A Comprehensive Review of the Evolution of Accounting Standards for State and Local Government Pension and Other Post-Employment Benefits in the United States

In recent years, both the business media and the popular press have emphasized the underfunding problems associated with pension funds that are set aside for state and local government workers, a group that also usually includes teachers and professors at state-affiliated colleges and universities. The realization that pension funds are typically underfunded stems from the fact that the accounting standards associated with state and local government employee pension funds have led to greater transparency since 2011. This paper examines, explains, and interprets the historical development over the last 70 years of accounting standards for state and local government pension funds in the United States. Pension accounting is controversial, partially because the issues are complex and because plan sponsors, as preparers, have not always agreed upon disclosure details, nor have they always welcomed transparency. Also, changing accounting standards, along with economic and social change, have led to consequences such as employers transforming their pension programs to avoid substantial costs and significant liabilities, for example by changing from defined benefit to defined contribution plans. Further, in recent years, the media have emphasized liability underfunding problems associated with defined benefit pension plans. The realization that such pension sums are often underfunded can be related to the changing accounting principles associated with pensions, thus increasing attention to such standards