How Bad Is the Pension Problem?

[See How to Lay the Groundwork for Retirement.]

On the bright side, a lot of states are being more proactive in modifying their benefits plans to be more fiscally realistic, Huh says, sometimes by asking employees to contribute more. "States are very aware that this is a bill they have to manage and they are trying very hard to do it," Huh says. "Even some of the worst-funded states are taking some actions to right the path they're on by increasing contributions and trying to raise capital, sometimes by borrowing."

While most experts agree that the majority of state pension programs aren't on the brink of collapse, many still face a host of near- and long-term economic and political challenges as state and local governments dig out of deep budget deficits and low tax receipts. The liabilities of pension plans have grown in recent years, according to the Center for Retirement Research at Boston College, and that pressure coupled with widespread budget state and local budget deficit issues has caused some policy makers to question to sustainability of public pension plans.

"The challenge is that over time, if that [pension] bill is unchecked, it grows," Huh says. "States really have to make an assessment whether or not they can afford this."

Twitter: @mmhandley

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