Question: How fast can things go from good to bad for a Texas pension plan?
Answer: Fairly quickly.
Less than 20 years ago, the City of Austin Employees’ Retirement System (COAERS) was actually overfunded, according to a new TPPF report Evaluating Solutions for Austin’s Billion Dollar Pension Crisis. Today, the fund is nowhere near as healthy.
In 2016, COAERS estimated its funded ratio to be 64 percent while its unfunded liability totaled $1.3 billion. Applying more realistic actuarial assumptions suggests that the real funded ratio is closer to 50 percent while its unfunded liability could actually be as high as $2.4 billion.
Under whichever set of actuarial assumptions, it’s clear that COAERS is overpromised and underfunded. Significant structural changes are needed soon to protect retiree and taxpayers alike. These changes are especially important in light of how quickly things can go from good to bad.