Certain mortality projections would increase life expectancy by2.3 years and reduce the funded ratio of the nation’s publicpension plans to 67 percent.

That’s according to a just-out brief from the Center for Stateand Local Government Excellence, “HowWill Longer Lifespans Affect State and Local Pension Funding?”which concludes that, while the impact of longer lives is notexactly a positive for funds, there’s no imminent threat to pensionfunding levels.

It explores what public plan liabilities and funded ratios wouldlook like under two alternative scenarios:

1. If public plans were required to use the newmortality tables designed for private sector plans; and

2. if public plans were required to go one step further andfully incorporate expected future mortalityimprovements.

The brief's key findings include:

• Using the private-sector standard, public plans underestimatelife expectancy by only 0.5 years, reducing the 2013 funded statusof state and local plans from 73 percent to 72 percent.
  
  
• Incorporating future mortality improvements would increase lifeexpectancy by 2.3 years and reduce the funded ratio of public plansfrom 73 percent to 67 percent.

Plans’ liabilities are affected, of course, by the longevity oftheir members, and the brief explores the degree to whichliabilities are affected, calculating that “state and local pensionplans would see their liabilities increase by 3.5 percent for eachadditional year of life expectancy.”

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When the differences among longevity tables are factored in, itbecomes clear that some plans, because of the way they calculatelife expectancy, will be more greatly affected by a change from onetable to another, while other plans will not see such drasticeffects.

The public sector, the brief said, is going to great efforts tomake sure its life expectancy assumptions are up to date.Reassuringly, the brief said, “The question underlying thisanalysis is whether outdated mortality assumptions are a seriousproblem among state and local plans. The answer appears to be‘no.’”