Les Richmond is Vice President and Pension Actuary for Build America Mutual, where he evaluates approximately 500 municipal pension and OPEB plans and liabilities annually as part of BAM's credit underwriting process.
With economic uncertainty ahead and the Federal Reserve potentially shifting to interest-rate cuts, analysts should take a closer look at individual issuers' financial disclosures.
The demographics of the public-sector workforce are likely to change, even as many state and local governments consider increasing wages and improving other benefits to attract and retain employees.
Considering pension risks within the framework of municipal credit analysis is particularly important now, following a lengthy period in which the global economy experienced low interest rates and low inflation.
The next phase of pension risk analysis will be different and more challenging: Assessing the long-term impacts of individual jurisdictions’ choices in the context of their unique workforce demographics, benefits and salary structure, and pension funding status.