May 18, 2012 (PLANSPONSOR.com) – The National Association of Bond Lawyers (NABL) has published guidelines for state and local government disclosure obligations when offering bonds to the market.
The document notes the overall point of the disclosure of pension funding obligations is to indicate whether the state or local government will likely struggle in meeting such obligations without making difficult financial decisions. One of those decisions may be related to the payment of debt service on bonds. Thus, in circumstances when an issuer’s pension funding obligations are expected to cause financial strain, being clear and plain about this point to investors is very important.
According to the document, plans should disclose two principal types of information: (a) the current financial information about the plan’s assets and financial activities, and (b) the actuarially determined liabilities of the employers that provide benefits through the plan, including information about the funded status of the benefits provided through the plan, the history of its funded status and the plan's progress on accumulating assets to pay benefits when due. “Pension funding obligation disclosure is not ‘one size fits all’ and the story of one issuer will be different from other issuers,” the guidelines say. The guidelines list documentation and key questions that are important to an analysis of what disclosure about an issuer’s pension funding obligations may be required in a particular instance.