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Simulating Utah State Pension Reform

Brigham Young University Macroeconomics and Computational Laboratory Working Paper Series No. 2012-01

29 Pages Posted: 14 Apr 2012 Last revised: 23 Aug 2012

Richard W. Evans

University of Chicago, Becker Friedman Institute and M.A. Program in Computational Social Science

Kerk Phillips

Brigham Young University - Department of Economics

Date Written: April 1, 2012

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.

Keywords: Pension reform, Numerical simulation, Simulation modeling, State pensions, Utah

JEL Classification: C63, C68, E37

Suggested Citation

Evans, Richard W. and Phillips, Kerk, Simulating Utah State Pension Reform (April 1, 2012). Brigham Young University Macroeconomics and Computational Laboratory Working Paper Series No. 2012-01. Available at SSRN: https://ssrn.com/abstract=2039492 or http://dx.doi.org/10.2139/ssrn.2039492

Richard Evans

University of Chicago, Becker Friedman Institute and M.A. Program in Computational Social Science ( email )

Chicago, IL 60637
United States

HOME PAGE: http://https://sites.google.com/site/rickecon/

Kerk Phillips (Contact Author)

Brigham Young University - Department of Economics ( email )

166 Faculty Office Bldg.
Provo, UT 84602-2363
United States
801-422-5928 (Phone)

HOME PAGE: http://sites.google.com/site/kerkphillips

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