Historical North Dakota pension information

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The historical North Dakota 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 North Dakota's pension system, click here.

As published 2016

North Dakota information (2015)

Total contributions: $416,305,000

Employee contributions: $141,399,000

Government contributions: $274,906,000

Total payments: $357,194,000

Total cash and investment holdings: $4,922,057,000

Number of state and local pension systems: 18

Active membership: 35,196

Inactive membership: 7,135

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.

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

According to the United States Census Bureau, there were 18 public pension systems in North Dakota as of 2015. Of these, four were state-level programs, while the remaining 14 were administered at the local level. As of fiscal year 2015, membership in North Dakota's various pension systems totaled 42,331. Of these, 35,196 were active members.

HIGHLIGHTS

In fiscal year 2015, the most recent year for which information is available, total contributions of $416.3 million were made to North Dakota's state and local pension systems. Of this amount, $141.4 million came from employees.

In fiscal year 2015, North Dakota's state and local pension systems made payments totaling $357.2 million.

As of fiscal year 2015, North Dakota's state and local pension systems held $4.9 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, North Dakota had four state pension plans as of 2015:

1. North Dakota Public Employees Retirement System
2. North Dakota Highway Patrol Retirement System
3. Retired Plan for the Employees of Job Service North Dakota
4. North Dakota Teachers' Fund for Retirement

In addition to the aforementioned state-level pension systems, there were 14 locally administered pension systems in North Dakota.

The table below provides general pension system information for North Dakota 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
North Dakota	4	14	42,331	35,196	83.14%	7,135	16.86%
Minnesota	12	588	568,470	309,659	54.47%	258,811	45.53%
Montana	9	93	81,686	53,450	65.43%	28,236	34.57%
South Dakota	1	2	57,109	40,441	70.81%	16,668	29.19%
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 $416.3 million were made to North Dakota's state and local pension systems. Of this amount, $141.4 million came from employees. The remainder came from state and local governments. The table below provides information about pension contributions in North Dakota 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
North Dakota	$416,305	$141,399	33.97%	$274,906	66.03%	$334,947
Minnesota	$2,338,593	$992,834	42.45%	$1,345,759	57.55%	$3,812,433
Montana	$525,080	$190,308	36.24%	$334,772	63.76%	$488,406
South Dakota	$240,754	$114,544	47.58%	$126,210	52.42%	$477,991
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, North Dakota's state and local pension systems made payments totaling $357.2 million. The table below provides pension payment information for North Dakota 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
North Dakota	$357,194	$330,832	$5,285	$21,076
Minnesota	$4,583,712	$4,444,689	$57,772	$81,250
Montana	$765,094	$702,021	$21,379	$41,692
South Dakota	$548,898	$493,718	$27,074	$28,106
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. North Dakota was reported to have about $48 million in unfunded liabilities for OPEBs. This was equal to about 0.01 percent of the country's total unfunded liabilities for these other services.

The chart below displays the unfunded liabilities for North Dakota 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
North Dakota	$48	0.01%
Minnesota	$652	0.13%
Montana	$447	0.09%
South Dakota	$68	0.01%
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, North Dakota's state and local pension systems held $4.9 billion in total cash and investment holdings. The table below summarizes pension system cash and investment holdings for North Dakota 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
North Dakota	$4,922,057	$119,269	$3,822,535	$980,253
Minnesota	$65,195,503	$1,328,640	$58,758,850	$5,108,013
Montana	$10,128,898	$209,618	$9,354,860	$564,420
South Dakota	$11,284,918	$835,045	$9,145,947	$1,303,926
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 North Dakota and surrounding states. For each state's pension system, total net assets are listed (both for the beginning and end of the fiscal year in question), as well as the total amount paid in management fees. In addition, the rates of return for the pension systems are presented. Compared to surrounding states, North Dakota had the lowest total net assets and total management fees.

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
North Dakota	2012	$3,743,377,317	$3,654,079,659	$19,081,399	0.51%	0.32%
Minnesota	2012	$53,069,265,000	$52,887,392,000	$64,886,000	0.12%	2.30%
Montana	2012	$8,305,942,274	$8,304,899,027	$43,312,842	0.52%	1.22%
South Dakota	2012	$7,936,269,496	$7,842,524,241	$35,142,279	0.44%	2.10%
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 April 23, 2015. Note: To access this data, navigate to the list of links below the article and click "Exhibit A."

