defined Benefit Pension Systems - All Data by State and Level of Government: 2015"

    Other post-employment benefits

    See also: Other post-employment benefits, data

    In addition to standard pension payments, some plans may offer pensioners additional benefits. These benefits, sometimes referred to as "other post-employment benefits," or "OPEBs," consist of health insurance, life insurance or other benefits that the pensioner may have received while employed. The cost of these benefits can prove complicated for actuaries to calculate because of the changes in fields like medicine. This, coupled with the normal challenges in calculating and meeting pension requirements, can result in funding shortages for pension plans.

    Unfunded liabilities totaled nearly $500 billion throughout the country for OPEBs. Arkansas was reported to have about $2.1 billion in unfunded liabilities for OPEBs. This was equal to about 0.41 percent of the country's total unfunded liabilities for these other services.

    The chart below displays the unfunded liabilities for Arkansas and its surrounding states. All dollar amounts displayed should be multiplied by 1,000,000. For instance, $300 translates to $300,000,000.

    Unfunded actuarial accrued liabilities for other post-employment benefits, fiscal year 2013 (dollars in millions)
    State Unfunded liabilities Percent of total
    Arkansas $2,056 0.41%
    Louisiana $8,543 1.72%
    Missouri $2,671 0.54%
    Oklahoma $4 0.0%
    U.S. total $497,693 100%
    Source: National Association of State Retirement Administrators, "Retiree Health Care Benefits for State and Local Employees in 2014," accessed April 30, 2015. Note: Although this article was dated for 2014, all figures were reported to have come from fiscal year 2013 reports.

    Cash and investment holdings

    See also: Pension data, U.S. Census

    Investments are a crucial part of the pension process. The goal is that, by investing pension contributions, the pensioner will receive more money when he or she retires than he or she and the employer were able to contribute. These investments can come in the form of cash investments, short-term investments, securities, or other investments. Cash investments are usually low-risk, short-term investments that have a lower rate of return than other types of investments. Other short-term investments are riskier than cash investments, but have the potential for greater returns. Securities can refer to stocks, bonds, or other types of financial certificates that hold some sort of financial value. As the values of these securities change, they can be traded to make a profit. While there are other applications of securities investments, this represents one of the most common practices.[3][4][5]

    As of fiscal year 2015, Arkansas' state and local pension systems held $26.5 billion in total cash and investment holdings. The table below summarizes pension system cash and investment holdings for Arkansas and surrounding states. The columns labeled "Total cash and short-term investments," "Total securities," and "Total other investments" are subsets of the grand total. All dollar amounts displayed should be multiplied by 1,000 ($240,000 is equal to $240,000,000).[1]

    Total cash and investment holdings, fiscal year 2015 (dollars in thousands)
    State Grand total Total cash and short-term investments Total securities Total other investments
    Arkansas $26,501,575 $793,078 $15,061,516 $10,646,981
    Louisiana $46,019,184 $2,401,542 $37,562,341 $6,055,301
    Missouri $72,371,692 $3,877,135 $56,595,843 $11,898,714
    Oklahoma $30,936,744 $842,958 $28,435,116 $1,658,670
    Source: United States Census Bureau, "State- and Locally-Administered Defined Benefit Pension Systems - All Data by State and Level of Government: 2015"

    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.[6]

    The table below presents the information collected by MPPI for Arkansas 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. In fiscal year 2012, Arkansas had more total net assets at the end of the year compared to the beginning of the year.

    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 % of total net assets Five-year rate of return
    Arkansas 2012; 2011 $15,912,286,857 $17,797,373,547 $65,729,237 0.41% 1.22%
    Louisiana 2012 $24,280,707,222 $23,704,758,063 $127,141,733 0.52% 1.10%
    Missouri 2012 $43,421,121,472 $43,142,177,174 $407,748,659 0.94% 1.60%
    Oklahoma 2012; 2011 $17,208,667,211 $18,979,092,225 $45,745,016 0.27% 2.75%
    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."[6]
    Source: Maryland Public Policy Institute, "Wall Street Fees, Investment Returns, Maryland 49 Other State Pension Funds," accessed July 1, 2013

