Key Takeaways
- U.S. state governments reduce pension stress when they share contribution volatility risk because the budgetary impact of poor returns doesn’t fall solely on the sponsor.
- Sharing risk can offset some negative credit views of high return assumptions because it limits associated market volatility.
- Affordability through risk sharing features often leads to improved funded ratios.
- We examine five U.S. states–Oregon, South Dakota, Tennessee, Utah, and Wisconsin–to show how this risk-sharing practice can benefit them.
21 Apr, 2021