Public Pensions and State and Local Budgets: Can Contribution Rate Cyclicality Be Better Managed?

Pension fund contribution rate volatility has challenged state and local government defined benefit plan sponsors over time. Methods to contain volatility have been used for years but recent experience has placed greater urgency on the search for better solutions. This chapter examines the historical approach to bring stability to employer rates as well as some of the current thinking on the issues. Because both asset and liability changes can affect volatility, governments are looking at both sides of the balance sheet for relief.