Tags: unfunded | pension | liability | govt

Unfunded Federal Pension Liabilities Head Skyward

By    |   Friday, 22 Feb 2013 07:55 AM

The unfunded liability of federal pensions have skyrocketed to more than $750 billion in the most recent accounting year available, according to an annual government report obtained by the Federal Times.

The unfunded liability hit $761.5 billion in fiscal 2011 — an increase of $139 billion from the year before, The Times reported.

The Times extracted the information from the Office of Personnel Management (OPM)’s Civil Service Retirement and Disability Fund annual report for 2012, which it received upon request to the OPM.

Editor's Note: How You Lost $85,000 During the Last Decade. See the Numbers.

Sen. Tom Coburn, R-Okla., said the report raises questions regarding how the U.S. government intends to pay for government worker retirements.

“It is clear Congress should take action to ensure federal employee retirement costs are not being funded at the expense of the taxpayers or by simply borrowing more money,” Coburn said.

“Moreover, we must conduct proper oversight of OPM to ensure proper accounting standards are being used to project future costs and liabilities.”

OPM maintained the jump in unfunded liability was caused largely by a revision in its actuarial assumptions, the Times reported. The agency acknowledged the 24 percent increase in federal retirements in 2011 also had some effect.

Federal employees are required to contribute 0.8 percent of their paychecks toward their pensions, and the government covers the rest. President Barack Obama recently proposed increasing the employee contribution to 1.2 percent.

The government is not alone in facing unfunded pension problems.

Actuarial consulting firm Milliman estimated the 100 largest defined-benefit corporate pension plans were underfunded by $453 billion at the end of September, 2012, a 30 percent increase from a year earlier, The Wall Street Journal reported.

State and local pension systems also face bleak prospects in many areas.

For instance, in Illinois, five state pensions are in the red by a $97 billion, or more than $20,000 for every household in the state, according to Reuters. Rating agencies have downgraded the state’s credit rating, and there are fears of service cuts, tax increases and other hardships for the residents.

California and Ohio are two other states with troublesome large state pension liabilities.

Editor's Note: How You Lost $85,000 During the Last Decade. See the Numbers.

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The unfunded liability of federal pensions have skyrocketed to more than $750 billion in the most recent accounting year available, according to an annual government report obtained by the Federal Times.
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Friday, 22 Feb 2013 07:55 AM
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