    As published 2015

    Public pensions in
    Arkansas
    Pension Policy Logo on Ballotpedia.png
    General information (2013)
    Total contributions:
    $1,001,918,000
    Employee contributions:
    $188,583,000
    Government contributions:
    $813,335,000
    Total payments:
    $1,530,229,000
    Total cash and investment holdings:
    $22,219,051,000
    Number of state and local pension systems:
    33 (6 state systems, 27 local systems)
    Active membership:
    134,089
    Inactive membership:
    32,501
    Pension health (2012)
    Assets:
    $18,745,631,000
    Actuarial accrued liability (AAL):
    $26,255,098,000
    Unfunded actuarial accrued liability (UAAL):
    $7,509,467,000
    Funded ratio:
    71.4%
    UAAL per capita:
    $2,614
    Public pensions
    in the states
    AlabamaAlaskaArizonaArkansasCaliforniaColoradoConnecticutDelawareFloridaGeorgiaHawaiiIdahoIllinoisIndianaIowaKansasKentuckyLouisianaMaineMarylandMassachusettsMichiganMinnesotaMississippiMissouriMontanaNebraskaNevadaNew HampshireNew JerseyNew MexicoNew YorkNorth CarolinaNorth DakotaOhioOklahomaOregonPennsylvaniaRhode IslandSouth CarolinaSouth DakotaTennesseeTexasUtahVermontVirginiaWashingtonWest VirginiaWisconsinWyoming

    Public Policy Logo-one line.png
    Public pensionsState public pension plansArkansas state budget and finances
    Note: This page utilizes information from a variety of sources. As such, the currency of the information varies somewhat. The information presented on this page reflects the most recent data available as of March 2015.


    Arkansas public pensions are the state mechanism by which state and many local government employees in Arkansas receive retirement benefits.

    According to the United States Census Bureau, there were 33 public pension systems in Arkansas as of 2013. Of these, six were state-level programs, while the remaining 27 were administered at the local level. As of 2013, membership in Arkansas' various pension systems totaled 166,590. Of these, 134,089 were active members.[1]

    According to a 2013 report by Morningstar, an independent financial research group, most states' pension plans continued to be funded below the 80 percent level considered necessary for a healthy fund. Decreased funding and increasing liabilities since the 2008 recession continued to put pressure on local and state budgets, in some cases leading to bankruptcy. Higher pension costs can have the following consequences:[2]

    • higher taxes
    • less intergovernmental aid for services
    • lower credit ratings
    • higher interest rates on state borrowing
    HIGHLIGHTS
  • Between fiscal years 2008 and 2012, the funded ratio of Arkansas' state-administered pension plans decreased from 87.2 percent to 71.4 percent. The state paid 95 percent of its annual required contribution, and as of fiscal year 2012, the pension system's unfunded accrued liability totaled $7.5 billion. This amounted to $2,614 in unfunded liabilities per capita.[2][7]
  • Background

    The basic information on this page comes from the U.S. Census Bureau, as reported by the states and pension funds themselves for fiscal year 2013. Also included are comparative data from three different reports, which looked at the states' Comprehensive Annual Financial Reports (CAFRs).

    General information

    See also: Pension data, U.S. Census

    According to the U.S. Census, Arkansas had six distinct state pension systems as of 2013:

    1. Arkansas Public Employees Retirement System
    2. Arkansas Teacher Retirement System
    3. Arkansas Highway Employees Retirement System
    4. Arkansas State Police Pension Retirement Plan
    5. Arkansas Judicial Retirement Plan
    6. Arkansas Local Police and Fire Retirement System[8]

    In addition to the aforementioned state-level pension systems, there were 27 locally administered pension systems in Arkansas.[1]

    The table below provides general pension system information for Arkansas and surrounding states.

    General pension system information, 2013
    State Systems Total members Active members Inactive members
    State Local Members Percent of total Members Percent of total
    Arkansas 6 27 166,590 134,089 80.49% 32,501 19.51%
    Louisiana 14 21 298,479 202,069 67.7% 96,410 32.3%
    Mississippi 4 0 293,905 162,455 55.27% 131,450 44.73%
    Missouri 10 56 330,705 266,395 80.55% 64,310 19.45%
    Oklahoma 6 6 176,034 158,289 89.92% 17,745 10.08%
    Source: United States Census Bureau, "State- and Locally-Administered Defined Benefit Pension Systems - All Data by State and Level of Government: 2013"

    Contributions

    See also: Pension contribution and payment data, U.S. Census

    Pension contributions are the funds paid into pension systems. These contributions come from the employer (in the case of public pensions, the government) and employees. Investment earnings are the main source of increases in the fund and are listed separately in the rightmost column in the below table.

