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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.

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