SALT LAKE CITY — Don't look for the legalization of recreational marijuana or establishing a city-run casino as ways to bail out a pension fund in Utah — unlike what Chicago Mayor Rahm Emmanuel proposed to plug $28 billion in pension plan debt in his city.
Pot, gambling and poorly run government pension funds just aren't a thing in Utah, where the Utah Retirement System for school teachers, police officers, firefighters and other government workers earned a 13.6 percent rate of return in 2017.
Chicago's lame-duck mayor proposed those solutions in December to fix the cash-strapped pension fund before he leaves office next May and his successor faces ballooning pension payments.
Utah's pension plan, with assets of $31.9 billion, ranks No. 8 in the country and its liabilities for future retirees are funded at 86 percent.
Some of the country's most pitiful pension plans hover in a funded ratio of just 30 percent.
Kentucky lawmakers convened an emergency legislative session this month to grapple with a $43 billion pension hole there, and California's Supreme Court heard arguments in early December challenging a reduction in pension plan benefits.
New Jersey, which is also grappling with $40 billion in pension debt, is also considering the legalization of marijuana to address its fiscal woes.
"The overall condition of public pension plans is in a wide range. There are some that are in bad condition and some that are in very good condition. There are more that are good than are bad," said Keith Brainard, research director with the National Association of State Retirement Administrators.
A defined benefit pension plan is a perk for government employees who often sacrifice higher salaries during the career for a job they love, such as teaching, policing or being a firefighter.
Jerry Silva, with South Salt Lake Police Department, will retire next July after 23 years on the job.
When the stock market tanked in 2008, he worried about his pension.
"When it crashed, everybody was concerned, everybody was worried," he said. "Since then, it has bounced back."
Silva, who works in the crime prevention unit and oversees the department's athletic league, got into law enforcement when officers could retire after 20 years and draw half their pay.
Since reforms instituted in 2010, police officers and firefighters who hire on after July 2011 must wait 25 years to retire, and then they get a reduced benefit.
Brainard said Utah also uniquely — the only state in the nation — adopted a two-tier program that gives employees the option of having a pension and 401(k) or 401(k) only with a employer contribution of 10 percent of their pay or 12 percent of pay if they are in the public safety system.
Utah, Brainard added, is unique, too, in that it has a noncontributory system in which employees are not required to pay into their own retirement.
Changes to the Utah plan came at a time when multiple pension plan reforms were going on around the country, Brainard said.
Lawmakers also put new restrictions on so-called "double dipping" or post-retirement income, making those who retire wait at least a year after retirement before they can go back to work for a local or state government entity.
Silva said that change puts people like him in a bind.
He got a job offer from the University of Utah Police Department, where he would continue to get health insurance benefits, but the year's wait put that plan on hold.
"Pretty much all the changes we have seen in the last 10 years have been benefit reductions," Brainard said, as pension plans seek to meet their funding obligations long term.
Pension plans get in trouble because the government doesn't pay its required contributions.
In Chicago, leaders there diverted money from the pension plan for teachers and spent it on education.
New Jersey had a law on the books requiring the state make a full contribution.
"But the legislature just blew off its own statute," Brainard said.
Utah has that same statutory requirement, but follows it, Brainard noted.
"Utah is one of those states that has always faithfully made its full contribution, which is one of the reasons Utah is in a good actuarial position," he said.
Utah also has a conservative rate of return for its investment goal of 6.95 percent rather than the median assumption of 7.5 percent.
"We’ve avoided pitfalls and problems potentially experienced by other public pension funds by carefully managing the risk of the investment portfolio and setting a realistic and comparatively low assumed rate of return," said Daniel Andersen, executive director of the Utah State Retirement System.22 comments on this story
"Counting on aggressive future investment earnings means you don’t have to collect as much money now from participating employers to pay for their workers’ pensions," he added. "This might sometimes be tempting and politically convenient in the short term, but it can eventually cause funding shortfalls if a pension fund doesn’t meet its aggressive earnings projections."
The fund paid out $1.7 billion in pension payments last year.
Correction: An earlier version and accompanying graphic incorrectly reported the net value of Utah pension fund's assets as $5.8 billion. The value is actually $31.9 billion. The $5.8 billion is the value of the fund's savings plan it administers.