Industry News
S&P Global Ratings Assesses Pension Risk Sharing for State Governments
On April 21, 2021, S&P Global Ratings published its report, Pension Spotlight: Risk Sharing Dilutes Pension Burden for Five States. In the report, S&P Global Ratings assesses pension risk sharing for state governments by examining five states’ plan designs in Oregon, South Dakota, Tennessee, Utah and Wisconsin.
The selected states have defined benefit plans that contain unique contribution volatility risk-sharing features. S&P Global Ratings studied how these features may affect credit analysis within each state.
According to the report, “State governments reduce pension stress when they share contribution volatility risk because the budgetary impact of poor returns doesn’t fall solely on the sponsor. Sharing risk can offset some negative credit views of high return assumptions because it limits associated market volatility. Affordability through risk sharing features often leads to improved funded ratios.”
The report is available here.