Magazine article Government Finance Review
Retirement and Benefits Administration in the Spotlight
A recent news article called public employee retirement systems "ticking time bombs for state and local budgets," citing chronic underfunding of defined benefit plans and the impending retirement of the baby boomers." Whether or not dour predictions like this one ultimately materialize remains to be seen, but one thing is certain: public employee pensions and benefits are receiving a lot of attention these days.
How much longer can public employers swallow double-digit annual increases in health care costs? Should public employee retirement systems convert from defined benefit programs to defined contribution, as several governors have recently proposed? What is the best strategy for funding OPEB liabilities in the wake of GASB 45? What caused the recent pension-related scandals in local government? These are just some of the questions being asked by the media, taxpayers, governments, and their employees.
This issue of Government Finance Review seeks to answer these questions. In our first article, Parry Young of Standard & Poor's weighs the various options for managing and funding the costs of other postemployment benefits now that these costs must be measured and reported on an accrual basis. He says implementation of the new OPEB reporting requirements will force governments to make some difficult policy decisions, including whether or not to fund OPEB and whether or not the existing benefit structure should be maintained. …