Everyone Shares in Keeping Wyoming’s Pensions Strong
During the last decade, there have been fundamental changes to our economy such as the Great Recession and decreasing capital markets. These changes are challenging, and have an impact on pension plans. As such, WRS has focused on benefit security and proactive pension management.
Ongoing monitoring of actuarial assumptions, contribution requirements and benefit provisions is critical to pension health. The Board does due diligence on all three areas, and advocates for adjustments when necessary. The changes accomplished have combined to keep adequate funding for the long-term.
1) Assumptions kept sound: Using sound actuarial assumptions, which align with actual experience over time, is a critical component of a well-funded pension plan. The Board has its actuary review assumptions each year. Most recently, the Board updated the assumptions used to quantify the liabilities of each pension plan after an experience study in 2017.
Changing the assumptions may impact the funded status or cause a need for a contribution rate increase. For example, it has been necessary to adopt assumptions to reflect longer life spans for pensioners and this increases the cost of the plan. Another change has been to decrease the assumption for investment returns, which also increases the cost of the plan.
2) Contributions gradually increased: An adequate contribution rate is key to the health of a pension plan. The Board advocates for legislative changes to the contribution rates when needed. In 2016, the legislature passed a four year plan to gradually raise the contribution rate for the Public Employee Plan1. Importantly when the four year plan is completed, a total of 7.37% more in contributions will be coming into the Public Employee Plan compared to 2010.
Wyoming Public Employees Association Executive Director, Betty Jo Beardsley, recently said, “The sentiment I hear from WPEA members is they value the pension and want to keep the plan strong. Working together with the legislature, we have been able to phase increases in over time so it is manageable for employers and employees. It allows us to head in the right direction, without the stress of getting it done all at once.”
3) Benefit provisions trimmed: To help take pressure off of contributions, benefit provisions for actively employed members have been cautiously adjusted. The moderately reduced pension formula for those hired after September 2012 has served to bring the costs of the Public Employee Plan benefits down. Other provisions around account balance refunds and death benefits have been fine-tuned. As a result, long-term projections show the cost of benefits earned in the current year is decreasing. This indicates the Public Employee Plan is sustainable for the long term.
It has been difficult for retirees to go without inflation adjustments for the last decade. While this has contributed to keeping the Public Employee Plan well-funded, there is a duty to address the need for inflation relief and stakeholder groups are leading the way.
Conclusion: It is good for Wyoming to have solid public pension plans. WRS paid $642 million in pension benefits to members in 2018, and most of it stays in Wyoming; benefiting both state and local economies. The cost of necessary changes has been shared among employers, employees and retirees. We must work together toward a secure future, and WRS is engaged with stakeholders and policymakers to that end.
1 The majority of WRS’ members are in the Public Employee Pension, and this article focuses on that plan. The WRS Board engages in similar proactive management for all eight of Wyoming’s public pension plans.