As published 2015

Public pensions in North Dakota

General information (2013)

Total contributions: $218,449,000

Employee contributions: $96,730,000

Government contributions: $121,719,000

Total payments: $286,420,000

Total cash and investment holdings: $4,074,364,000

Number of state and local pension systems: 11 (2 state systems, 9 local systems)

Active membership: 33,294

Inactive membership: 9,700

Pension health (2012)

Assets: $1,750,600,000

Actuarial accrued liability (AAL): $2,641,100,000

Unfunded actuarial accrued liability (UAAL): $890,500,000

Funded ratio: 66.3%

UAAL per capita: $1,350

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 • North Dakota 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.

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

According to the United States Census Bureau, there were 11 public pension systems in North Dakota as of 2013. Of these, two were state-level programs, while the remaining nine were administered at the local level. As of 2013, membership in North Dakota's various pension systems totaled 42,994. Of these, 33,294 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 North Dakota's state-administered pension plans decreased from 93.3 percent to 66.3 percent. The state paid 53 percent of its annual required contribution, and for fiscal year 2012 the pension system's unfunded accrued liability totaled $890.5 million. This amounted to $1,350 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, North Dakota had two state pension plans as of 2013:

1. North Dakota Public Employees Retirement System
2. North Dakota Teachers Retirement Fund

In addition to the aforementioned state-level pension systems, there were nine locally administered pension systems in North Dakota.

The table below provides general pension system information for North Dakota 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
North Dakota	2	9	42,994	33,294	77.44%	9,700	22.56%
Minnesota	8	137	524,577	290,747	55.43%	233,831	44.58%
Montana	9	0	76,880	52,570	68.38%	24,310	31.62%
South Dakota	2	2	55,061	39,700	72.1%	15,361	27.9%
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 $218.5 million were made to North Dakota's state and local pension systems. Of this amount, $96.7 million came from employees. The remainder came from state and local governments. The table below provides information about pension contributions in North Dakota 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
North Dakota	$218,449	$96,730	44.28%	$121,719	55.72%	$303,302
Minnesota	$1,863,559	$849,422	45.58%	$1,014,137	54.42%	$8,124,504
Montana	$392,484	$164,007	41.79%	$228,477	58.21%	$1,520,578
South Dakota	$218,101	$104,925	48.11%	$113,176	51.89%	$1,563,340
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, North Dakota's state and local pension systems made payments totaling $286.4 million. The table below provides pension payment information for North Dakota 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
North Dakota	$286,420	$257,932	$10,471	$18,020
Minnesota	$4,012,990	$3,876,893	$69,626	$66,471
Montana	$674,954	$608,545	$19,180	$47,229
South Dakota	$486,617	$420,272	$25,161	$41,184
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, North Dakota's state and local pension systems held $4.1 billion in total cash and investment holdings. The table below summarizes pension system cash and investment holdings for North Dakota 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
North Dakota	$4,074,364	$161,042	$3,035,451	$877,871
Minnesota	$53,136,559	$1,302,010	$43,933,076	$7,901,473
Montana	$9,060,965	$358,479	$8,124,094	$578,392
South Dakota	$9,571,530	$12,376	$8,244,552	$1,314,602
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 North Dakota and neighboring states. They found the following:

