Making Sense of Pension Liability Measurement Using Organizational Psychology

Abstract

For decades pension actuaries and accountants have calculated the funding necessary to secure pension obligations—and have done so in a manner that systematically underestimates the funding required to make such obligations secure. This mismeasurement is a significant contributing factor to today’s funding crises among state, municipal, and Taft-Hartley pension funds. Economists have long known of this problem, and have attempted to increase awareness and encourage action to address the problem. But they mostly have been ignored, and sometimes demonized, by those who control how these calculations are done. Using the lens of organizational psychology, this article strives to understand how this could be.