In the 2013 comprehensive revision of the National Income and Product Accounts, BEA introduced a new accrual treatment of defined benefit pension plans based on actuarial estimates of liabilities and normal costs. Accrual accounting is the preferred method for compiling national accounts because it matches incomes earned from production with the corresponding output and records both in the same period. The recording of pension plan transactions on an accrual basis better aligns pension-related compensation with the timing of when employees earn the future retirement benefits. This paper describes the methodology for estimating defined benefit pension liabilities and normal costs for state and local governments and presents estimates by state for 2000-2011.
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