Dear Actuary: Pension obligation bonds—An attractive solution for communities with pension funding gaps

This white paper serves as a primer for officials at municipalities. It covers the basics of pension obligation bonds (POBs) and their use to fund asset-liability gaps faced by many communities. It walks the reader through terms used in pension fund management, and presents two hypothetical examples to show how overall debt servicing costs for a city could decrease since by using POBs, which would replace the funding gap for a pension with low-interest debt. The paper also makes the point how actuaries can help model thousands of scenarios to gauge risk when deciding whether to issue POBs.