1. Pension Funding Proposal
Presentation to the
Senate Budget and Taxation Committee and House Appropriations Committee
February 2015

2. Origins of Pension Funding Components
Corridor funding method enacted in 2002 in response to Governor Parris N. Glendening underfunding required pension contribution
Supplemental contribution (reinvested savings) enacted in 2011 as part of comprehensive pension reform

3. Corridor Funding
Froze employer pension contribution rates for Teachers’ Combined Systems (TCS) and Employees’ Combined Systems (ECS) at fiscal 2002 levels as long as a system was at least 90% funded but not more than 110% funded
When systems dropped below 90% funding, set TCS/ECS contribution rates at the previous year’s rate plus 20% of the difference between that rate and the current year’s full actuarial rate

4. Corridor vs. Full Actuarial Funding
Fiscal
Source: State Retirement Agency, Department of Legislative Services

5. Supplemental Contribution
Benefit Sustainability Commission considered repealing the corridor method, but budgetary conditions did not support that
Commission recommended reinvesting a portion of the savings generated by pension reform to begin closing the corridor funding gap
$300 million was recommended (phased in over years) based on projection that it would enable funding level to reach 80% in 10 years

6. Role of Supplemental Contributions
Fiscal
Source: Department of Legislative Services

7. Effect of Paying Full Actuarial Contribution
Fiscal
($ in Millions)
2016
2017
2018
2019
2020
Corridor + Supplemental
$1,839
$1,942
$2,028
$2,068
$2,041
Actuarial Contribution
1,768
1,763
1,795
1,782
Total Savings
$71
$179
$233
$286
$258
General Fund Savings 60
151
196
241
217
Source: State Retirement Agency, Department of Legislative Services