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Retirement Benefit Types
- Pension Plan: A retirement income plan that offers a defined benefit based on a combination of salary history, years of service, and benefit accrual rate (or “multiplier”).
- OPEB: Other Post-Employment Benefits (or OPEB) typically refer to retirement healthcare benefits or health insurance benefits. The type of healthcare benefit, duration, and eligibility vary significantly from municipality to municipality.
Some employers offer “Simple” retirement income programs called SEPs, or defined contribution retirement income plans, including 401(k) and 401(a) plans. These are not represented in this data set. For a list of employers that offer these kinds of benefits please contact us.
What Do These Terms Mean?
- Assets: This is the assets held in reserve by the municipality for the purposes of paying out the benefit (either Pension or OPEB).
- Projected Benefits: This is the total value of benefits that local governments are currently committed to providing to public employees in retirement. The amount shown is the total amount the municipality estimates that it owes in Pension or OPEB benefits to people already retired plus to people currently working but who have earned benefits for their retirement. In technical terms, this is called the actuarial accrued liability or simply the liability.
- Unfunded Benefits: This is the difference between the value of projected benefits and the assets currently held to pay those benefits. In technical terms, this is the unfunded liability, more commonly called Pension debt or OPEB debt.
Defined benefit Pensions and defined benefit OPEB are designed to be paid for in advance, with payments put into an account that earns interest so that when benefits are owed the exact amount is available to pay them. This is different than the way Social Security is funded, which relies on contributions from current employees to pay benefits of retirees. Thus, it is important that defined benefit Pension or OPEB plans have Assets on hand that equal the Liabilities at any given time.
Historically, defined benefit OPEB plans have typically not been funded in advance, which explains why they have such larger amounts of unfunded benefits.
- Funded Ratio or
Funded Status: This shows what percentage of retirement benefits are actually paid for — i.e. the funded ratio measures the percentage of Assets available to pay Projected Benefits. The Funded Ratio is a measure of the health of a Pension or OPEB plan. Anything less than 100% funded means the municipality is carrying debt.