Commentary

Governance & Decision-Making in Underfunding of Public Sector Pension Plans

Cities and states throughout our country are struggling to meet the financial demands of skyrocketing public employee pension contributions. Forward-looking projections of contribution rates reveal little to no relief for many years to come. And while this crisis has prompted government agencies at all levels to call for reform of the public pension systems, the question remains – will these proposed reforms fix the problem?

Recent research suggests that investment returns played only a minor role in the current underfunding and that behavioral issues might be more significant than previously thought. Reforms may want to look at the roots of structural governance issues in the traditional make-up of pension boards that approve the assumptions that are used to create their forecasts.

To read more commentary on the impact of pension boards in investment projections and funding decisions, go here.

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