A new study by the Center For Retirement Research at Boston University attempts to project the impact on unfunded liabilities in public pension plans if the Governmental Accounting Standards Board, or GASB, goes through with a series of proposed reforms to how funds should value their assets and their liabilities. The study suggests that funded ratios of public pension funds collectively would fall sharply, from about 77 percent to just 53 percent,based on 2010 figures. But that's not the most interesting news in the report.
Using the stricter standards for discounting a plan's future liabilities that GASB proposes, the authors of the study also look at how fast pension plans are being depleted and what the projected 'run out' date of many plans would be under the new standards. It's hair-raising. About one-fifth of plans would be in danger of running out of money in the next 25 years, including some awfully big ones.
The BU study is not meant to alarm anyone. The authors say their purpose is to prepare the media and taxpayers for a sharp change in funding ratios should GASB go through with its recommendations that public pension funds use more conservative estimates of their projected investment returns. But to those who think the current actuarial standards that pension funds are using are too risky, the BU study confirms their fears.
The BU study is not meant to alarm anyone. The authors say their purpose is to prepare the media and taxpayers for a sharp change in funding ratios should GASB go through with its recommendations that public pension funds use more conservative estimates of their projected investment returns. But to those who think the current actuarial standards that pension funds are using are too risky, the BU study confirms their fears.
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