Fed Accounting Change Boosts Unfunded Pension Obligations

(Bloomberg) -- In case you missed it, the Federal Reserve’s quarterly Financial Accounts report last week included a change to accounting for state and local pension-fund programs. The central bank revised its data for unfunded liabilities, applying a “projected benefit obligation” method instead of the prior “accumulated benefit obligation” approach. With the change increasing unfunded obligations by $2.3 trillion -- more than double the previous total -- “the Fed dropped a bomb,” according to Stephanie Pomboy of researcher MacroMavens LLC, who says states will eventually need to cut spending or raise taxes to compensate.

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