Comments on: How ratings agencies will approach pension liabilities Bridges, budgets, bonds Mon, 24 Nov 2014 00:29:08 +0000 hourly 1 By: DanKaplan Thu, 01 Aug 2013 23:11:00 +0000 Too much has been written about how to measure pension liabilities and too little on what matters to employees, retirees and taxpayers: the adequacy of existing asset and contribution levels to fund current and expected benefits. GASB is the first to admit that their accounting rules are not intended to address these questions.

Instead of debating how to measure liabilities, let’s analyze 1) what level of contributions is needed over a 30-year career to provide a sufficiently high probability that assets accumulated at the time of retirement will be sufficient to fund pension benefits and 2) what level of additional contributions is needed to fund expected payments to retirees, given current asset levels and the expected volatility of asset returns.

We have stress tests for our banks, why not for our pension funds?