Welcome to the latest edition of This Week in Pensions! We have gathered the top stories about pensions and retirement security from the previous week.
This summer, three new research papers have been released, spotlighting the vital role pensions play in supporting our communities and generating state and local tax revenue.
Pensions are funded through a combination of worker paycheck deductions, employee matching contributions, and investment growth. Public pensions yield $125.7 billion in state and local revenues. These three reports offer a deeper examination of the connection between pensions, how those funds are invested, and the vital role pensions play in supporting communities across America.
Cutting Public Pensions Puts Government Revenues at Risk
Policy decisions made under short-term pressure can lead to unintended consequences. According to a new report from the National Conference on Public Employee Retirement Systems (NCPERS), efforts to reduce or dismantle public pension benefits carry a significant risk of producing adverse long-term effects. In this phase of its ongoing research into the role of public pensions in the U.S. economy, NCPERS aimed to measure the extent of that risk.
From the report:
The results show that in 2016, pension funds generated approximately $277.6 billion in state and local revenues. The taxpayer contribution to pension plans in the same year was $140.3 billion. In other words, pension funds generated $137.3 billion more in revenues than the taxpayer contribution. The state-by-state results indicate that pensions in 38 states had a positive impact on net revenues. In the remaining 12 states, either pensions were revenue-neutral or taxpayer contributions were greatly subsidized by state and local revenues generated by public pensions.
Check out the full NCPERS report here: Unintended Consequences: How Scaling Back Public Pensions Puts Government Revenues at Risk.
How Public Pension Plans Have Diversified as Markets Shift
This week in Forbes, National Institute on Retirement Security Executive Director Dan Doonan noted that the funded ratio of public pensions reached 81.1% as of May 31, 2025, as measured by the Milliman 100 Public Pension Funding Index.
Doonan writes:
The period immediately following the GFC (Great Financial Crisis) was a time of substantial change for public pension plans, with significant modifications on the actuarial and investment fronts. During periods of significant change, it can often be difficult to measure results before a track record is established.
Despite the challenges in evaluating the changes cited, newly released data from the organization Doonan leads, NIRS, in partnership with financial services firm AON, provides a robust look back at the impact of those adjustments. The data shows that public pension plans diversified their investment strategies following the Great Recession, improved investment performance, and that these changes have enhanced the plans’ ability to meet investment return expectations.
Check out the full NIRS/AON report here: EVOLUTION AND GROWTH: How Public Pension Plans Have Diversified Their Investments Amid Changing Markets
Is Enthusiasm Among Pension Funds for Private Equity Now Waning?
While the data from NIRS and AON appear to show how diversified investment portfolios, including private equity, have delivered more substantial returns than equities and bonds over comparable periods, a third new paper from the American Federation of Teachers (AFT) and the Americans for Financial Reform Education Fund conveys caution regarding private equity and retirement investments.
The report examines the drivers behind private equity’s rapid growth and assesses whether it delivers the returns expected by public pension funds that manage workers’ retirement funds, cautioning against allowing private equity to access individual 401(k) accounts. The paper outlines policy and fiduciary actions at the state and federal levels to mitigate investment risks. It provides specific recommendations for the institutions responsible for safeguarding the retirement security of millions of working Americans.
Check out the full AFT/Americans for Financial Reform Education Fund report here: From Public Pensions to Private Fortunes: How Working People’s Retirements Line Billionaire Pockets.
Be sure to check back next Friday for the latest in the fight for a secure retirement! For now, sign up for NPPC News Clips to receive daily pension news from across the country directly to your inbox.