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Moody’s Issues Final Comment on Adjustments to U.S. State and Local Government Reported Pension Data

In its final comment on Adjustments to U.S. State and Local Government Reported Pension Data, Moody’s Investor Service announced that it will proceed with four principal adjustments to as-reported pension plan data. As expected, the final comment did not change significantly from Moody’s original proposal. The GFOA, in its comment letter to Moody’s in September 2012, expressed opposition to all four adjustments.

 
Moody’s adjustments will be applied accordingly:
  • Multiple-employer cost-sharing plan liabilities will be allocated to specific government employers based on proportionate shares of total plan contributions.
  • Accrued actuarial liabilities will be adjusted based on a high-grade long-term taxable bond index discount rate as of the date of valuation.
  • Asset smoothing will be replaced with reported market or fair value as of the actuarial reporting date.
  • The resulting adjusted net pension liability (i.e. adjusted liabilities less assets) will be amortized over 20 years using a level-dollar method to create a measure of annual burden related to the net pension liability.