How well each state funds its police and firefighters' pensions

In plain terms

How well funded are US police and fire plans?

Of the 70 largest US police and fire plans tracked here, the median holds 79% of what it has promised, and 21 are outside Social Security, so for those plans that pension carries more of the retirement load, though an individual's own Social Security from other work may differ. The weakest, New Orleans (LA) Firefighters, holds 18%. There is no single safe number: what a ratio means depends on the trend, whether the sponsor pays in full, and the return the plan assumes.

Are these pensions defined benefit or defined contribution?

Defined benefit. The plan promises a set cheque for life, worked out from a member's salary and years of service, and the government carries the investment risk. That is why the funded ratio matters: the plan owes a fixed promise, so whether it holds enough to cover that promise is the whole question. A defined-contribution plan, like a 401(k), just holds an account balance and has no funded ratio.

What is a “funded ratio”?

The money a pension holds, divided by what it has promised to pay. 100% means it holds every dollar it owes. 50% means it holds half, and is counting on future contributions and investment growth to make up the rest. There is no magic number: the widely quoted 80% 'healthy' line has been rejected by the actuarial profession as a test of soundness — the trend, the sponsor's contributions and the assumed return matter more than any single threshold.

Are all these figures from the same year?

Not exactly. Each plan reports on its own timetable, and audited figures arrive a year or so late, so the plans here span FY2022 to FY2025. We include a plan only if its latest figure is within about three years of the freshest. A funded ratio can move from one year to the next, sometimes sharply, so each plan's own year is shown in the table, and where two plans sit close together it is worth checking their years before reading much into the difference.

What does “no Social Security” mean for these plans?

Most US workers pay into Social Security and get a federal cheque for life. In the 1950s some states were allowed to keep their public workers out of it, running a state pension instead. Where this work is not covered, a public-safety worker pays no Social Security on it, so the state pension carries more of the retirement load. A given person may still have Social Security from other jobs, so an individual's own position can differ — this is a plan-level fact, not a personal one.

What is the “assumed return”, and why does it matter?

The investment return a plan assumes it will earn over the decades before it has to pay. Assume a high return and you can claim you need less money set aside today, which makes the plan look better funded now. So a plan that is “80% funded” on a 7.5% assumption is leaning harder on optimism than one that is 80% funded on 6.5%. It is the vertical axis on the chart above.