There are many Multiemployer (Union) plans that are as badly funded as your typical government plan (when valued honestly) since, even though union plans have rules, they have some ‘flexibility’ that allows them to keep using 7.5% interest rates for funding and, since 2014, cut benefits when they deem appropriate which is exactly what the Teamsters Central States Pension Plan is doing.
A little perspective:
In response to a comment/question in a prior blog:
John, are you a part of any “screaming actuaries” groups? Are there such things? I recently sat through three finalist presentations as a citizen trustee for a municipal plan and it seemed like there were a dozen different actuary groups that these pension actuaries were in. Do any of them represent the ideas that Dr. Gold laid out of pushing for standards demanding more and explicitly considering role of serving the public?
I’m asking because I think that asking finalist candidates and the like whether they are a member of these groups would be a good practice as a fiduciary who is focused on my long-term responsibility to the fund. Or even to get them to put an answer in their response to the RFP to just get them to official state their stance.
And one more question – do you think it would be reasonable to make as a part of an RFP and then contract that they need to also publish the “disclosure of accrued benefits discounted by the Treasury yield curve – & the associated annual cost” that Dr. Gold mentions on slide 34? I think these are the “North/Rauh/Pepta numbers” that he mentioned, but I’m really not clear enough what these are to demand them. Does Dr. Gold publish a best practice valuation report showing what this would be?
which referenced this comment/question from Jeremy Gold:
and raised two seminal points worth exploring:
The Union County Improvement Authority (UCIA) was embarking on another project of dubious value to taxpayers but of critical importance to various political insiders and they had to go before the Local Fiance Board on May 8, 2013 for rubber-stamping.
We knew going in that it would be futile but if only to get it on some public record Jim Buettner and I commented at that hearing. Jim got to say everything he wanted but in my few minutes I was interrupted:
That voice in the background not willing to sit and listen to me was this guy:
Jeremy Gold summed it up well in his presentation at the 2015 MIT Center for Finance and Policy Annual Conference:
Chris Christie’s people have had to resort to some desperate measures to give off the illusion of relevancy to their guy’s campaign (from holding events at places where people eat or play pool to calling into any radio station in New Hampshire or Iowa with a double digit cume) but they may have hit rock bottom with the ploy for attention they are planning for Iowa this Tuesday morning.
According to a just-released item on the Des Moines Register website:
In explaining why Rhode Island seems to have succeeded in reforming public pensions while Chicago, Illinois, and New Jersey remain mired in a morass of lawsuits and plummeting funding ratios Mary Williams Walsh called upon her inner-Baudelaire:
Ms. Raimondo, who started her battle as state treasurer, faced obstacles not unlike those confronting Mayor Rahm Emanuel of Chicago: entrenched political machinery, powerful unions, a decades-old practice of promising rich pensions without setting aside enough money to pay them, truculent taxpayers, record numbers of retirees and an all-enveloping fog of discredited numbers.
The upshot of the story is that the pension promises made in Rhode Island were not contractual so they could be changed by a legislature scared into action (which Central Falls did) but it was that last phrase, thrown out there and not explored, that hit home.
benchmark: a standard or point of reference against which things may be compared or assessed.
audit: an official inspection of an individual’s or organization’s accounts, typically by an independent body.
At the State Investment Council bimonthly meeting it was reported:
New Jersey’s pension-fund investments posted an annual return of 4.16 percent in the fiscal year that ended June 30, following years of mostly sustained double-digit returns, state officials said Wednesday.
Nevertheless, according to Treasury Department data, the unaudited investment returns beat the state’s benchmark, a composite of various indexes, which yielded 2.93 percent.
Which brings up the obvious (at least to me) questions: