(The Center Square) – A new report shows Ohio’s pension plans as stable but warns current funding levels will likely not be sufficient.
S&P Global, a national financial analytics company, said in a new report market swings could create issues for cities and states nationwide with pension contributions.
The report, however, called Ohio’s state pensions stable but funding will need to increase rather than continue at a fixed rate. It also criticized what analysts called aggressive assumptions that could lead to future funding issues.
“Given current employer contributions rates, which are established by state legislation, the plans are on a slow but steady path towards full funding,” S&P Global’s report team said in an email to The Center Square. “However, if the aggressive funding assumptions are not met, such as high discount rates that indicate exposure to market volatility risk, it can be difficult to make consistent progress since statutory contributions can be slow to change and plan funding levels may deteriorate over time.”
The report examined the Ohio Public Employee Retirement System, Ohio Police and Fire Pension Fund, State Teachers Retirement System, and School Employee Retirement System.
The report said recent changes to retiree medical and other benefits have helped control costs and limit government risks to the noneducational plans.
“From our key takeaways, Ohio statewide retirement plans have generally adapted to increasing costs by either slowly increasing pension contributions or changing the structure of retiree medical benefits, which has historically led to generally stable costs for plan participants,” analysts said.
STRS and SERS received positive reports for minimum funding progress last year, while OP&F and OPERS were below what the report called the minimum.
Funding ratios for all four systems were stable. The police and fire pension received a poor report in both the assumed rate of return and funding plan, while the others were stable in both categories.
The report also called local government pensions and benefits manageable for cities and counties but warned aggressive assumptions could lead to higher costs.
It also said school districts have generally been able to absorb retirement costs without creating stress on budgets.
