GASB plans to hear testimony Wednesday from actuaries and others on possible changes to its pension accounting rules for public defined benefit plans, including re-examining the practice of discounting pension liabilities by the expected long-term return on investments or moving to a market-return approach, such as based on the risk-free Treasury securities, according to a GASB statement.
Segal Co., which released its comment letter to the public, supports continued use of the expected long-term investment return to value liabilities for public DB plans for “practical and theoretical” reasons.
Valuations based on expected long-term returns of a plan “improve the ability of employers to make decisions on the cost of both current benefits and plan improvements based on the expected contributions that, together with future investment earnings, will be required to fund the plan,” wrote Thomas D. Levy, Segal senior vice president and chief actuary, and Cathie Eitelberg, Segal senior vice president and national public-sector market director.
Market discount rates “are often volatile” and “would lead to taxpayers incurring widely varying costs from period to period for the same long-term benefit commitment,” they wrote.
The Governmental Accounting Standards Board makes available comment letters for viewing only at the organization’s office or through the purchase of a CD, said Christine L. Klimek, communications manager.
GASB, which has not yet taken a position, is seeking feedback on possible modifications to its existing public pension accounting standards, possibly toward developing an exposure draft of a proposed new accounting rule.
GASB has set no time frame for any possible change.