There is a continuing public discourse regarding Maryland’s public pension system.
About half of Maryland’s counties participate in Maryland’s public pension system, meaning county employers are members of the System and county governments provide the System with contributions for those employees. Since 2012, all Maryland counties also share in the funding responsibility for Maryland’s teacher pensions, one of the plans within the Maryland public pension system.
This article excerpts from letters to the editor published in The Washington Post and a report on the subject of Maryland’s pension funding and policy as compared to other similarly sized public pension plans across the country.
In a letter to the editor in The Washington Post, James Hohman of the Mackinac Center and Carol Park of the Maryland Public Policy Institute write,
According to a recent study of the 30 largest government pension funds, Maryland lost out on $7 billion in returns over a decade just by underperforming other state pension funds in investment. Over the 10 years ending in June 2017, Maryland earned just 4.2 percent annual return on the money it set aside for pensions. Maryland’s pension plan overseers disguised this shortfall by assuming a 7.5 percent discount rate in calculating its liability figures, making the pension fund appear closer to being fully funded.
Read the complete letter, What Maryland can learn from Michigan’s successful public pension reform.
Carol Park’s letter references a Maryland Public Policy Institute report which concludes,
The MSRPS, the 22nd-largest public pension fund in the nation, is billions of dollars underwater. The Maryland Public Policy Institute’s study of the 30-largest public pension funds reveals that Maryland has one of the worst-funded plans out of the 30. To properly understand and ultimately overcome Maryland’s pension crisis, this study recommends that the MSRPS:
- Lower its discount rate to unveil the true size of Maryland’s pension liability
- Index the vast majority of its portfolio to save management costs
- Adopt DB+DC or cash balance plans with more predictable cost structure
Read the complete report, How to Reduce Maryland’s Pension Liabilities: Lessons From the 30-Largest U.S. Public Pension Funds.
In a response letter to the editor in The Washington Post, R. Dean Kenderdine, Executive Director of the Maryland State Retirement and Pension System writes,
In their April 14 Local Opinions essay, “Maryland can learn from Michigan’s pension reform,” James Hohman and Carol Park failed to acknowledge that reforms enacted by the Maryland legislature — increasing employees’ contributions, reducing benefits and consistently contributing the full employer’s share — have produced results exceeding original projections. The writers stated that over the 10-year period ending in June 2017, Maryland earned just 4.2 percent, but they failed to mention that over the 10-year period ending Feb. 28, Maryland earned 9.83 percent.
Read the complete letter, Maryland’s pension plan is just fine.