What is an example of an underfunded liability at the federal level?

An example of an underfunded liability at the federal level is pension funds. Pension funds represent a commitment by the government to provide retirement benefits to its employees, and they can become underfunded when the assets set aside to meet these future obligations are insufficient to cover the promised benefits. This situation often arises due to a combination of factors, including actuarial assumptions that may not align with actual investment returns, demographic changes, and legislative decisions that impact contributions to the fund.

Underfunded pension liabilities are significant because they pose a risk to the financial stability of governmental entities, necessitating that governments allocate resources to address these obligations. This is particularly relevant for federal and state governments that have large public employee pension systems that are typically backed by taxpayer dollars.

In contrast, bond offerings, capital assets, and revenue bonds do not fall under the same category of liabilities. While they do represent financial elements within a government's portfolio, they do not directly relate to funding obligations for retirement or pension plans. Thus, pension funds distinctly illustrate the concept of underfunded liabilities in a governmental context.