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Simulating Utah State Pension Reform

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Author Info

  • Richard W. Evans

    ()
    (Department of Economics, Brigham Young University)

  • Kerk L. Phillips

    ()
    (Department of Economics, Brigham Young University)

Abstract

In 2008, the Utah Retirement System experienced a negative return of almost 25 percent on its portfolio. This resulted in an underfunding of the pension system. In 2010 the Utah legislature reformed state pension participation, placing all new employees hired after mid-2011 in a new hybrid pension system. Employees hired prior to July 2011 continue to participate in the previous defined benefits program. This paper models and simulates the effects of Utah's pension reform on the balance in the defined benefits fund. In our baseline simulations, we find that the recent reform has extended fund solvency, but not eliminated the threat. Our simulations show that there is at least a ten percent chance of pension fund insolvency sometime in the next two decades.

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File URL: http://economics.byu.edu/Documents/Macro%20Lab/Working%20Paper%20Series/BYUMCL2012-01.pdf
File Function: First version, 2012
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Bibliographic Info

Paper provided by Brigham Young University, Department of Economics, BYU Macroeconomics and Computational Laboratory in its series BYU Macroeconomics and Computational Laboratory Working Paper Series with number 2012-01.

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Length: 28 pages
Date of creation: Apr 2012
Date of revision:
Handle: RePEc:byu:byumcl:201201

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Postal: 130 Faculty Office Building, P.O. Box 22363, Brigham Young University, Provo, Utah 84602
Phone: (801) 422-2859
Fax: (801) 422-0194
Web page: https://economics.byu.edu/Pages/MacroLab/Home.aspx
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Keywords: Pension reform; Numerical simulation; Simulation modeling; State pensions; Utah;

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