    In fiscal year 2013, total contributions of $1 billion were made to Arkansas' state and local pension systems. Of this amount, $189 million came from employees. The remainder came from state and local governments. The table below provides information about pension contributions in Arkansas and surrounding states in fiscal year 2013.[1]

    Pension contributions, fiscal year 2013 (dollars in thousands)
    State Total contributions from employees and employers Employee contributions Government contributions Earnings on investments
    Contributions Percentage of total Contributions Percentage of total
    Arkansas $1,001,918 $188,583 18.82% $813,335 81.18% $3,002,058
    Louisiana $3,290,695 $803,410 24.41% $2,487,285 75.59% $4,702,512
    Mississippi $1,464,067 $550,047 37.57% $914,020 62.43% $2,673,187
    Missouri $2,665,322 $907,805 34.06% $1,757,518 65.94% $9,005,066
    Oklahoma $1,616,816 $445,367 27.55% $1,171,449 72.45% $3,347,687
    Source: United States Census Bureau, "State- and Locally-Administered Defined Benefit Pension Systems - All Data by State and Level of Government: 2013"

    Payments

    See also: Pension contribution and payment data, U.S. Census

    Payments are the amounts paid to pension recipients by their pension plans. Pension payments include benefits and withdrawals. Benefits are the regular payments made by a pension plan to the plan's recipients. Pension beneficiaries may also withdraw funds before they are due to receive regular benefits.

    In fiscal year 2013, Arkansas' state and local pension systems made payments totaling $1.5 billion. The table below provides pension payment information for Arkansas and surrounding states in fiscal year 2013. The columns labeled "Benefits," "Withdrawals," and "Other" are subsets of total payments. All dollar amounts displayed should be multiplied by 1,000 ($240,000 is equal to $240,000,000).

    Pension payments, fiscal year 2013 (dollars in thousands)
    State Total payments Benefits Withdrawals Other
    Arkansas $1,530,229 $1,426,482 $29,710 $74,037
    Louisiana $4,024,041 $3,707,693 $174,517 $141,831
    Mississippi $2,206,114 $2,029,121 $108,536 $68,457
    Missouri $4,781,070 $4,003,664 $101,554 $675,855
    Oklahoma $2,119,356 $1,953,360 $74,671 $91,325
    Source: United States Census Bureau, "State- and Locally-Administered Defined Benefit Pension Systems - All Data by State and Level of Government: 2013"

    Cash and investment holdings

    See also: Pension data, U.S. Census

    As of fiscal year 2013, Arkansas' state and local pension systems held $22.2 billion in total cash and investment holdings. The table below summarizes pension system cash and investment holdings for Arkansas and surrounding states. The columns labeled "Total cash and short-term investments," "Total securities," and "Total other investments" are subsets of the grand total. All dollar amounts displayed should be multiplied by 1,000 ($240,000 is equal to $240,000,000).[1]

    Total cash and investment holdings, fiscal year 2013 (dollars in thousands)
    State Grand total Total cash and short-term investments Total securities Total other investments
    Arkansas $22,219,051 $572,890 $17,776,482 $3,869,679
    Louisiana $39,936,873 $2,213,904 $31,152,419 $6,570,550
    Mississippi $23,017,265 $1,071,566 $20,085,810 $1,859,889
    Missouri $58,748,518 $3,131,578 $45,429,297 $10,187,644
    Oklahoma $26,611,420 $1,275,900 $23,945,848 $1,389,672
    Source: United States Census Bureau, "State- and Locally-Administered Defined Benefit Pension Systems - All Data by State and Level of Government: 2013"

    Pension health

    Pension health is a term used to describe the overall state of pension systems. It can be difficult to gauge pension health in each state, but many studies use calculations to determine the average liabilities, unfunded liabilities, funded ratio and other data. Most experts believe that pension systems need to be funded at least 80 percent to be considered healthy. This information is then used to provide a snapshot of the state's overall pension health. This section provides information from three studies regarding the health of pensions in Arkansas and neighboring states. They found the following:

    • According to the Pew Charitable Trusts, Arkansas paid 95 percent of its required contribution and its funded ratio was only 71 percent in fiscal year 2012.
    • According to Morningstar, the state had a per capita pension debt of $2,614 and a funded ratio of 71.4 percent in fiscal year 2012.
    • According to State Budget Solutions, which assumed a lower rate of return, Arkansas had a per capita pension debt of $13,512 and a funded ratio of 35 percent in fiscal year 2013.

