The 2,600 [American state and local government] pension plans provide retirement savings for 22m public employees in towns and cities across the US, and range in size from the giant Calpers, with $120bn (€91bn, £81bn) in assets, to tiny small town funds which pay pensions for local garbage collectors and police.
State pension benefits are protected by law, and must be paid even if the fund is making a loss. Calpers, the largest fund, has lost $70bn in value in the past eight months, but still has to pay $11bn in benefits this year. Unless the fund starts recouping its losses soon, the California state government, which is already mired in a huge deficit, will have to lift contributions to Calpers starting from next year.
The FT goes on to note that US pension plans are in worse shape than those in Europe.
This is because American pension funds are more underfunded. That gets back to policy decisions made over the years. Couple that with the worst economic downturn in decades, and policy makers are left with tough choices: cut benefits, increase the size of contributions, or merge plans.
Places with pension funds that are less than 50 percent funded include Philadelphia, West Virginia, Pittsburg, Providence, Little Rock, Jersey City, Wilmington, Deleware, and Atlanta.