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

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

Key terms

Actuarial value of assets (AVA) • Unfunded actuarial accrued liability (UAAL) • Annual required contribution (ARC) • Discount rate • Funded ratio • Rate of return • Active member • Inactive member • OPEB

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.

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:

• 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.

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.

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).

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.

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).

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.

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." 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

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

Alabama • Alaska • Arizona • Arkansas • California • Colorado • Connecticut • Delaware • Florida • Georgia • Hawaii • Idaho • Illinois • Indiana • Iowa • Kansas • Kentucky • Louisiana • Maine • Maryland • Massachusetts • Michigan • Minnesota • Mississippi • Missouri • Montana • Nebraska • Nevada • New Hampshire • New Jersey • New Mexico • New York • North Carolina • North Dakota • Ohio • Oklahoma • Oregon • Pennsylvania • Rhode Island • South Carolina • South Dakota • Tennessee • Texas • Utah • Vermont • Virginia • Washington • West Virginia • Wisconsin • Wyoming

Public pensions • State public pension plans • Arkansas 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.

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:

• 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.

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

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

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.

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).

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.”

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.”

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." 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."

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.

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. 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.

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.".

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."

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.

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.

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." 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).

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. 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." 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.

Basic pension plan information -- Arkansas
Plans	Current value	Percentage funded		Unfunded liabilities		Membership
		State figure	SBS figure	State figure	SBS figure
Arkansas Public Employees Retirement System	$5,625,000,000	68.9%	N/A	$2,538,000,000	N/A	45,937 active members
Judicial Retirement System	$167,796,000	85.8%		$27,658,000		140 active members
State Police Retirement System	$215,010,000	60.5%		$140,290,000		534 active members
District Judges	$13,925,350	49.1%		$14,418,018		55 active members
Teacher Retirement System	$11,484,000,000	71.2%		$4,655,000,000		75,627 active members
Highway and Transportation Retirement Plan	$1,239,900,000	90.2%		$134,100,000		Data not available
Local Police and Fire Retirement System	$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.

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 were instructed to use an actuarially determined contribution or a statutory contribution for reporting purposes.

ARC historical data
Fiscal year	Arkansas Public Employees Retirement System		Judicial Retirement System		State Police Retirement System		District Judges
	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		Highway and Transportation Retirement System		Local Police and Fire Retirement System
	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).

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 the two Arkansas pension systems included in the report (APERS and HTRP) in fiscal year 2011 was ranked the 36th 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 - 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.

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%

Historical pension plan data - Arkansas Public Employees Retirement System
Year	Value of assets	Accrued liability	Unfunded liability	Funded ratio
2007	$5,498,000,000	$6,174,000,000	$676,000,000	89.1%
2008	$5,866,000,000	$6,543,000,000	$677,000,000	89.7%
2009	$5,413,000,000	$6,938,000,000	$1,525,000,000	78.0%
2010	$5,409,000,000	$7,304,000,000	$1,895,000,000	74.1%
2011	$5,467,000,000	$7,734,000,000	$2,267,000,000	70.7%
Change from 2007-2011	-$31,000,000	$1,560,000,000	$1,591,000,000	-18.4%

Historical pension plan data - Judicial Retirement System
Year	Value of assets	Accrued liability	Unfunded liability	Funded ratio
2007	$159,587,000	$157,373,000	$(2,215,000)	101.4%
2008	$169,061,000	$165,747,000	$(3,314,000)	102.0%
2009	$167,433,000	$180,166,000	$12,732,000	92.9%
2010	$165,244,000	$182,912,000	$17,668,000	90.3%
2011	$165,377,000	$186,635,000	$21,258,000	88.6%
Change from 2007-2011	$5,790,000	$29,262,000	$23,473,000	-12.8%

Historical pension plan data - State Police Retirement System
Year	Value of assets	Accrued liability	Unfunded liability	Funded ratio
2007	$233,130,000	$307,660,000	$74,530,000	75.8%
2008	$238,004,000	$320,010,000	$82,060,000	74.4%
2009	$206,320,000	$325,940,000	$119,620,000	63.3%
2010	$211,070,000	$333,600,000	$122,530,000	63.3%
2011	$208,050,000	$343,210,000	$135,160,000	60.6%
Change from 2007-2011	-$25,080,000	$35,550,000	$60,630,000	-15.2%

Historical pension plan data - District Judges
Year	Value of assets	Accrued liability	Unfunded liability	Funded ratio
2007	$12,582,548	$24,387,433	$11,804,885	51.6%
2008	$12,398,225	$24,797,303	$12,399,078	50.0%
2009	$10,004,394	$25,671,893	$15,667,499	39.0%
2010	$11,112,521	$26,775,249	$15,662,728	41.5%
2011	$12,950,730	$27,524,848	$14,574,118	47.1%
Change from 2007-2011	$368,182	$3,137,415	$2,769,233	-4.5%

Historical pension plan data - Teacher Retirement System
Year	Value of assets	Accrued liability	Unfunded liability	Funded ratio
2007	$10,519,000,000	$12,329,000,000	$1,810,000,000	85.3%
2008	$11,319,000,000	$13,334,000,000	$2,015,000,000	84.9%
2009	$10,617,000,000	$14,019,000,000	$3,402,000,000	75.7%
2010	$10,845,000,000	$14,697,000,000	$3,852,000,000	73.8%
2011	$11,146,000,000	$15,521,000,000	$4,375,000,000	71.8%
Change from 2007-2011	$627,000,000	$3,192,000,000	$2,565,000,000	-13.5%

Historical pension plan data - Highway and Transportation Retirement Plan
Year	Value of assets	Accrued liability	Unfunded liability	Funded ratio
2010	$1,199,400,000	$1,305,000,000	$105,600,000	91.9%
2011	$1,227,700,000	$1,342,700,000	$115,000,000	91.4%
Change from 2010-2011	$28,300,000	$37,700,000	$9,400,000	-0.5%
*Data for this system was retrieved from the state's Comprehensive Annual Financial Report, as no system-specific reports could be found. Consequently, only information for the past two fiscal years is included here..

Historical pension plan data - Local Police and Fire Retirement System
Year	Value of assets	Accrued liability	Unfunded liability	Funded ratio
2007	$827,546,002	$1,054,599,720	$227,053,718	78%
2008	$788,633,082	$1,200,515,663	$411,882,581	66%
2009	$878,958,364	$1,379,093,412	$500,135,048	64%
2010	$982,154,992	$1,519,527,855	$537,372,863	65%
2011	$1,070,685,918	$1,654,156,087	$583,470,169	65%
Change from 2007-2011	$243,139,916	$599,556,367	$356,416,451	-13%

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.

See also

• Public pensions in the United States
• Arkansas state budget and finances
• Tax policy in Arkansas
• Pension statistics
• Public pension health by state
• Public pensions

External links

• Pension Tsunami
• Pension Calculator from Public Sector Inc.
• Arkansas Public Employees' Retirement System - Annual Financial Report (2012)
• Arkansas Teachers' Retirement System - Annual Financial Report (2011)

Footnotes

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