    Pew research

    See also: Pew Charitable Trusts pensions study, 2014

    According to a 2014 report by the Pew Charitable Trusts, “many states are seeing their pension debt continue to increase, despite reform efforts, because of missed contributions and the continued impact of investment losses.” The funding gap between what state pension systems have promised in benefits (liabilities) and current funding (assets) increased by $158 billion from 2010 to 2012 (14 percent), leaving state-run retirement systems with $915 billion in unfunded liabilities. Only 15 states made at least 95 percent of the annual required contributions (ARCs) for their pensions between 2010 and 2012; the aggregate shortfall in funding for all state plans was $21 billion. Data on these state pensions come from the Comprehensive Annual Financial Reports (CAFRs) that each state’s pension plan prepared for fiscal year 2012; these reports include actuarial valuations based on “the expected rate of return on investments and estimates of employee life spans, retirement ages, salary growth, retention rates, and other demographic characteristics.”[9]

    All dollar amounts displayed should be multiplied by 1,000,000 (e.g., $240,000 is equal to $240,000,000,000).

    Pension health metrics from the Pew Charitable Trusts report, 2010-2012 (dollars in millions)
    State 2012 Funded ratio Percent of ARC paid
    Liability Unfunded ARC 2010 2011 2012 2010 2011 2012
    Arkansas $26,255 $7,510 $713 75% 72% 71% 106% 98% 95%
    Louisiana $43,736 $19,306 $1,968 56% 56% 56% 84% 87% 96%
    Mississippi $35,290 $14,860 $767 64% 62% 58% 100% 101% 101%
    Missouri $56,986 $12,523 $1,295 77% 82% 78% 89% 93% 96%
    Oklahoma $33,072 $11,602 $1,095 56% 67% 65% 70% 65% 104%
    Totals in the U.S. $3,298,643 $914,653 $87,213 75% 74% 72% 78% 77% 77%
    Source: The Pew Charitable Trusts, "The Fiscal Health of State Pension Plans: Funding Gap Continues to Grow"

    Morningstar report

    See also: Pension data, 2013 Morningstar report

    In 2013, independent investment research firm Morningstar released "The State of State Pension Plans 2013," a report detailing various metrics of pension system health in all 50 states. Morningstar found a $1.2 trillion gap in 2012 for the largest 100 U.S. public pension plans (according to the actuarial firm Milliman). Based on two key drivers in Morningstar’s analysis—the funded ratio and the unfunded actuarial accrued liability (UAAL) per capita—the fiscal solvency and management of these plans varied greatly. Overall, the firm found that "more than half of all states fall below Morningstar’s fiscally sound threshold of a 70 percent funded ratio" and all state plans combined were "72.6 percent funded with a UAAL per capita of roughly $2,600.”[2]

    According to Morningstar's research, Arkansas' state pension plans were funded at a rate of 71.4 percent in fiscal year 2012. The table below provides state pension system health metrics for Arkansas and surrounding states in fiscal year 2012. Figures in the columns labeled "Assets," "AAL," and "UAAL" are rendered in thousands of dollars (for example, $2,400,000 translates to $2,400,000,000). Figures in the remaining columns have not been abbreviated. To view the full report, click here.

    Pension health metrics from the Morningstar report, fiscal year 2012
    State Assets Liabilities (AAL) Unfunded liabilities (UAAL) Funded ratio Unfunded liabilities
    per capita
    Arkansas $18,745,631 $26,255,098 $7,509,467 71.4% $2,614
    Louisiana $23,026,791 $41,457,631 $18,430,840 55.5% $4,161
    Mississippi $20,274,489 $34,933,825 $14,659,336 58% $4,983
    Missouri $38,543,470 $50,101,293 $11,557,824 76.9% $1,952
    Oklahoma $19,710,700 $30,186,093 $10,475,393 65.3% $2,850
    Totals in the U.S. $2,157,578,916 $2,979,267,860 $821,688,945 72.40% N/A
    Source: Morningstar, "The State of State Pension Plans 2013: A Deep Dive Into Shortfalls and Surpluses," accessed September 16, 2013

