- Assumed Rate of Return
- Myth: The Assumed Rate of Return Determines the Value of Your Benefits
- Quick Recap: Normal Cost
- Unfunded Liabilities
- Amortization Payments
- Funded Ratios
- Myth: It Is Okay For a Pension Plan to Target Less than 100% Funding
- Actuarially Determined Contribution (ADC)
- Myth: More Teachers are Needed to Ensure Pension Debt Gets Paid Off
- Myth: Pension Funds Don't Need to Contribute the Full ADC
- Quick Recap: Unfunded Liabilities
- Governance: Who is in Charge of Pension Funds?
- States Running Healthy Teacher Pensions
Myth: Pension Funds Don't Need to Contribute the Full ADC
Fact: It is best practice for governments that sponsor a pension system to ensure 100% of the actuarially determined contribution is made each year.
When a pension system accrues debt, the cost of that debt is factored into the overall costs of the system going forward. If governments continue to underfund pensions, the overall costs continue to rise.
The only way out of debt is to pay it. Attempts to mask the amount of underfunding, or avoid paying for those liabilities in the short term, only threaten the financial health of the system in the long term. A major key to a healthy pension system is making the full actuarially determined contribution each year. When a system does accumulate debt, it should pay that debt off as quickly as possible.