Simulating Utah State Pension Reform
Richard W. Evans
Brigham Young University
Brigham Young University - Department of Economics
April 1, 2012
Brigham Young University Macroeconomics and Computational Laboratory Working Paper Series No. 2012-01
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.
Number of Pages in PDF File: 29
Keywords: Pension reform, Numerical simulation, Simulation modeling, State pensions, Utah
JEL Classification: C63, C68, E37
Date posted: April 14, 2012 ; Last revised: August 23, 2012
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