Reforming Nevada’s public employees pension plan

Reforming Nevada’s Public Employees Pension Plan

Download PDF

While a defined-contribution (DC) approach is not perfect, experience with reformed 401(k) plans and the Thrift
Savings Plan for federal government employees shows that a DC pension plan can be managed cost-effectively for employees and taxpayers alike.

The Public Employees’ Retirement System of Nevada provides retirement, survivors and disability benefits for Nevada state and local government employees. It is currently one of the better-funded public-sector pensions, due to sound management and consistent government contributions.

However, the true funding health of Nevada PERS is far poorer than most realize, due to accounting standards that are far more lax than those required for private-sector plans. Using fair-market valuation, which is endorsed by the vast majority of professional economists, is used by financial markets to value liabilities and which is required of private-sector plans, Nevada PERS’ funding ratio falls from 70 percent to around 34 percent and its unfunded liabilities would rise from about $10 billion to almost $41 billion.

Annual contributions to cover accruing pension costs and amortization of unfunded liabilities would rise from $1.6 billion to an estimated $5.8 billion.

As alarming as these figures may be, they are the figures that economists and financial markets believe are the most
revealing of the true financial health of the Nevada pension program.

Shifting PERS to a defined-contribution, 401(k)-type structure would not make these unfunded liabilities go away. However, it would ensure that benefit obligations are fully funded going forward, ensuring that lawmakers, taxpayers and public employees are clear regarding the pensions promises the government has made and its ability to fulfill them.

Andrew G. Biggs is a resident scholar at AEI

Also Visit
AEIdeas Blog The American Magazine
About the Author

 

Andrew G.
Biggs

What's new on AEI

Making Ryan's tax plan smarter
image The teacher evaluation confronts the future
image How to reform the US immigration system
image Inversion hysteria
AEI on Facebook
Events Calendar
  • 01
    MON
  • 02
    TUE
  • 03
    WED
  • 04
    THU
  • 05
    FRI
Wednesday, September 03, 2014 | 9:00 a.m. – 10:30 a.m.
From anarchy to Augustus: Lessons on dealing with disorder, from Rome’s first emperor

We invite you to join us for two panel discussions on how Augustus created order from chaos 2,000 years ago, and what makes for durable domestic and international political systems in the 21st century.

Event Registration is Closed
Wednesday, September 03, 2014 | 12:00 p.m. – 1:30 p.m.
Multiple choice: Expanding opportunity through innovation in K–12 education

Please join us for a book launch event and panel discussion about how a marketplace of education options can help today's students succeed in tomorrow's economy. Attendees will receive a complimentary copy of the featured book.

Thursday, September 04, 2014 | 12:00 p.m. – 1:30 p.m.
How conservatives can save the safety net

Please join us for a luncheon event in which our panel will discuss what conservatives can learn from how liberals talk and think about the safety net and where free-market economics, federalism, and social responsibility intersect to lift people out of poverty.

No events scheduled this day.
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.