Why your state’s public pension plan is in a much bigger hole than you already fear
by Ed Bartholomew and Jeremy Gold
U.S. state and local employee pension plans are in trouble — and much of it is because of flaws in the actuarial science used to manage their finances. Making it worse, standard actuarial practice masks the true extent of the problem by ignoring the best financial science — which shows the plans are even more underfunded than taxpayers and plan beneficiaries have been told.
The bad news is we are facing a gap of $6 trillion in benefits already earned and not yet paid for, several times more than the official tally.
Pension actuaries estimate the cost, accumulating liabilities and required funding for pension plans based on longevity and numerous other factors that will affect benefit payments owed decades into the future.