Question

when governmental entities provide defined benefit pension plans to governmental employees, a pension trust fund is used by the governmental entity that is acting as a trustee on behalf of current and future retirees to manage the funds at the "plan" level. The pension trust fund reports liabilities on its Statement of Fiduciary Net Position that primarily are related to pension benefits currently due to retired employees. The statement does not report a long-term liability for an unfunded portion, if any, of pension obligations. Do you think this is misleading? What, if anything, should be done differently at the "plan" level to provide readers with greater transparency regarding long-term funding of pension obligations?

Answer 1

It should not be considered as misleading, because it is the government entity, backed by the government that is patronizing the funds and liabilities discloses net position of pension benefits, due to the pensioners. So, it is disclosing the information that is most important for the pensioners. The information regarding the long term liabilities for an unfunded portion is not mentioned, because it is backed by the government  resources and it is not mandatory to disclose it to the people. If it is done, then it can create anxiety, chaos among people. To prevent it, it shows the information that is important, mandatory and required for the people who are affected by it.

Though, measures can be taken to bring more transparency. It can be done by the disclosures of the information in another note, with information of potential sources to fund the unfunded portion of the pension obligations. It will make people know the future sources of funding that can be used to make pensions continue and calm their nerves. Other people also know the sources and its impact upon them. At the same time, the government will be more conscious to organize resources, used to fund it.