The Math of 158 and 45

Over the last few years the Financial Accounting Standards Board (158) and the Government Accounting Standards Board have issued rules which require their charges to account for the future value of defined benefit pension systems. Both rules have created some grumpiness but a new article in the Atlantic gives a good perspective of the scale of the problem in each sector. The FASB rules cover some 34 million workers and are about $10 billion out of whack. Part of that problem is related to the declines in the financial markets. The private sector's response to the problem has been to restructure their pensions so that more workers are covered by defined contribution plans (the company then shares no risk on pensions) and by funding their liabilities. A corporate board on which I serve has done a series of moves to assure that their pensions are in compliance with the 158 requirements. It is a moving target, but the board has grappled with the issue.

The article points out that the problem on the GASB side could reach north of $1 trillion covering employees that number something a bit more than 22 million. To give you an idea of scope that means that the GASB covered employers are facing a problem that is 154 times larger than the FASB employers. There is one other difference. If the FASB people screw up there is something called the Pension Benefit Guaranty Corporation, which is tasked with protection those pensions. The equivalent of the PBGC is the taxpayer. Is that what they call one of those "public private partnership?"