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How Would GASB Proposals Affect State and Local Pension Reporting?


  • Alicia H. Munnell
  • Jean-Pierre Aubry
  • Josh Hurwitz
  • Laura Quinby


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.

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  • Alicia H. Munnell & Jean-Pierre Aubry & Josh Hurwitz & Laura Quinby, 2011. "How Would GASB Proposals Affect State and Local Pension Reporting?," Issues in Brief ibslp23, Center for Retirement Research, revised Nov 2011.
  • Handle: RePEc:crr:issbrf:ibslp23

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    1. Alan L. Gustman & Olivia S. Mitchell & Andrew A. Samwick & Thomas L. Steinmeier, "undated". "Pension and Social Security Wealth in the Health and Retirement Study," Pension Research Council Working Papers 97-3, Wharton School Pension Research Council, University of Pennsylvania.
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