How To Reduce Maryland's Pension Liabilities
Lessons From the 30-Largest U.S. Public Funds
On June 30, 2017, the 30-largest public pension funds in the United States, with combined assets of $2.65 trillion, reported a group median funded status of 75.32 percent. At that time, the Maryland State Retirement and Pension System (MSRPS), the 22nd-largest public pension fund in the country, reported a funded status of 69.4 percent.
To categorize and compare Maryland’s pension status with similar large public pension funds and develop policy recommendations to reduce the state’s pension liabilities, the Maryland Public Policy Institute conducted a study of the 30-largest public pension funds in the country by comparing the funds’ discount rates, 10-year investment returns, and member contribution rates. The study identified three main problems underlying Maryland’s pension crisis: undervalued pension liability, underperforming investment, and inadequate cost sharing.
Until today, Maryland legislators have largely neglected these pension problems, which merit immediate attention. Meanwhile, other states with large public pension funds that face similar problems have implemented various reforms over the years to fix their pension systems. Drawing on lessons from other large pension funds that are back on the track to being fully funded, this report recommends these pension reforms for Maryland: a lower discount rate, passive investment strategy, and DB+DC and cash balance plans.