Funded

• A fully funded state pension means that the government is actively making contributions to the pension plan. The pension is considered fully funded when contributions equal actuarial projections for contributions necessary to achieve the promised future benefits. The contributions, combined with the assumed or guaranteed interest rate factor, need to at least match the defined benefit payment on your pension plan statements.
  
  

Unfunded

• An unfunded pension plan is not being funded at adequate levels to pay future benefits. The state may make less than the full contribution required or no contribution at all. In the latter scenario, the state is relying entirely on future income for the state through taxes to fund your pension benefits. These benefits may not materialize if the state cannot collect enough revenue to pay your retirement benefits.
  
  

Effects

• A fully funded pension plan is the safest. It ensures that you are paid what you are promised by the state. Since all payments are made to meet actuarial projections, your pension is a true defined benefit plan. An unfunded pension plan might leave you with lower future pension payments. A worst case scenario would result in the state defaulting on its promised pension payments.
  
  

Consideration

• You should consider increasing your private savings if you live in a state which under-funds or offers a completely unfunded pension plan. Retirement plans like 403(b) plans are available to some government employees. Individual Retirement Accounts (IRAs) also allow you to save additional money for yourself. In this way, you become more self-reliant and will be better prepared if your state pension turns out to be less than you expected.