The determination of whether a pension is underfunded is based on actuarial studies that, by necessity, must make assumptions about both the longevity of retire

The determination of whether a pension is underfunded is based on actuarial studies that, by necessity, must make assumptions about both the longevity of retirees (and survivors) and the return on invested funds. A fund which is fully funded under a 6% return assumption which then takes a 20% hit to its assets due to a sudden market downturn then becomes underfunded, and the sponsoring entity is required to make catch-up contributions. There is no difference between the public and private sectors in this regard. However, as stated by the author, the pension beneficiaries of a public system have much more powerful tools to force their interests to come first in the event of underfunding than do private pension beneficiaries. There have also been cases of manipulation of the actuarial numbers, including a case in New York or New Jersey (can't remember which) where the actuary doing the pension study was also a paid consultant for the public sector unions. Not surprisingly, he concluded that significant benefit increases could be managed at the current funding level.