The New York Times reports on the New York City pension fund.

Ms. Stark said that she was sure of the pension funds’ health because the city was contributing responsibly to them every year, and because she was confident that the investments in the funds would meet their targets of 8 percent average annual returns over the long haul. Many other public plans have investments targets in this range…

Asked why the pension funds appeared to be fully funded back in 1999, when they were swollen with gains from the stock market boom, and still appear to be almost fully funded now — after losing billions of dollars in the stock market and granting billions of dollars worth of new benefits — she said that the numbers were “smoothed” to avoid short-term fluctuations. She also noted that the city had been increasing its annual contributions in recent years.

If you assume 8 percent annual returns, many things are possible. Until the actual returns come in.

Defined-benefit pension plans, in which the pension provider bears all of the risk of a shortfall in returns relative to expectations, are not viable. They are disappearing from the private sector. The only way that they remain in the public sector is through accounting chicanery.