How Would GASB Proposals Affect State and Local Pension Reporting?

22 Pages Posted: 27 Aug 2013

See all articles by Alicia H. Munnell

Alicia H. Munnell

Boston College - Center for Retirement Research

Jean-Pierre Aubry

Boston College - Center for Retirement Research

Joshua Hurwitz

Boston College - Center for Retirement Research

Laura Quinby

Boston College - Center for Retirement Research

Date Written: June 2012

Abstract

States and localities account for pensions in their financial statements according to standards laid out by the Governmental Accounting Standards Board (GASB). Under these standards, state and local plans generally follow an actuarial model and discount their liabilities by the long-term yield on the assets held in the pension fund, roughly 8 percent. Most econo­mists contend that the discount rate should reflect the risk associated with the liabilities and, given that benefits are guaranteed under most state laws, the appropriate discount factor is closer to the riskless rate. The point is not that liabilities should be larger or smaller, but rather that the discount rate should reflect the nature of the liabilities; the characteristics of the assets backing the liabilities are irrelevant.

Suggested Citation

Munnell, Alicia and Aubry, Jean-Pierre and Hurwitz, Joshua and Quinby, Laura, How Would GASB Proposals Affect State and Local Pension Reporting? (June 2012). Available at SSRN: https://ssrn.com/abstract=2316838 or http://dx.doi.org/10.2139/ssrn.2316838

Alicia Munnell (Contact Author)

Boston College - Center for Retirement Research ( email )

Fulton Hall 550
Chestnut Hill, MA 02467
United States
617-552-1762 (Phone)

Jean-Pierre Aubry

Boston College - Center for Retirement Research ( email )

Fulton Hall 550
Chestnut Hill, MA 02467
United States

Joshua Hurwitz

Boston College - Center for Retirement Research ( email )

Boston, MA
United States

Laura Quinby

Boston College - Center for Retirement Research ( email )

140 Commonwealth Avenue
Boston, MA 02467
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
115
Abstract Views
649
rank
242,520
PlumX Metrics