The Focus On The ROA Has Lead Us Astray

Regular readers of the KCS blog know that we believe that the pension accounting rules (GASB  and to a lesser extent, FASB) have created many of the issues facing Pension America today, especially for public pension plans given their focus on the ROA as the discount rate for plan liabilities.

Instead of having to listen to us once more on this subject, I am sharing with you today the thoughts expressed by Ron Ryan, Ryan ALM, who is one of the most thought provoking investment professionals and pension experts in our industry.  The following link is to a presentation that he will be delivering to the Florida Public Pension Trustees Association (FPPTA).

http://kampconsultingsolutions.com/images/ROAPENSIONCRISIS.pdf

I encourage you to review this material, as it will give you great insight into why the focus on returns (ROA) has lead to a massive mismatch between a plan’s assets and their liabilities, and why in this low return environment, it is leading to huge increases in contribution rates.

Please don’t hesitate to reach out to either KCS or Ryan ALM with any questions and / or comments.

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