Wednesday, August 15, 2012

Zelinsky on Pension Underfunding via Interest Rate Assumptions

ZelEd Zelinsky (Cardozo) has just posted on OUP Blog Public Pensions’ unrealistic rate of return assumptions.  Here's the take-away:

The problem of underfunded public pensions cannot be solved until it is acknowledged. Unrealistically high rate of return assumptions, like those embraced by CalPERS and other public retirement plans, mask the magnitude of the underfunding of public pensions. The refusal to confront the problem of pension underfunding may help state officials to get re-elected by kicking the proverbial can past the next election, but the problem cannot be ignored indefinitely. The longer the problem of underfunded state pensions is ignored, the more difficult will be the ultimate adjustments required of state taxpayers and state employees.

Sure wish my 401k was earning even half of what these pension plans are assuming as rates of return.


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