The Case for Marking Public Plan Liabilities to Market

Jeremy Gold and Gordon Latter

in The Future of Public Employee Retirement Systems

Published in print August 2009 | ISBN: 9780199573349
Published online February 2010 | e-ISBN: 9780191721946 | DOI:
The Case for Marking Public Plan Liabilities to Market

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State and local US pension plans hold an estimated $3 trillion in assets, with market values regularly disclosed in plan financial statements. By contrast, public defined benefit pension liabilities are routinely reported at actuarial values that may differ substantially from market values. The authors propose that a more accurate way to value plan liabilities measures the present value of accrued benefits discounted at market interest rates for fixed income investments that are (or are nearly) default-free. They illustrate the difference between these measures for a set of public sector pensions using publicly available information.

Keywords: accrued pension benefits; accumulated benefit obligation; actuarial standards; actuarial valuation; actuarial accrued liability; mark-to-market liability; market value of liability; north ratio; projected benefit obligation; solvency liability

Chapter.  10982 words.  Illustrated.

Subjects: Public Management and Administration

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