Pension Obligation Bonds: Financial Crisis Exposes Risks (Brief Number 9 in State and Local Pension Plans Series ed.)

Munnell, A., Calabrese, T., Monk, A., Aubry, J.-P
Center for Retirement Research at Boston College

The brief’s key findings are:

  • Some state and local governments issue Pension Obligation Bonds (POBs) to raise cash to cover their required pension contributions.
  • POBs allow governments to avoid increasing taxes in bad times and could reduce pension costs, but they pose considerable risks.
  • Those who issue POBs are often fiscally stressed and not well-positioned to handle the investment risk.
Wagner Faculty