    State Budget Solutions report

    See also: Pension data, State Budget Solutions report

    State Budget Solutions is "a nonpartisan, nonprofit, national public policy organization with the mission to change the way state and local governments do business."[10] It should be noted that although the organization is technically nonpartisan, its ideology and mission have conservative leanings. In November 2014, the organization released a research report that used a fair market valuation based on a discount rate of 2.743 percent to determine the unfunded liabilities of public pension plans. The group concluded that "state public pension plans were underfunded by $4.7 trillion in 2014, up from $4.1 trillion in 2013. Overall, the combined plans' funded status ... dipped 3 percentage points to 36 percent. Split among all Americans, the unfunded liability [was] over $15,000 per person."[11]

    According to the State Budget Solutions report, Arkansas' pension plans were funded at a rate of 35 percent. This was lower than the Morningstar report's data, and below the Pew Center's recommended level of 80 percent.

    To read the full report, click here.

    Note that all dollar amounts displayed (excluding those under the "Unfunded liability per capita" column) should be multiplied by 1,000 (e.g., $240,000 is equal to $240,000,000).

    Pension health metrics from the State Budget Solutions report, fiscal year 2013 (dollars in thousands)
    State Assets Market Liability* Funding Ratio Unfunded Liability Unfunded Liability Per Capita Unfunded Liability as % of 2013 Gross State Product
    Arkansas $21,504,868 $61,485,975 35% $39,981,107 $13,512 32%
    Louisiana $36,292,411 $120,761,745 30% $84,469,334 $18,264 33%
    Mississippi $20,928,447 $76,926,497 27% $55,998,050 $18,722 53%
    Missouri $50,188,100 $135,964,067 37% $85,775,967 $14,192 31%
    Oklahoma $22,608,163 $69,797,055 32% $47,188,892 $12,254 26%
    Totals in the U.S. $2,679,831,466 $7,416,319,293 36% $4,736,487,827 $15,052 29%
    Source: American Legislative Exchange Council, "Promises Made, Promises Broken 2014: Unfunded Liabilities Hit $4.7 Trillion"

    Other factors

    Rate of return

    According to a 2012 analysis by the Pew Center for the States, most state pension plans assumed an 8 percent rate of return on investments at that time. Proponents argued that an 8 percent rate of return would bear out over the long-term (15-30 years). Critics asserted that this assumption was unrealistic, citing changing market conditions and lower investment returns across the board in preceding years.[12][13]

    Assuming a lower rate of return to predict investment earnings increases current plan liabilities, thereby lowering the percent funded ratio and requiring increased employer contributions (ARCs). 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.[14] 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.[15] 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.[16]

    Financial crisis

    In the wake of the 2008 recession, proponents of a lower assumed rate of return argued that the standard 8 percent assumptions could cause pension fund managers to engage in more risky investments and imprudent stewardship of public funds. Jeffrey Friedman, a senior market strategist at MF Global, said, "To target 8 percent means some aggressive trading. Ten-year Treasury [bonds] are yielding around 2 percent, economists say we are headed for a double-dip, and house prices aren't getting back to 2007 levels for the next decade, maybe.".[17][18][19][20][21]

    Advocates of the 8 percent return rate argued that the dip following the 2008 financial crisis did not prove that there was a long-term downward trend in investment returns. According to Chris Hoene, executive director of 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."[22]

    The National Association of State Retirement Administrators researched the median annualized rate of return for public pensions for the 1-, 3-, 5-, 10-, 20- and 25-year periods ending in 2013 and found it was 7.9 percent over the 20-year period, and exceeded 8 percent for the 1-, 3- and 25-year periods. It is important to note that the NASRA data reported the median returns, which means that median annualized returns of investment portfolios for half of the examined public pension funds failed to meet an 8 percent assumed rate of return.[23]

    Studies and reports

    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.[6]

    The table below presents the information collected by MPPI for Arkansas 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.

