The Aftermath of Structural Pension Reform. Cheolsu Kim
under their DBSs are likely to grow as more civil servants move into retirement. Early studies indicated that costs could become alarmingly high before beginning to decline rapidly as the final cohorts of DBS retirees begin to die.
At the request of the government, the Asian Development Bank (ADB) agreed to assist a small group of states in estimating their DBS liabilities and in implementing their new defined contribution schemes.2 These states included Assam, Bihar, Chhattisgarh, Jharkhand, Kerala, and Madhya Pradesh.
ADB provided financial support for a small group of experts to advise the states on construction of databases required to project current DBS pension liabilities. After meeting with these experts, five of six states accepted ADB’s offer of assistance in developing two databases required for projecting annual DBS pension outlays over the next 25 years and beyond.3 One of the databases would contain data on each current civil servant covered under the state DBS. The second would contain information on current pensioners.
ADB also agreed to advise states on implementing their new defined contribution pension schemes. Implementing these schemes requires collecting and recording monthly contributions for each participant, matching employees with state contributions, and ultimately developing a system that can seamlessly pass electronic records of NPS contributions to a central records agency and transfer information on enrollees’ investment choices to pension fund managers.
Finally, ADB financed the development of models to project DBS outlays on an annual basis and to provide insight into potential tools for managing DBS costs. These also measured the impacts of various DBS reforms if these became necessary to avoid severe fiscal burdens during the period when DBSs would be phasing out.
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