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The Future of Public Employee Retirement Systems$
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Olivia S. Mitchell and Gary Anderson

Print publication date: 2009

Print ISBN-13: 9780199573349

Published to Oxford Scholarship Online: February 2010

DOI: 10.1093/acprof:oso/9780199573349.001.0001

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The Case for Marking Public Plan Liabilities to Market

The Case for Marking Public Plan Liabilities to Market

Chapter:
(p.29) Chapter 3 The Case for Marking Public Plan Liabilities to Market
Source:
The Future of Public Employee Retirement Systems
Author(s):

Jeremy Gold

Gordon Latter

Publisher:
Oxford University Press
DOI:10.1093/acprof:oso/9780199573349.003.0003

State and local US pension plans hold an estimated $3 trillion in assets, with market values regularly disclosed in plan financial statements. By contrast, public defined benefit pension liabilities are routinely reported at actuarial values that may differ substantially from market values. The authors propose that a more accurate way to value plan liabilities measures the present value of accrued benefits discounted at market interest rates for fixed income investments that are (or are nearly) default-free. They illustrate the difference between these measures for a set of public sector pensions using publicly available information.

Keywords:   accrued pension benefits, accumulated benefit obligation, actuarial standards, actuarial valuation, actuarial accrued liability, mark-to-market liability, market value of liability, north ratio, projected benefit obligation, solvency liability

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