The best way to close public pension funding gaps, according to the National Conference on Public Employee Retirement Systems (NCPERS), is to reform state and local revenue systems and close tax loopholes.

“But that is a long road, and it is beyond the scope of responsibilities of pension trustees and administrators,” NCPERS said in a recent research paper called “Ten Ways to Close Public Pension Funding Gaps.” “However, we can help ensure that state and local governments are looking at the appropriate data when determining how to fund public services and programs, including pensions.”

NCPERS notes that when state and local governments are faced with public pension funding gaps, they often default to “knee-jerk solutions” such as shutting down defined benefit (DB) plans in favor of defined contribution (DC) plans, or altering benefits and contribution formulas, “sometimes to a punishing degree,” which it said can lead to serious unintended consequences.

As the title of the paper suggests, the organization identifies 10 policy options that can be adapted to a pension plan’s specific circumstances and that it said neither undermine public pensions nor cause harmful economic consequences.

However, NCPERS said the paper is not intended to offer recommendations, but ideas to consider and explore. “Each pension system is unique and must explore, in consultation with experts and through a robust due diligence process, policy options that best fit its needs,” said NCPERS.

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