BEST PRACTICES: Disclosures of Pension Funding Obligations in Official Statements Flashcards
Issuers should implement appropriate procedures when determining the level of information that needs to be disclosed about their pension funding obligations relative to their financial position.
What principle guides the content of disclosure in an Official Statement (OS)?
Materiality is the guiding principle.
How should pension obligation disclosure be considered in an OS?
In the context of the issuer’s overall financial resources.
What may dictate the amount of pension plan disclosure in the OS?
The type of pension plan used by a government, with DB plans likely requiring more extensive disclosures.
What is the main focus of pension disclosure in an OS according to NABL guidance?
How pension obligations could affect the issuer’s ability to make bond payments and affect creditworthiness.
What factors should be considered when preparing pension disclosure for an OS?
Size of obligations relative to budget, funding status of the pension plan, trends, and revenue sources for pension obligations and debt service payments.
What should issuers do when determining the level of pension funding disclosure needed?
Implement appropriate procedures and address key questions with the assistance of legal counsel and financing team.
What questions should issuers address to determine the appropriate level of pension funding disclosure?
Dependency of debt service and pension plan funding on the same revenue, materiality of pension funding to budgets, budget stress due to pension obligations, legal restrictions on pension funding, and trends or issues related to pension funding.
What should issuers consult if extensive pension funding disclosures may be required?
Consult the NABL guidance, especially Appendix D.
Where can additional disclosures about pension funding obligations be sourced from?
Annual comprehensive financial reports, budgets, other public reports, actuarial reports, laws affecting pension funding, and information from the pension plan.
