Group Offers Guidelines for Public Pension Disclosure Obligations

May 18, 2012 ( – 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.

The guidelines were established by a Pension Disclosure Task Force (PDTF), which included members of NABL, and representatives of issuers, underwriters, analysts, institutional investors, accountants, actuaries and other interested parties.  

In 2010, the Securities and Exchange Commission (SEC) charged the State of New Jersey with securities fraud, saying it did not provide adequate and full disclosures to its bondholders (see “Running the Fund: Jersey Sure?”).  

Since then, the SEC has also investigated disclosures in Illinois (see “SEC Probing Illinois Pension Accounting and Disclosures”) and Rhode Island (see “SEC Looking into RI Bond Transactions”).  

The PDTF recommends issuers, their counsel and other members of the financing team give due attention its list of considerations in making the determinations as to what disclosure and reasonable investigation is appropriate in a particular instance.    

The document is here.