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Public Pension Reporting Rules to Change Dramatically

Pension funds will show bigger liabilities under new accounting and reporting

Financial reporting standards for public pensions in the United States are set to change dramatically following a recent vote from the Governmental Accounting Standards Board, according to Reuters.

For some states, shortfalls in pension reports will appear much larger under the new rules. There has been a considerable amount of confusion in recent years over the ways in which pension liabilities are calculated and the overall financial health of these programs. According to GASB Chairman Robert Attmore, the new standards will give "a clearer picture of the size and nature of the financial obligations to current and former employees for past services rendered."

One provision that is sure to impact pension reports is the elimination of the practice of "smoothing," or spreading risks and losses out over several years, according to the Financial Times. The new regulations would require state governments to report these losses annually. Pension funds are also currently allowed to discount liabilities by 8 percent to reflect projected investment growth, another practice that will end under the new rules. Going forward, funds will reassess their projections to reflect a 3 percent investment growth rate.