We have written previously about the dilemma facing advisors whotry to help clients integrate public-sector defined benefitpension promises into retirement income planning.

Related: What is a DB pension reallyworth?

The simple, logical approach is to assume that 100 percent ofpromised pension benefits will be paid on schedule. Yet, thefunding of many public-sector plans is so rickety that thisapproach can leave your clients stranded later in retirement with less income than theyexpect or need.

We’ve suggested that one solution is to help clients decide whatpart of their pension benefits – from 100 percent down to perhaps70 percent – they want to illustrate as reliable, given fundingrealities of their specific plans.

But how do clients make such a decision?

A new free online analytical tool created by the StanfordInstitute for Economic Policy Research can be helpful. CalledPensionTracker, it contains realistic data that relates directly tothe fiscal health of public pension systems of each state.

Pension Tracker includes a new metric, called Market PensionDebt, which is long overdue in evaluating the soundness ofpublic-sector pensions.

Unlike private pensions, which are required to estimate theirfuture liabilities using a conservative discount rate, publicpensions can choose any discount rate they believe investments canearn. Choosing 7.5 percent is typical, says Stanford Institute.

But the higher the discount rate, the lower the present value offuture liabilities. Stanford calls the calculation of totalpresent-value pension liabilities, using each state’s chosendiscount rate, Actuarial Pension Debt.

In calculating Market Pension Debt, Stanford Institute assumes adiscount rate equal to 20-year Treasury yields rounded to thenearest one-quarter percentage point – currently 2.2 percent. Thisis not only much more conservative than Actuarial Pension Debt butalso more in line with discount rates of private-sectorpensions.

Then, Stanford expresses the financial health of public pensionsystems using several metrics including Pension Debt Per Householdand Funded Ratios, expressed on both an Actuarial and Market basis.(The funded ratio is the market value of plan assets divided by thepresent value of future liabilities.)

On an Actuarial basis, the present-value pension liabilities ofall U.S. public pension programs combined total $1.04 trillion, or$8,872 per U.S. household.

But using the more conservative Market basis, totalpresent-value pension debt balloons to $4.83 trillion, $41,219 perhousehold. Using aggressive discount rates makes all U.S.public-sector pension liabilities appear to be only 22 percent ofwhat they would be with a conservative rate!

On a Market basis, the funded ratios of a few states are inbasket-case territory. They include Illinois (23.3%), Connecticut(25.5%), and Kentucky (29.8%). As an indication of what a shamblespublic-sector pension funding has become overall, only nine stateshave Market-basis funded ratios above 50 percent.

Using Public Tracker to discuss Market-basis pension debt perhousehold and funded ratios for your state will be an eye-openerfor clients who participate in public pension plans. They will beless likely to believe 100 percent of the promises, and perhapsmore likely to plan prudently for a realistic retirement incomethat won’t disappoint in the long run.

To help clients drill-down into details of their own specificpublic pension plans, you can use the Public Plans Databaseof the Center for Retirement Research at Boston College.