New Jersey needs minimum funding rules


At the last Enrolled Actuaries meeting there was a session on public plans where the suggestion was made that pension actuaries in New Jersey should get more involved and speak out.  I disagreed and recommended an ERISA-type law for public plans.  Here’s how that played out:

Apparently most public plan actuaries do not feel there is a need for outside funding rules for governmental plans.  They may have a point.  Federal oversight of private-sector plans has not eliminated defaults or stemmed deficits.

However, what those rules have done is create benchmarks.  No plan sponsor would be able to trick the public into believing that the funding problem is really an investment-return issue or that pathetically weak ‘reforms’ affecting only new-hires will solve anything.  Those states that do make their required contributions will look better to participants, taxpayers, and bondbuyers while the New Jerseys will be exposed (to more than only pension actuaries).

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5 responses to this post.

  1. Posted by skip3house on May 10, 2011 at 5:31 pm

    NJ has been ‘exposed.’ So what? Thinking by NJEA group interviewing me, as a NJ Senate cand. in 2001, responded to shortage concern then,’Better we have an underfunded promise than nothing.’

    Reply

  2. Good point John, but all an ERISA-style insurance program would do is give them a safety net they would abuse, the way many companies have. Though, some big companies have been pumping cash into their pension funds as the best long-term investment they can make for stockholders, including institutional investors who pay attention to the books. Misinformed taxpayers don’t pay attention until it’s too late. The only solution is to require honest accounting by states and municipalities that goes way beyond the toothless GASB requirements. Pew at least put an allusion to the real numbers inside it’s latest “Gap” report. Unfortunately, nobody got past the press release.

    http://www.franklincenterhq.org/2375/pew-state-pension-retirement-crisis-update-shows-3-trillion-sneak-a-tax/

    Reply

  3. Posted by Tough Love on May 10, 2011 at 6:37 pm

    The BEST approach is to lay out (as a level percentage of cash pay) the full cost of funding (over their working careers) what the various groups of Civil Servants get vs the typical Private Sector taxpayer …. and then ask … WHY ?

    Fix the BENEFIT side, and the funding side (at least for future accruals) will fix itself.

    Reply

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