I read the August and most of the November working papers and plan additional blogs on several aspects of them that I found confusing, wrong, or insightful but for now, in bullet form, this is how I would present the authors’ thesis to laypeople:
- Valuing liabilities for public pension plans should be based on the benefits offered and not upon the assets expected to finance those benefits
- U.S. Treasury long-term bond rates are at about 2%
- Liabilities for public pension plans should be valued at about 2%
Of course most public plans are now costed in the 8% range so expecting to only get only 2% in trust earnings would explode liability values and contribution ‘requirements’ and a lot of yelling by politicians at their actuaries would ensue – hence the reluctance of anyone currently hired by a government entity to provide them with numbers to embrace this concept.