Organizations oppose proposed federal accounting rules for pension plans
A group of nine state and local government organizations, including the Washington-based International City/County Management Association (ICMA), are up in arms over proposed federal legislation that would mandate federal reporting requirements on state and local governments regarding their pension costs. The groups say the Public Employee Pension Transparency Act (PEPTA) sets a precedent for federal intervention into areas that are the financial responsibility of the states, cities and counties, and that local reforms are already under way that make the legislation unnecessary.
U.S. Rep. Devin Nunes, R-Calif., one of three sponsors for PEPTA, say the legislation is necessary because, under current reporting rules, public pension plans can hide the true size of their debt by using unreasonably high discount rates and, in some cases, they also distort fair market value of assets to hide debt. The legislation would also prohibit any federal bailout of public employee pension plans. “The plans themselves admit to more than a $1 trillion in unfunded liabilities,” Nunes said in a statement. “Unfortunately, the true level of unfunded liabilities associated with these plans — perhaps more than $3 trillion — is being hidden thanks to unrealistic accounting standards.”
However, ICMA and the other opposing groups say the legislation represents a fundamental lack of understanding regarding the strong accounting rules and strict legal constraints already in place for public employee pension plans. They also say the legislation is unwarranted, as state and local governments are not seeking a so‐called federal “bailout” for their retirement systems. “On the contrary, for the last several years, state and local government employers, employees, retirees and taxpayer organizations have been forging meaningful changes to their systems that will improve and enhance pension sustainability over the long term,” says a statement from the groups.
Along with ICMA, the coalition of opposing groups include the Washington-based National Association of Counties, U.S. Conference of Mayors and National League of Cities; along with the Lexington, Ky.-based National Association of State Auditors Comptrollers and Treasurers; the Chicago-based Government Finance Officers Association; the Alexandria, Va.-based International Personnel Management Association for Human Resources; the Sacramento, Calif.-based National Council on Teacher Retirement; and the Baton Rouge, La.-based National Association of State Retirement Administrators.