• According to the Pew Charitable Trusts, North Dakota paid 53 percent of its required contribution and its funded ratio was 63 percent in fiscal year 2012.
• According to Morningstar, the state had a per capita pension debt of $1,350 and a funded ratio of 66.3 percent in fiscal year 2012.
• According to State Budget Solutions, which assumed a lower rate of return, North Dakota had a per capita pension debt of $12,192 and a funded ratio of 29 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
North Dakota	$5,513	$2,014	$163	72%	69%	63%	66%	52%	53%
Minnesota	$62,720	$15,609	$1,160	80%	79%	75%	65%	84%	81%
Montana	$11,908	$4,303	$282	70%	66%	64%	81%	75%	69%
South Dakota	$8,571	$638	$100	96%	96%	93%	98%	102%	99%
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, North Dakota's state pension system was funded at a rate of 66.3 percent in fiscal year 2012. The table below provides state pension system health metrics for North Dakota 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
North Dakota	$1,750,600	$2,641,100	$890,500	66.3%	$1,350
Minnesota	$28,188,567	$37,594,728	$9,406,161	75%	$3,197
Montana	$7,631,717	$11,942,461	$4,310,744	63.9%	$4,427
South Dakota	$7,927,002	$8,562,591	$635,589	92.6%	$795
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, North Dakota's pension plans were funded at a rate of 29 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
North Dakota	$3,570,622	$12,385,498	29%	$8,814,876	$12,192	16%
Minnesota	$48,822,058	$140,704,151	35%	$91,882,093	$16,952	29%
Montana	$8,285,745	$23,115,583	36%	$14,829,838	$14,611	34%
South Dakota	$8,857,928	$16,894,527	52%	$8,036,599	$9,511	17%
Totals in the U.S.	$2,679,831,466	$7,416,319,293	36%	$4,736,487,827	$15,052	29%
Source: State Budget Solutions, "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 North Dakota and surrounding states. For each state's pension system, total net assets are listed (both for the beginning and end of the fiscal year in question), as well as the total amount paid in management fees. In addition, the rates of return for the pension systems are presented. Compared to surrounding states, North Dakota had the lowest total net assets and total management fees.

Public pension fund management fees, 2011-2012
State	Fiscal year	Total net assets at the beginning of the year	Total net assets at the end of the year	Total management fees	Management fees as a percentage of total net assets	Five-year rate of return
North Dakota	2012	$3,743,377,317	$3,654,079,659	$19,081,399	0.51%	0.32%
Minnesota	2012	$53,069,265,000	$52,887,392,000	$64,886,000	0.12%	2.30%
Montana	2012	$8,305,942,274	$8,304,899,027	$43,312,842	0.52%	1.22%
South Dakota	2012	$7,936,269,496	$7,842,524,241	$35,142,279	0.44%	2.10%
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. North Dakota was reported to have about $48 million in unfunded liabilities for OPEBs. This was equal to about 0.01 percent of the country's total unfunded liabilities for these other services.

The chart below displays the unfunded liabilities for North Dakota 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
North Dakota	$48	0.01%
Minnesota	$652	0.13%
Montana	$447	0.09%
South Dakota	$68	0.01%
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

Taken together, the funding ratio for North Dakota's pension systems decreased from 85.68 percent in fiscal year 2007 to 63.46 percent in fiscal year 2012, a decrease of 22.22 percentage points, or 25.9 percent. Likewise, unfunded liabilities increased from under $1 billion in fiscal year 2007 to more than $2 billion in fiscal year 2012.

A 2012 report from the Pew Center on the States noted that North Dakota's pension system was funded at 72 percent at the close of fiscal year 2010, below the 80 percent funding level experts recommend. Consequently, Pew designated the state's pension system as cause for "serious concern."

According to the systems' Comprehensive Annual Financial Reports for fiscal year 2012, North Dakota had a total of at 31,269 active members in its retirement plans. 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' Comprehensive Annual Financial Reports. The "percentage funded" was calculated by taking the current value of the fund and dividing by the estimated amount of total liabilities. The assumed rate of return used to calculate fund value varied by system in fiscal year 2012 (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 -- North Dakota
Plans	Current value	Percentage funded		Unfunded liabilities		Current members
		State figure	SBS figure	State figure	SBS figure
Public Employees Retirement System	$1,627,400,000	65.1%	N/A	$873,900,000	N/A	21,091 active members
Highway Patrolmen's Retirement System	$48,100,000	70.3%		$20,300,000		145 active members
Retirement Plan for Employees of Job Service North Dakota	$75,100,000	105.2%		-$3,700,000		19 active members
Teachers’ Fund for Retirement	$1,748,100,000	60.9%		$1,123,800,000		10,014 active members
TOTALS	$3,498,700,000	63.46%	32%	$2,014,300,000	$7,308,162,000	31,269 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 North Dakota paid 66 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	PERS		HPRS		RPEJS		TRF
	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	$91,458,077	42%	$2,170,739	66%	N/A	N/A	$69,373,794	66.5%
2011	$82,909,840	39%	$1,744,270	74%	N/A	N/A	$65,112,696	68.4%
2010	$54,157,866	56%	$1,312,591	91%	N/A	N/A	$52,053,217	76.5%
2009	$40,327,067	69%	$1,025,737	109%	N/A	N/A	$41,986,174	89.3%
2008	$35,875,117	70%	$905,591	117%	N/A	N/A	$44,114,585	76.4%

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 North Dakota) instead of the state-reported assumed rates of return (8.00 percent for North Dakota's largest plan as of July 1, 2011).

