Cathy Jensen retired from the state of Utah twice — once in 2010 after 33 years as a teacher and principal, and again in 2023 after about 14 years working for the Utah State Office of Education.
“The first several months was really, really hard. I didn’t like it at all,” she said of retirement. “I loved my work and had a hard time finding fulfillment.”
Working with Utah Retirement Systems, however, has been easy — and she said a group of retired teachers she now hikes with twice weekly feel similarly.
“They think it’s so seamless, well-run, they never make mistakes,” she said. “It’s been really good.”
But how does Jensen’s experience relate to how Utah Retirement Systems is operating now? And what kind of experiences can Utah’s public employees expect in the future?
How Utah’s retirement benefits stack up next to other states
According to Keith Brainard, the research director for the National Association of State Retirement Administrators, Utah Retirement Systems is “better funded than most.”
The most common way to measure a public pension plan’s overall health is what’s called its “actuarial funding ratio,” he said.
That ratio is calculated by dividing a plan’s assets by its liabilities. Brainard explained that most plans use their actuarial value in the calculation, which takes into account investment gains and losses over several years.
“The URS funding ratio is well above average compared to other public pension plans around the United States,” he said.
Nationally, he said, those ratios usually sit at around 75-76%. In Utah, it’s currently about 95%, putting the state in the top 10% of funding levels for public pension plans nationwide.
Brian Holland, the communications manager for Utah Retirement Systems, mentioned that while anything under 100% could seem problematic, “that’s not necessarily the case.”
“Not everyone will retire tomorrow,” he said. “While URS is on an anticipated path to reach our goal of 100% funding status soon, pension liability is a long-term liability, like a mortgage. Much of that liability will be paid with future investment earnings.”
He said Utah Retirement Systems is on track to achieve its 100% funding-status goal. Still, Brainard said an actuary ratio alone doesn’t determine the entire health of a pension plan.
A lot of it comes down to the fiscal condition of the plan sponsor, he said. In the case of URS, that’s the state of Utah and its employers — towns, school districts, counties and other entities.
If, he explained, a plan was funded at 50% — “which is not a good funding level” — but the sponsor is financially solid, with revenues expected to keep incoming, the sponsor could be able to pay down the unfunded portion and provide benefits.
On the other side of that coin, a pension plan may have a high actuarial ratio, but if employers that need to pay contributions are in bad financial shape, it could become difficult for them to face the ongoing costs of the plan.
“You’ve got to eliminate the unfunded liability, of course, but you also have to pay for the cost of benefits being accrued each year,” Brainard said. “Employers have to keep up with it, and so that is why there’s no clear answer as to what is a funding level that could be considered sound or solid. The answer is it just depends.”
If the cost of the plan causes fiscal distress, that’s when Brainard said he starts to see an issue.
But while state and local governments throughout the nation typically spend just over 5% on pension benefits, he said Utah spends 3.6%, a cost low enough that it likely won’t cause significant financial stress.
“You’re able to say, overall, it’s a pretty healthy system,” he said. “It’s doing pretty well.”
And, according to Holland, Utah Retirement Systems operates with a long-term view in mind.
In rough economic years, he said, some states will take a “contribution holiday” — where employers aren’t required to pay their contributions.
“Utah has never done this,” Holland noted. “At URS, our participating employers share our long-term perspective and value careful funding today for the sake of a healthy, sustainable pension fund tomorrow.”
How employer contributions have changed
(Trent Nelson | The Salt Lake Tribune) The Utah Capitol in Salt Lake City on Monday, Jan. 13, 2025. State lawmakers in 2010 made changes to limit the total amount of retirement costs that public employers pay.
In 2010, state lawmakers changed Utah Retirement Systems to limit the total amount of retirement costs that public employers pay.
Any employees hired during or after July 2011 were given a “Tier 2″ retirement program that limits employers’ required retirement contributions to 10% of employee salaries, or 12% of firefighter or public safety worker salaries.
Since then, lawmakers have raised firefighter and public safety employers’ caps to 14% and authorized employers to pay more.
Each year, Utah Retirement Systems’ pension contribution rate also changes based on several factors, including projected returns and cost assumptions. If it is less than 10% — or 14% for firefighters and public safety workers — employers pay the difference as a 401(k) contribution to “Tier 2″ employees.
If the determined contribution rate rises above the 10% or 14% employer cap, employees must pay the rest themselves.
For several years, the contribution rate has been above 14% for firefighters and public safety workers, and in 2024-25, it rose above 10% for other public employees.
The 2011 change also increased the number of years public employees must work to reach their full benefits and lessened the amount of potential cost of living allowances, among other changes.
Even with the change, however, one thing remained consistent: 65-year-old employees with at least four years of service don’t face any allowance reductions when retiring.
“Tier 2″ employees also have the option to forgo a state pension plan and have their employers contribute the 10% or 14% to a 401(k).
“Eligibility requirements didn’t change, but the benefits did. Tier 2 benefits are not quite as rich as Tier 1 benefits,” Holland said.
He explained that the changes helped Utah Retirement Systems secure a solid footing among successful public pension plans in the country and that, even though it doesn’t match what the “Tier 1″ plan offered, “[i]t’s still an outstanding benefit, especially compared to other state pension systems across the country.”
Brainard said Utah’s “Tier 2″ system pension plan is pretty unique. He said it’s normal for other states’ public pension plans to require employees to contribute 4-8%.
How state pensions help fuel Utah’s economy
Holland pointed out that pension payouts don’t only impact the retired employees they go to, but also “keep Utah’s economy buzzing, supporting thousands of jobs and significantly boosting the tax base.”
In 2021, for instance, when URS paid out over $1.8 billion to almost 68,000 Utahns, the Kem C. Gardner Policy Institute found that people spending those pension benefits “supported an estimated 9,400 jobs and over $450 million in 2021 job earnings.”
“Spending of a portion of Utah pension benefits on goods and services in the state in 2021 created positive impacts on the state and local economies,” the study states.
The study also found that payments to Utah retirees made up over 1.1% of the state’s total personal income.
In 2024, Holland said, URS paid out more than $2.15 billion to more than 70,000 Utahns.
“For perspective,” Holland said, “this is larger than the earnings paid by many entire industries in Utah, including motor vehicle and parts dealers, truck transportation, and repair and maintenance.”
What the future holds
Since the 2020 COVID-19 pandemic, Holland said Utah’s public employees are receiving “rapid salary growth.”
“We’re happy to see public employees in Utah, such as teachers, firefighters and police officers, get the higher salaries that most people agree they deserve,” he said. “However, because salary is a key component in calculating the size of pension benefits, these unexpectedly large salary increases mean URS needs more money to pay future benefits.”
Projected salary, he said, is one of many variables Utah Retirement Systems monitors. If needed, he said the system can “adjust our projected assumptions and costs accordingly.”
And, though Utah continues to rapidly grow, Brainard said “growth is a good thing.”
“If you’ve got a state that is growing, like Utah is, then you have a strong tax base,” he said. “It is that tax base which is accessible to eliminate your unfunded liability. We’re not really worried about the benefits being accrued each year. We can manage that cost.”
He said the potential challenges that URS does face — challenges he said any pension plan could face — will be the long-term state of the U.S. economy and market performance.
According to Holland, URS has had a 7.58% annual rate of return over the past 20 years, which exceeded its assumed rate of return.
“The URS pension system is not just sustainable but thriving,” he said.
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