According to a Reuter’s news report, David Bean said the board will release an exposure draft on the possible requirements in June. Governments would have to make more thorough annual Cost of Living Adjustments calculations along with presenting employees’ projected salary increases. “Where the fistfights occur is with the discount rate,” Bean said about returns on pension funds’ investments, which affect how well a government can cover those liabilities, Reuters reported.
The board would require governments to disclose their long-term expected rate of return on plan investments as determined by actuaries. “This is the actual expected rate of return as recommended by the actuaries,” he said, according to Reuters. “We’re going to make very clear this is not a number that is pulled out of the air. This is based on solid science.”
The federal standards board wants to “draw back the curtain” and provide more information about how return rates are derived, Bean said.
Republican members of the House of Representatives would like public pensions to forecast a lower rate of return, around 4% which they consider “riskless.” Some have introduced legislation that would bar a state from selling tax-exempt bonds if they did not lower the return to what is considered a riskless forecast.