Pushing Public Employees to Retire

School superintendents are by far the highest paid government employees in New Jersey, making even more than heads of some Utilities Authorities, though they do need to come to work occasionally.

Governor Christie makes $175,000 in salary so in 2010 he imposed that as a prospective cap on superintendent salaries.

In an article today, a purported blowback example is provided in the retirement of Judith Wilson who has 35 years of service with a salary of about $225,000 and is retiring on a pension of $144,000 at age 56 rather than swallow a pay cut.  What that writer is missing…..

Calculating What’s Expedient – Politically

Joshua Rauh, GASB, and Moody’s would all like to see public pension plans report the value of their liabilities using an interest assumption in the 4% range instead of the 8% most use but the cost of doing all this extra work has been cited as a barrier to providing that information.

Last week New Jersey announced what localities would need to pay into PERS and PFRS for 2014 per a DLGS email blast:

“Sore Loser” With “Limited Credibility”

That’s what a group of 70 Public Plan actuaries* at this month’s EA meeting view was of Moody’s and their revised rating methodology for US states as it relates to valuing unfunded pension liabilities:

New Jersey’s Retirement System Should Be Disqualified

To be qualified a government plan must meet some of the standards laid out in IRC section 401(a) including:

(25) Requirement that actuarial assumptions be specified.— A defined benefit plan shall not be treated as providing definitely determinable benefits unless, whenever the amount of any benefit is to be determined on the basis of actuarial assumptions, such assumptions are specified in the plan in a way which precludes employer discretion.

Because of the elimination of retiree Cost-of-living-adjustments (COLAs) New Jersey public employees should be paying taxes on the benefits being accrued for them.  Terry A.M. Mumford of the law firm Ice Miller LLP thinks otherwise but I am unpersuaded by her two arguments:

Can they do that to public employees?

That’s the issue to be addressed tomorrow morning in Session 703 at the EA meeting:

703 – Can They do That? Plan Design and Constitutional Issues

Credits: EA Core 0.75 EA Noncore 0.75 CPD 1.50

Many governmental plan boards and sponsors are asking their actuaries for advice on plan design and contribution changes to address issues of underfunding and sustainability. The speakers at this session provide a brief overview of the type of plan design changes that have occurred since 2008 and focus on the legal constraints on reducing benefits and increasing contributions for participants. The panelists also address other “change agents” affecting governmental plans, such as municipal bankruptcy and IRS policies.

My first question would be how many actuaries get asked for advice on plan design when none get asked* about the choice of actuarial assumptions.  My second question:

No Cure for Cancer in Actuarial Profession

It’s Enrolled Actuary meeting time again and I’m in Washington, DC until Wednesday getting CPE credits by listening to 20 hours of speakers reading their powerpoint slides.

Coincidentally the American Association for Cancer Research is also holding their convention this same week thus making finding a parking space near the Spy Museum* challenging.  My first non-politically-correct thought upon seeing the Cancer Research banner was to wonder how serious they really were about curing cancer when, if they were to ever come up with a pill, procedure, or lifestyle change that would eradicate this dread disease it would likely also eradicate their jobs.  Then I made a connection to my profession.

Ill-informed Judgment on Stockton Pensions in Bankruptcy

A judge ruled yesterday that the city of Stockton can go bankrupt.  Next up, what happens to the pensions of Stockton retirees and employees.  Some judge will decide that in the near future without, in all likelihood, possessing the two most pertinent pieces of information.

Popping the New Bubble

“Public pension funds account for 9 percent of hedge-fund investments.”

Les Leopold – How to  Make a Million Dollars An Hour

Not private pension funds which theoretically have the same motivations but PUBLIC pension funds.  New Jersey has around 24% of their pension fund assets in alternative investments and is committing to more.  What’s the attraction?

Fatal Flaw GASB 68 Wants Fixed

John G. Dickerson, financial expert and author of two new reports on government pension accounting, recently presented some alarming findings on how changes at Moody’s Investor Service and new pension accounting standards will unmask the staggering debt threatening vital community services.  The pertinent excerpt from his talk:

SEC Legalizing Fraud

The state of New Jersey was charged by the SEC with committing fraud in its pension disclosures at around 9 am on August 18, 2010.  A few hours later the case was settled.

The state of Illinois was charged by the SEC with committing fraud in its pension disclosures at around 9 am on March 11, 2013.  A few hours later the case was settled.

And the SEC wonders why investors think its spineless.  I’m not an investor but I do wonder what this prosecution-by-kabuki accomplishes.  Let’s see how New Jersey panned out.