Pension Tsunami Looming? Calpers On Hotseat Over Two Sets Of Books

A simmering controversy in the world of public pension accounting centers on Calpers, the California Public Employees’ Retirement System, the largest public pension fund in the nation. An article in the New York Times looks at what happened when a participating member, a small pension fund for a group of pest control workers, wanted to convert to a 401-k. That process involves paying Calpers off with a calculated “market value” of the pension account, a number that reflects the estimated cost of making good on its obligations to future retirees. It turns out the market value is different and far higher than the “actuarial value” that Calpers and other big pension funds nationwide provide to participants and the public. This double-take on the condition of the books has been the subject of heated controversy in professional actuary associations, and some see it as the harbinger of a pension train wreck in the works as more and more baby boomers retire. The issue may extend to the municipal bond markets, because their ratings are in part a function of the purported strength of the relevant pension funds.