WASHINGTON — Amid widespread concern about the viability of public sector pension plans, the Municipal Securities Rulemaking Board is weighing whether it should help issuers disclose more about their pension plans and liabilities.
At its quarterly board meeting in San Diego last week, the MSRB was expected to consider whether it should provide a platform on its Electronic Municipal Market Access website, or EMMA, for additional public pension-related disclosures, according to people familiar with the matter.
The outcome of the self-regulator’s discussion about pensions will not be publicly discussed until Monday morning, when MSRB officials brief reporters on their three-day meeting. On Friday, board officials would only say that they are discussing important issues affecting the muni market and had no immediate plans to take action on pensions.
However, sources said the pension discussion stems from a roundtable with other regulators and congressional staff that the MSRB held on Jan. 21, in which the board’s staff asked participants to share their perspectives on the topic.
The participants included representatives from the Treasury Department, Labor Department, Securities and Exchange Commission, Governmental Accounting Standards Board and the Financial Industry Regulatory Authority.
Noting that the Dodd-Frank Wall Street Reform and Consumer Protection Act expanded the MSRB’s mandate to include the protection of municipal issuers — on top of its existing mandate to protect investors — staff asked participants to share suggestions for how it might protect issuers’ public pension plans and improve their transparency.
Staff also asked if the SEC’s enforcement actions in San Diego and in New Jersey over pension disclosure issues might be helpful in determining whether it should encourage issuers to make additional pension disclosures.
Currently, pension information is disclosed in bond offering documents as well as the footnotes to annual audited financial statements.
GASB is developing accounting standards that would require that the unfunded portion of a retirement plan be included in the financial statement and that it constitute a liability.
Any MSRB project would also appear to piggyback on the top initiative of the National Association of Bond Lawyers to develop model pension-fund disclosure for official statements.
Multiple market participants said it is a stretch for the board to argue that it has oversight of public pensions, and others worried that if issuance slips by half in 2011, the MSRB will not collect enough fees to afford an expansion of EMMA. Some also cautioned that voluntary initiatives are usually ineffective.
“It’s a wasted effort,” said Christopher “Kit” Taylor, the former executive director of the MSRB. “Typically no issuer wants to be found to have cooperated [with a regulator], if you will, so nothing gets filed.”
Tim Firestine, chief administrative officer for Montgomery County, Md., and a member of the Government Finance Officers Association’s debt committee, said GFOA has suggested to MSRB officials that they view the expansion of their mission only to mean that when they promulgate regulations for the muni market, they consider the needs and perspectives of issuers and ensure there is fair dealing with all industry participants.
“The committee does not feel as though it is appropriate nor that the MSRB has the authority to be involved with matters involving issuers, including public pensions, aside from their specific rule writing role for broker-dealers and financial advisers, but should take the considerations of municipal entities or issuers into account when developing these rules,” Firestine said.
