Summary: Pension obligations owed to current D.C. employees and retirees exceed the District's pension fund assets by nearly $5 billion. Further, the percentage of pension obligations covered by assets is lower than that reported by most of the comparable plans GAO examined. This inadequate funding results primarily from the federal government's transferring a $2 billion unfunded liability for pension benefits to the D.C. government more than a decade ago. There is no legal requirement to amortize this unfunded liability. Mandated federal and District contributions to the retirement funds, through 2004, will not stop the unfunded liability from increasing. It will reach an estimated $7.7 billion by that year. Under the D.C. Retirement Reform Act, the unfunded liability will never be eliminated, although the formula for determining District contributions will change beginning in 2005 and the liability should stop increasing, assuming the District makes the required contributions. In 2005, under the changed formula, the District's annual contribution could represent about 15 percent of the revenue collected by the District, compared with about eight percent in 1991.