The report's authors found that adjusted net pension liabilities varied dramatically from state to state, from 6.8 percent (Nebraska) to 241 percent (Illinois) of governmental revenues in fiscal year 2011.

The adjusted net pension liability for North Dakota in fiscal year 2011 was ranked the 38th 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 - North Dakota
	Governmental revenue*	Personal income	State GDP	Per capita
State findings	61.2%	10.1%	8.1%	$4,781
National ranking	19th	13th	17th	13th
*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 data

Historical pension plan data - all systems
Year	Value of assets	Accrued liability	Unfunded liability	Funded ratio
2007	$3,377,100,000	$3,941,700,000	$564,600,000	85.68%
2008	$3,647,100,000	$4,193,600,000	$546,500,000	86.97%
2009	$3,642,100,000	$4,475,800,000	$833,700,000	81.37%
2010	$3,586,500,000	$4,977,500,000	$1,391,000,000	72.05%
2011	$3,596,600,000	$5,224,100,000	$1,627,500,000	68.85%
Change from 2007-2011	$219,500,000	$1,282,400,000	$1,062,900,000	-16.83%

Historical pension plan data - PERS
Year	Value of assets	Accrued liability	Unfunded liability	Funded ratio
2007	$1,503,100,000	$1,610,200,000	$107,100,000	93.4%
2008	$1,609,800,000	$1,737,600,000	$127,800,000	92.6%
2009	$1,617,100,000	$1,901,200,000	$284,100,000	85.1%
2010	$1,621,700,000	$2,208,400,000	$586,700,000	73.4%
2011	$1,650,400,000	$2,339,800,000	$689,400,000	70.5%
Change from 2007-2011	$147,300,000	$729,600,000	$582,300,000	-22.9%

Historical pension plan data - HPRS
Year	Value of assets	Accrued liability	Unfunded liability	Funded ratio
2007	$48,200,000	$51,500,000	$3,300,000	93.5%
2008	$50,800,000	$54,600,000	$3,800,000	93.0%
2009	$50,200,000	$57,600,000	$7,400,000	87.2%
2010	$49,300,000	$61,800,000	$12,500,000	79.8%
2011	$49,500,000	$67,100,000	$17,600,000	73.7%
Change from 2007-2011	$1,300,000	$15,600,000	$14,300,000	-19.8%

Historical pension plan data - RPEJS
Year	Value of assets	Accrued liability	Unfunded liability	Funded ratio
2007	$75,700,000	$70,700,000	-$5,000,000	107.1%
2008	$77,000,000	$70,800,000	-$6,200,000	108.8%
2009	$74,500,000	$71,100,000	-$3,400,000	104.7%
2010	$73,500,000	$70,100,000	-$3,400,000	104.8%
2011	$74,100,000	$67,400,000	-$6,700,000	110.0%
Change from 2007-2011	-$1,600,000	-$3,300,000	-$1,700,000	2.90%

Historical pension plan data - TRF
Year	Value of assets	Accrued liability	Unfunded liability	Funded ratio
2007	$1,750,100,000	$2,209,300,000	$459,200,000	79.2%
2008	$1,909,500,000	$2,330,600,000	$421,100,000	81.9%
2009	$1,900,300,000	$2,445,900,000	$545,600,000	77.7%
2010	$1,842,000,000	$2,637,200,000	$795,200,000	69.8%
2011	$1,822,600,000	$2,749,800,000	$927,200,000	66.3%
Change from 2007-2011	$72,500,000	$540,500,000	$468,000,000	-12.9%

Reforms

2013

S.B. 2059

Introduced by the Senate Committee on Government and Veterans Affairs, S.B. 2059 provided for increased employer and employee contributions to the Highway Patrolmen's Retirement System and the Public Employees Retirement System. After clearing the Senate on February 20, 2013, the bill failed to pass the House on March 25, 2013.

See also

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

External links

• Pension Tsunami
• Pension Calculator from Public Sector Inc.
• Center for Retirement Research at Boston College, "How did state/local plans get so underfunded?"
• North Dakota Retirement and Investment Office

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