NEW rules by the Governmental Accounting Standards Board could have a significant impact on the reporting of state pension obligations, including those in Oklahoma. The rules, which would take effect in 2013, change how states report pension assets and liabilities, likely increasing the latter.
State pensions discount liabilities based on assumed long-term yields on assets, typically assuming an 8 percent yield. That number has exceeded market performance in recent years, potentially disguising the severity of state shortfalls. It's also lower than the discount rates used in the corporate world.
One of the biggest changes in GASB's rules would force underfunded plans to use a lower discount rate. Oklahoma would likely be among those affected.
Based on 2010 figures, the Center for Retirement Research at Boston College estimates the Oklahoma Teachers Retirement System's funding status would fall from 47.9 percent funded to 41.8 percent under the new rules.
The Boston College researchers also estimate the Oklahoma Public Employees Retirement System's funded status would fall from 66 percent to 60 percent.
Experts typically agree pension funds should be able to cover 80 percent of long-term obligations to be considered financially sound.
The accounting changes come hot on the heels of a report by the Pew Center on the States, which ranked Oklahoma's pension systems the sixth-worst funded in the nation based on 2010 figures.
The Boston College and Pew figures paint a darker picture of Oklahoma's pension status than may be warranted because they don't take into account recent reforms. In the 2011 legislative session, lawmakers approved measures that shaved $5.5 billion from Oklahoma's unfunded liabilities, reducing that total to $10.6 billion.
The combination of a reduced unfunded liability and asset growth improved the integrated ratio of Oklahoma state pensions from 56 percent to 67 percent.