Publications

Center for
Retirement Research
at Boston College
Hovey House
140 Commonwealth
Chestnut Hill
MA 02467-3808

617-552-1762 TEL
617-552-0191 FAX
crr@bc.edu

Briefs

Briefs offer concise and insightful analyses of topical issues.

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How Would GASB Proposals Affect State and Local Pension Reporting?

by Alicia H. Munnell, Jean-Pierre Aubry, Josh Hurwitz, and Laura Quinby

November 2011

SLP#23

Introduction

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...

For full brief

Alicia H. Munnell is the director of the Center for Retirement Research at Boston College (CRR) and the Peter F. Drucker Professor of Management Sciences at Boston College’s Carroll School of Management. Jean-Pierre Aubry is the assistant director of state and local research at the CRR. Josh Hurwitz and Laura Quinby are research associates at the CRR.

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