US. Public Pensions Adopt Cost Sharing Mechanisms to Stem Volatility

In spring 2016, Sandy Matheson, the executive director of the Maine Public Employees Retirement System, was panicking. After earning 2 percent the previous fiscal year, record low bond yields and global stock market turmoil were dragging the pension’s returns even lower -- and further away from its 6.9 percent assumed annual return. She modeled government pension payments under a scenario where investments returned 4 percent a year for four years and then 6.9 percent thereafter. The result: government contributions would increase...