    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 % of total net assets Five-year rate of return
    Arkansas 2012; 2011 $15,912,286,857 $17,797,373,547 $65,729,237 0.41% 1.22%
    Louisiana 2012 $24,280,707,222 $23,704,758,063 $127,141,733 0.52% 1.10%
    Mississippi 2012 $20,840,987,000 $20,220,476,000 $47,575,948 0.23% 1.30%
    Missouri 2012 $43,421,121,472 $43,142,177,174 $407,748,659 0.94% 1.60%
    Oklahoma 2012; 2011 $17,208,667,211 $18,979,092,225 $45,745,016 0.27% 2.75%
    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."[6]
    Source: Maryland Public Policy Institute, "Wall Street Fees, Investment Returns, Maryland 49 Other State Pension Funds," accessed July 1, 2013

    Other post-employment benefits

    See also: Other post-employment benefits, data

    In addition to standard pension payments, some plans may offer pensioners additional benefits. These benefits, sometimes referred to as "other post-employment benefits," or "OPEBs," consist of health insurance, life insurance or other benefits that the pensioner may have received while employed. The cost of these benefits can prove complicated for actuaries to calculate because of the changes in fields like medicine. This, coupled with the normal challenges in calculating and meeting pension requirements, can result in funding shortages for pension plans.

    Unfunded liabilities totaled nearly $500 billion throughout the country for OPEBs. Arkansas was reported to have about $2.1 billion in unfunded liabilities for OPEBs. This was equal to about 0.41 percent of the country's total unfunded liabilities for these other services.

    The chart below displays the unfunded liabilities for Arkansas and its surrounding states. All dollar amounts displayed should be multiplied by 1,000,000. For instance, $300 translates to $300,000,000.

    Unfunded actuarial accrued liabilities for other post-employment benefits, fiscal year 2013 (dollars in millions)
    State Unfunded liabilities Percent of total
    Arkansas $2,056 0.41%
    Louisiana $8,543 1.72%
    Mississippi $690 0.14%
    Missouri $2,671 0.54%
    Oklahoma $4 0.0%
    U.S. total $497,693 100%
    Source: National Association of State Retirement Administrators, "Retiree Health Care Benefits for State and Local Employees in 2014," accessed April 30, 2015. Note: Although this article was dated for 2014, all figures were reported to have come from fiscal year 2013 reports.

    Public pensions in 2012

    In fiscal year 2012, according to the systems' Actuarial Valuation Reports, Arkansas had a total of at least 135,461 active members in its retirement plans (information regarding the number of active members in the Highway and Transportation Retirement System could not be located as of October 2013). 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).[24]

    The following information was collected from the systems' 2012 Actuarial Valuation Reports, which measured fund status as of June 30, 2012 (except the report for LPFRS, which measured fund status as of December 31, 2012). Valuation reports are annual reports produced by outside consultants, using unaudited data provided by the pension systems themselves, in order to determine what employers in the system should contribute in the coming year to maintain or improve the fiscal health of the pension funds.

    Arkansas' Actuarial Valuation Reports for 2012 were produced by Gabriel Roeder Smith and Company, a national actuarial and benefits consulting services firm.[25] The "percentage funded" was calculated by taking the current value of the fund and dividing by the estimated amount of total liabilities. The assumed rates of return used to calculate current fund value varied by system (see "Rate of return" for more information). The Government Accountability Office (GAO) and Pew Research Centers cited a percent funded ratio of 80 percent as the minimum threshold for a healthy fund, though the American Academy of Actuaries suggested that all pension systems "have a strategy in place to attain or maintain a funded status of 100 percent or greater."[26][27] The column labeled "SBS figure" refers to a market liability calculation of the fund by the nonprofit organization State Budget Solutions. This analysis used a rate of return of 3.225 percent, which was based upon the 15-year Treasury bond yield. The organization called this a "risk-free" rate of return that would make it easier for states to achieve their pension funding requirements in the future. Beginning in 2006, all private sector corporate pension plans incorporated market costs into their funding schemes.[28]

    Basic pension plan information -- Arkansas
    Plans Current value Percentage funded Unfunded liabilities Membership
    State figure SBS figure[29] State figure SBS figure[29]
    Arkansas Public Employees Retirement System[30] $5,625,000,000 68.9% N/A[31] $2,538,000,000 N/A[31] 45,937 active members
    Judicial Retirement System[32] $167,796,000 85.8% $27,658,000 140 active members
    State Police Retirement System[33] $215,010,000 60.5% $140,290,000 534 active members
    District Judges[30] $13,925,350 49.1% $14,418,018 55 active members
    Teacher Retirement System[34] $11,484,000,000 71.2% $4,655,000,000 75,627 active members
    Highway and Transportation Retirement Plan[35] $1,239,900,000 90.2% $134,100,000 Data not available
    Local Police and Fire Retirement System[36] $1,169,357,127 65% $636,458,514 13,168 active members
    TOTALS $19,914,988,477 71.0% 36% $8,145,954,532 $35,101,319,000 135,461 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 Arkansas paid 106 percent of its annual required contribution.[37]

