CHART OF THE DAY: Cities Use This Accounting Trick To Hide Massive Unfunded Pension Liabilities

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New research from Robert Novy-Marx and Joshua Rauh [PDF] projects a nearly 50% higher level of unfunded pension liabilities than most cities acknowledge.

Most cities use Entry Age Normal accounting, which assumes employees will retire at a normal age and not receive any increase in benefits.

A more accurate system is Present Value of Benefits accounting, which assumes employees will retire at a normal age after receiving typical salary and benefit increases.

Suddenly the pension crisis looks even more dire.

chart of the dat, pension system, oct 2010

Now check out the first 10 cities pensions that will run out of money >

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