Little known to most people is that the government does contribute to pension plans and schemes. In most countries like the United States, the pensions are given through what is referred to as a defined benefit plan (Financial Services Department, 2015). Under this type of plan, a retired worker (government worker in this case) keeps receiving a certain amount of pay monthly which is predetermined in regards to the years they have worked within the government institution, the salary amount upon retirement, and the accrual rate. For government employees, the government is the primary employer and is thus the one that manages the issuing of pensions (Financial Services Department, 2015).
Despite having to spend governmental money on these payments, pensions are not included in the government’s wide-ranging statements (Financial Services Department, 2015). The pensions are covered in a fund known as the fiduciary fund which also includes agency funds. The reason for this non-inclusion policy is because fiduciary funds account for resources that are exclusively non-governmental.
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State and local governments are expected to report pension liabilities on the annual or monthly basis (Financial Services Department, 2015). These liabilities are covered under the pension funds as well as trust funds. This way, the government is able to account for their financial activities and expenditures.
The Comprehensive Annual Financial Report (CAFR) does indicate the actuarial value that is in relation to plan assets and liabilities (Financial Services Department, 2015). In most cases, the plans are overfunded given that the government has more assets than liabilities. This makes it possible for the funding of future retirement plans by employees.
Reference
Financial Services Department. (2015). City of Garland Texas: comprehensive annual financial report for the fiscal year ended September 30, 2015 . Garland, Texas: City Council of the City of Garland.
