Public Sector Accounting and Budgeting

Public Sector Accounting and Budgeting

The role of value-based asset - liability management in reforming public sector pension plans

Document Type : Review Article

Authors
Mehdi Tolouei Moghadam 1
Behbood Mehrabi Kaly 2
1 Shahid Beheshti University, Tehran, Iran
2 M.A in Governmental Management, Central Tehran Branch, Islamic Azad University, Tehran, Iran
Abstract
Most public sector pension planes in different countries offer significant benefits. Long-term forecasts show that full payment of these benefits threatens many employers' financial resources, which means that either taxes should be increased or pensions or other public expenditures should be reduced. Sustainability of pension plans and their improvement for governments requires measures such as increasing participation and adjusting the investment strategy of pension funds. Since pension funds can be considered a zero-sum game, such interventions and actions add value to the redistribution between current and future plan participants as well as current and future taxpayers. For this purpose, the "value-based asset- liability management (ALM) method" can be used to estimate the value of these transfers. In this article, we will explore this method, using some of the pension planes implemented in the United States, and examine the application of this method in modifying planes. Estimates suggest that if the value-based ALM method is used, the financial stability of the pension fund will be largely guaranteed and the deficit will be avoided. In addition, pension funds will always have extra money to pay their obligations. 
Keywords
Value-based asset- liability management
Pension planes
Pension funds
Budget
Governmental Accounting Standards Board

Subjects

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  • Receive Date 16 June 2021
  • Revise Date 09 July 2021
  • Accept Date 23 July 2021