As reported in a new article for the Wall Street Journal, “Pension Gaps Loom Larger,” David Reilly notes that based on unrealistic return assumptions, the nation’s largest public employee pensions could face big shortfalls:

“Many of America’s largest pension funds are sticking to expectations of fat returns on their investments even after a decade of paltry gains, which could leave U.S. retirement plans facing an even deeper funding hole and taxpayers on the hook for huge additional contributions.

“The median expected investment return for more than 100 U.S. public pension plans surveyed by the National Association of State Retirement Administrators remains 8%, the same level as in 2001, the association says.

. . . .

“The rosy expectations persist despite the fact that the Dow Jones Industrial Average is back near the 10000 level it first breached in 1999. The 10-year Treasury note is yielding less than 3%, and inflation is running at only about 1%, making it tougher for plans to hit their return targets.

. . . .

“The concern is that the reluctance to plan for smaller gains will understate the scale of the potential time bomb facing America’s government and corporate pension plans.

. . . .

For the full article, please click here.