This paper analyzes the risk-taking incentives of U.S. pension funds and examines how such incentives shape their asset allocation. Defined-benefit pension funds facing asset-liability mismatch have competing incentives when choosing how much risk to carry with their portfolios. Both public and private funds may engage in risk management to avoid costly financial distress, yet they may also exhibit risk shifting behavior due to limited liability. This paper highlights how a major difference in accounting standards related to discount rate can encourage public funds to invest more in risky assets than their private counterparts when their funding status deteriorates. Consistent with this discount rate channel, empirical evidence suggests that, while risk management incentives dominate for private funds, public funds have much stronger incentives to shift risk.