    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.[38] As a result, ARCs were removed as a reporting requirement. Instead, plan administrators and accountants were instructed to use an actuarially determined contribution or a statutory contribution for reporting purposes.[39]

    ARC historical data
    Fiscal year Arkansas Public Employees Retirement System[30] Judicial Retirement System[32] State Police Retirement System[33] District Judges[30]
    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 $229,631,149 100% $5,465,079 100% $14,052,962 139.94% $1,805,741 102%
    2011 $195,628,572 100% $5,220,623 100% $12,580,828 112.30% $1,950,782 95%
    2010 $169,604,041 100% $4,667,612 100% $12,748,302 161.18% $1,906,776 93%
    2009 $159,232,361 100% $4,466,571 100% $10,535,605 115.25% $1,581,100 102%
    2008 $173,462,377 100% $5,144,958 100% $9,996,439 116.56% $1,525,167 110%
    ARC historical data
    Fiscal year Teachers Retirement System[34] Highway and Transportation Retirement System[32] Local Police and Fire Retirement System[36]
    Annual Required Contribution (ARC) Percentage contributed Annual Required Contribution (ARC) Percentage contributed Annual Required Contribution (ARC) Percentage contributed
    2012 $443,650,000 89.9% $17,936,000 100% $66,648,849 100%
    2011 $417,320,000 95.9% $17,661,000 100% $61,818,119 100%
    2010 $362,850,000 107.3% $17,999,000 100% $58,654,842 100%
    2009 $344,030,000 104.4% N/A N/A $53,051,887 100%
    2008 $343,990,000 101.8% N/A N/A $49,518,628 100%

    Public pensions in 2011

    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 Arkansas) instead of the state-reported assumed rates of return (8 percent for Arkansas' largest pension plan).[40]

    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.[40]

    The adjusted net pension liability for the two Arkansas pension systems included in the report (APERS and HTRP) in fiscal year 2011 was ranked the 36th highest in the nation.[40] 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 - Arkansas
    Governmental revenue* Personal income State GDP Per capita
    State findings 33.6% 5.0% 4.7% $1,681
    National ranking 33rd 27th 26th 28th
    *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.[40]

    Historical pension plan data

    Historical pension plan data - all systems
    Year Value of assets Accrued liability Unfunded liability Funded ratio
    2010 $18,822,981,513 $25,368,815,104 $6,545,833,591 74.20%
    2011 $19,297,763,648 $26,809,225,935 $7,511,462,287 71.98%
    Change from 2010-2011 $474,782,135 $1,440,410,831 $965,628,696 -2.22%

    Reforms

    Enacted reforms

    2013

    While several bills pertaining to the administration of the state's pension plans were passed during the 2013 session of the Arkansas General Assembly, none constituted significant structural reforms to the existing system.[41]

