“If you are not investing assets in a manner to achieve a long-term rate, you generally are not going to earn a long-term rate,” said Scott Reeser, project manager for GASB.

Under GASB’s overhaul, governments calculating pension costs for the period after the depletion date must use lower assumed rates of return. Instead of projected annual earnings of about 8 percent, as is typical for many systems, they have to use a return based on 20-year general-obligation bonds rated at least AA, the third-highest level, said Reeser. The bonds yielded 3.19 percent as of Dec. 12, Moody’s Investors Service data show.

“That rate is generally lower than most governments use as a long-term expected rate of return,” Reeser said. “The lower the discount rate used, the higher the liability.”

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