Public plans: Using risk profiles to manage funding

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By Joshua Davis, Karen Steffen, Scott F. Porter | 01 May 2009

Funding policies for public pension plans have traditionally focused on managing payment obligations while also recognizing the long-term nature of retirement system benefit promises. However, to cope with today’s increasing potential for market volatility, plan funding strategies and actuarial models must also manage a plan’s investment risk profile. This paper discusses two alternative funding policies designed to align plan portfolio risks with liabilities and maturity.