This article aims to present a concise view of the theoretical and mathematical concepts in measuring the stochastic liabilities of a pension benefits portfolio in the Brazilian Public Sector Pension System. This work discloses the basic logic formulations required to estimate the benefits reserves and to test the economic e financial solvency of a pension plan, in order to improve the understanding of the entire process by those working in that system. Those formulations are in accordance with the legal rules governing the system and with current pension actuarial theory and practice, and mainly include: i) the projection of future cashflows of contributions, benefits and expenses and ii) the estimation of the Actuarial Present Values of stochastic rights and liabilities. Using such formulations, this study also includes the aggregate results of five municipal benefit plans analyzed by the authors, which reveal an important distortion in the capital accumulation process, as a result of poor management, with improper contributions and investments to fund all accrued benefits.
Public Sector Retirement; Public Sector Social Security System; Benefit Liabilities; Actuarial and Financial Equilibrium