    See also

    External links

    Footnotes

    1. 1.0 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 United States Census Bureau, "State- and Locally-Administered Defined Benefit Pension Systems - All Data by State and Level of Government: 2015," accessed August 26, 2016 Cite error: Invalid <ref> tag; name "census" defined multiple times with different content
    2. 2.0 2.1 2.2 2.3 Morningstar, "The State of State Pension Plans 2013: A Deep Dive Into Shortfalls and Surpluses," accessed September 16, 2013
    3. Investopedia, "Cash investment definition," accessed April 6, 2015
    4. Investopedia, "Short-term investments definition," accessed April 6, 2015
    5. Investopedia, "Securities," accessed April 6, 2015
    6. 6.0 6.1 6.2 6.3 Maryland Public Policy Institute, "Wall Street Fees, Investment Returns, Maryland 49 Other State Pension Funds," accessed July 1, 2013 Cite error: Invalid <ref> tag; name "report" defined multiple times with different content Cite error: Invalid <ref> tag; name "report" defined multiple times with different content Cite error: Invalid <ref> tag; name "report" defined multiple times with different content
    7. The Pew Charitable Trusts, “The Fiscal Health of State Pension Plans: Funding Gap Continues to Grow,” accessed April 16, 2015
    8. U.S. Census, "2013 Survey of Public Pensions: State Data," accessed April 16, 2015. Note: To access this data, navigate to the bottom of the page and click "Unit ID file."
    9. The Pew Charitable Trusts, “The Fiscal Health of State Pension Plans: Funding Gap Continues to Grow,” accessed April 16, 2015
    10. State Budget Solutions, "About SBS," accessed October 31, 2013
    11. American Legislative Exchange Council, "Promises Made, Promises Broken 2014: Unfunded Liabilities Hit $4.7 Trillion," accessed November 12, 2014
    12. The Widening Gap Update, "Pew Center on the States," accessed October 17, 2013
    13. The New York Times, "Public Pensions Faulted for Bets on Rosy Returns," accessed May 27, 2012
    14. Benefits Magazine, "Public Pension Funding 101: Key Terms and Concepts," accessed October 23, 2013
    15. Crain's Chicago Business, "State teachers pension board lowers expected rate of return," accessed September 21, 2013
    16. Huffington Post, "California Pension Funds Expect Lower Investment Return," accessed March 14, 2012
    17. The Washington Post, "Kansas’s pension funding gap just grew by $1 billion," accessed September 6, 2013
    18. Topeka Capital-Journal, "KPERS' unfunded liability rises to $10.2B," accessed September 4, 2013
    19. Wall Street Journal, "Pensions Wrestle With Return Rates," accessed October 10, 2011
    20. The Courant, "Promising Too Much On Public Pensions," accessed August 10, 2012
    21. Business Wire, "NCPERS 2013 Survey: Public Pension Plans Report Increasing Confidence, Lower Costs, Growing Returns," accessed October 22, 2013
    22. Governing, "Expert: Governments Are Masking Their Pension Liabilities," accessed October 25, 2013
    23. National Association of State Retirement Administrators, "Issue Brief: Public Pension Plan Investment Return Assumptions," accessed October 23, 2013
    24. Organisation for Economic Co-operation and Development, "Pensions Glossary," accessed November 27, 2013
    25. Gabriel Roeder Smith & Company, Consultants & Actuaries, "About Us," accessed October 29, 2013
    26. 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
    27. American Academy of Actuaries, "Issue Brief: The 80% Pension Funding Standard Myth," July 2012, accessed October 23, 2013
    28. Governing Magazine, " Is There a Plot Against Pensions?" accessed October 14, 2013
    29. 29.0 29.1 State Budget Solutions, "Promises Made, Promises Broken - The Betrayal of Pensioners and Taxpayers," accessed September 20, 2013
    30. 30.0 30.1 30.2 30.3 30.4 30.5 Arkansas Public Employees Retirement System, "Actuarial Valuation and Experience Gain/(Loss) Analysis," accessed June 30, 2012
    31. 31.0 31.1 Analysis only available for system totals and not individual funds.
    32. 32.0 32.1 32.2 32.3 Judicial Retirement System, ""Actuarial Valuation and Experience Gain/(Loss) Analysis," accessed June 30, 2012
    33. 33.0 33.1 33.2 State Police Retirement System, "Actuarial Valuation and Experience Gain/(Loss) Analysis," accessed June 30, 2012
    34. 34.0 34.1 34.2 Teacher Retirement System, "2012 Comprehensive Annual Financial Report," accessed October 30, 2013
    35. 35.0 35.1 State of Arkansas, "2012 Comprehensive Annual Financial Report," accessed October 30, 2013
    36. 36.0 36.1 36.2 Local Police and Fire Retirement System, "Compiled Annual Actuarial Valuations Report as of December 31, 2012," accessed October 30, 2013
    37. Government Accounting Standards Board, "Annual Required Contribution (ARC)," accessed October 17, 2013
    38. Reuters, "Little-known U.S. board stokes hot pension debate," accessed July 10, 2012
    39. State Budget Solutions, "GASB's ineffective public pension reporting standards set to take effect," accessed June 5, 2013
    40. 40.0 40.1 40.2 40.3 Moody's Investor Service, "Adjusted Pension Liability Medians for US States," accessed June 27, 2013
    41. National Conference of State Legislatures, "Pensions and Retirement State Legislation Database - Arkansas 2013," accessed November 22, 2013