Funding the Future for Pension Payouts

Pensions are common among public employees, including beloved teachers, nurses and firefighters, and function as a tax-free retirement account. In many cases, the employee, employer and government make regular contributions to a pension, which is paid out in monthly increments upon the employees’ retirement.

Pension payouts have become a significant challenge for governments to manage. More often than not, the amount set aside by government agencies does not mirror the actual amount owed to retirees. The discrepancies in funds allocated vs. owed are referred to as “unfunded liabilities” and last year the amount of state public pension unfunded liabilities increased 433 billion dollars, bringing the total amount to an all-time high of six trillion dollars.

In 2017, state public pension unfunded liabilities increased 433 billion dollars, bringing the total amount to an all-time high of six trillion dollars.

As the financial implications of this “unfunded liabilities” crisis continues to grow, it threatens to derail society’s connective tissue as both government workers and civilians begin to question and distrust the system.

It was the issue of unfunded liabilities that sparked an interest for Jasmine Nachtigall-Fournier, while serving as Development Director at California Common Sense, a non-profit dedicated to opening government to the public. In a serendipitous moment, Nachtigall-Fournier was introduced to Ted Price who shared her passion for understanding and improving the process for pension payouts and other post-employment benefits (OPEB). As they rolled up their sleeves to uncover why this was happening, Price and Nachtigall-Fournier founded GovInvest in 2014 to provide a solution.

“During my time at California Common Sense the issue of unfunded liabilities came up a lot. To hear that the bucket for pension payouts was underfunded by trillions of dollars really stuck with me,” recalls Nachtigall-Fournier, co-founder and president of GovInvest. “Ted and I met with several city finance directors  to discuss the antiquated process of actuarial analysis and specific pain points. From there we started mapping out a blueprint for modernizing pension and OPEB operations.”

Why is it such a big problem?

The GovInvest co-founders soon realized how difficult it is to navigate the actuarial reports that are used to predict how much money should be set aside annually for retiree benefit payouts. On top of that, city council members and finance directors are tasked with making these difficult and complex decisions about pension payouts outside of their day-to-day roles. While some government agencies hire expensive actuarial consulting firms to analyze the confusing spreadsheets of data, others make decisions in the dark. Price and Nachtigall-Fournier knew there had to be a better way to interpret and manage these reports that would ultimately lead to cost savings and the improved daily lives of the deserving retired government workers.

The GovInvest co-founders soon realized how difficult it is to navigate the actuary reports that are used to predict how much money should be set aside annually for retiree benefit payouts.

And so, the GovInvest software platform was born. The software solution provides visuals and digestible analysis of the valuation reports that contain hundreds of convoluted assumptions and mathematical equations. GovInvest’s platform also enables real-time sensitivity analysis to evaluate employee raises, medical and dental payout benefit modifications and more.

Since Jasmine and Ted’s initial meetings with government finance directors in 2014, demand for GovInvest’s suite of solutions has grown tremendously. In less than four years the Govtech Fund portfolio company has signed more than 200 government agencies to its roster of customers – including most recently, the state of California and major cities of Seattle and Portland. The team attributes this success to their superior product, passion for a solution and standout industry presence.

In less than four years the Govtech Fund portfolio company has signed more than 200 government agencies to its roster of customers – including most recently, the state of California and major cities including Seattle and Portland.

“It has been a pleasure working with GovInvest over the last couple of years,” said Tracey Hause, previous finance director of Temple City. “Not only is their modeling software for future retirement and OPEB costs extremely helpful and user friendly, the other services they provide such as the actuarial studies have been excellent.  I look forward to continue working with GovInvest to help tell the story of our financial future.”