WASHINGTON — Market participants are split over public pension-disclosure guidance floated earlier this year by a bond lawyers’ group, with analysts saying they need more information about a plan’s future funding status and issuers and pension experts balking at providing speculative information about future liabilities.
These opposing views have emerged in comments and interviews after the National Association of Bond Lawyers sought input on a draft of its 13-page pension disclosure guidance, entitled “Considerations in Preparing Defined Benefit Pension Plan Disclosure in Official Statements.” At a meeting here last month, NABL asked participants to provide input on the draft by July 25.
As of Tuesday, six groups had submitted comment letters: the National Federation of Municipal Analysts; the Investment Company Institute; the National Association of State Auditors, Comptrollers and Treasurers; the National Association of Public Pension Attorneys; the National Association of State Retirement Administrators; and the National Council on Teacher Retirement. The last two groups submitted a joint letter, signed by their presidents, Michael Williamson of NASRA and Ronnie Jung of NCTR.
In their four-page letter, dated July 19, 2001, NASRA and the NCTR told NABL’s board of directors: “We are hopeful that such a voluntary, collaborative industry effort can help provide a better appreciation of pension financing and a reasonable approach to achieving the appropriate level of related disclosures in issuers’ official statements.”
Still, the groups wrote, governmental plans already prepare and disseminate significant information in their required financial disclosures and public pension plans are unique — certain information in one plan’s financial statements may not be available in another.
In particular, the letter from NASRA and the NCTR said, the NABL project should not require plans to disclose information about a plan’s prospective funding status unless such data is available and prepared by the plan’s actuary.
“We would hope that the [NABL] task force would resist calls to require projections, whether of the [annual required contribution], funded status or other result,” NASRA and the NCTR wrote. “We do believe that a description of the funding program is a very important part of an accurate analysis of a defined-benefit plan, but that a projection can be misleading unless subject to the appropriate caveats.”
As currently drafted, NABL’s guidance says governments should provide, “if available,” a 10-year table with the prospective funding status of each public pension plan, based on actuarial projections.
An issuer who participated in the NABL meeting by phone last month echoed this concern. Ben Watkins, Florida’s director of bond finance, said he supports disclosing already-available information about public-sector pensions, but would be reluctant to generate new information, such as projections about a plan’s future annual required contributions, or ARCs.
“I’m not in the business of speculating,” Watkins said.
Analysts, however, said projections about a plan’s future liabilities would be helpful in shedding light on possible credit risks and boosting transparency.
“I think it’s an issue of getting at the right balance,” said Joseph Rosenblum, a senior vice president and head of municipal credit research at AllianceBernstein LP in New York, who represented ICI at the NABL meeting last month.
In an interview, Rosenblum said he personally believes that a five- to 10-year projection of a plan’s prospective funding status would be useful.
“Anything beyond that opens itself up to being too loose,” he said.
NABL, meanwhile, said it will weigh the comments before circulating another draft and reconvening the various groups in Washington on Aug. 24.
“We knew going into this there would be some areas we would be developing further,” said Kenneth Artin, a partner at Bryant Miller Olive in Orlando, who heads NABL’s pension-disclosure task force.
In addition to the NFMA, NAPPA, NASACT, NASRA, the NCTR, and ICI, the entities participating in the NABL project are: the American Institute of Certified Public Accountants, Bond Dealers of America, the Governmental Accounting Standards Board, the Government Finance Officers Association, the National Association of State Treasurers, the Securities Industry and Financial Markets Association, and the Conference of Consulting Actuaries.
