Pension Funding Guide: A Guide for Local Officials

Source: National Governors Association (NGA), National Conference of State Legislatures (NCSL), The Council of State Governments (CSG), National Association of Counties (NACo), National League of Cities (NLC) The U.S. Conference of Mayors (USCM), International City/County Management Association (ICMA), National Council on Teacher Retirement (NCTR), National Association of State Auditors, Comptrollers and Treasurers (NASACT), Government Finance Officers Association (GFOA), National Association of State Retirement Administrators (NASRA), March 2013

…In addition to GASB’s new accounting standards, policymakers should be aware that rating agencies such as Moody’s may use yet another set of criteria to assess the impact of pension obligations on the creditworthiness of a municipal bond issuer. If the ratings agencies publicize their pension calculations, state and local officials would be faced with the challenge of interpreting three sets of pension numbers: an accounting number to comply with the GASB’s financial reporting requirements, an actuarial calculation to determine funding requirements for budgeting purposes, and a financial analysis figure produced by bond rating agencies to evaluate and compare issuers of municipal debt. …

…This guide provides key facts about public pension plans, why it is essential to have a pension funding policy, a brief overview of the new GASB standards, and which issues state and local officials need to address. The guide also offers guidance for policy makers to use when developing their pension plan’s funding policy….