This article appeared online at TheNewAmerican.com on Monday, March 27, 2017:
The looming state and municipal pension plan crisis, estimated by Moody’s at $1.75 trillion just a few months ago, has now been adjusted upward to $1.9 trillion. But that number, according to Bloomberg’s Danielle DiMartino Booth, greatly underestimates the level of underfunding. It’s more like $6 trillion “if the prevailing yields on Treasuries were used.”
Instead, most state and local pension plans use a much higher, more generous, and more deceptive assumed rate of return of between six and seven percent, with some still clinging to a “castles in the sky” eight percent. Those assumptions greatly reduce the pressure on plan sponsors to make proper contributions to fund those plans.
And, according to the investment firm GMO (Grantham, Mayo & van Otterloo),