Stern Program for Undergraduate Research

Closed On: 02-07-2014
Research ID: RS000072
Research Title: Pension Obligation Bonds
Description: Some public pension plans have issued debt in the amount of their unfunded pension obligations and deposited the proceeds in their pension funds. If the pension investments do well relative to the cost of debt, selling debt was worthwhile, ex post. If pension investments do relatively poorly, however, selling debt would have been a mistake. In either case, politicians can say that pension obligations have been funded, even though debt commitments have simply replaced pension commitments.
But do we want public pensions to issue bonds? If it works out, public worker benefits will be paid and perhaps increased. If it doesn't work out, however, taxpayers will have to make increased contributions to meet existing pension obligations.
This research project will i) collect data on the universe of large, public pension plans; ii) collect data on the issuance of pension obligation bonds; iii) collect data on rules governing the accounting and funding of public pension plans. With this data set, the project will try to answer the following 2 questions:
1) What rules encourage the issuance of pension bonds?
2) How should the rules be changed to protect taxpayers?
Relevant Areas of Study: Accounting
Finance
Statistics
Pre-requisites: Interest in public policy; experience with large data sets desirable.
Start Semester: Spring 2013
Credits Per Semester: 2.0
Faculty Member: Bruce Tuckman (btuckman@stern.nyu.edu)
Department Affilation: N/A
Contact: Bruce Tuckman (btuckman@stern.nyu.edu)
Expired On: 03-04-2013