Double (Accounting) Standards: A Comparison Of Public And Private Sector Defined Benefit Pension Plans

Abstract

We examine and compare funding status, actuarial assumptions and asset investment allocations of defined benefit pension plans in the public and private sectors across time, using information as reported under GASB and FASB. We find that pension plans in both sectors are underfunded and that inferences about pension funding in the public sector would be different if pension assets' fair values were required in the computation of funding status. Actuarial assumptions of public employee plans appear to be both more optimistic and less variable than those of private sector plans. Finally, we document that public sector plans allocate invested assets somewhat differently than in the private sector, although our findings do not confirm anecdotal reports of riskier pension investment strategies relative to the private sector.

Citation

Easterday, K.E. and Eaton, T.V. (2012), "Double (Accounting) Standards: A Comparison Of Public And Private Sector Defined Benefit Pension Plans", Journal of Public Budgeting, Accounting & Financial Management, Vol. 24 No. 2, pp. 278-312. https://doi.org/10.1108/JPBAFM-24-02-2012-B005