Actuaries Explaining DB/DC Difference

At yesterday’s hearing on the solvency of the multiemployer retirement system Representative Phil Roe posed to an actuary a basic question that many non-actuaries would have:

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That did not entirely explain why Defined Benefit plans got so severely underfunded. There is a real answer but most actuaries will not voice it:

Breaking News: Nineteenth Union Plan Files

Just appearing on the MPRA website is the Plasterers and Cement Masons Local No. 94 Pension Fund out of Harrisburg, PA.

From their latest 5500:

Multiemployer Plan Primer and My Free Speech

The Joint Select Committee on the Solvency of Multiemployer Pension Plans held a public hearing today on an overview of the multiemployer pension system for which they released a document that provides a useful summary of present law relating to retirement plans generally and to multiemployer defined benefit plans in particular, as well as selected data relating to multiemployer defined benefit plans. Very little coverage of the hearing so far but it is becoming ever more likely that this process is setting up for a bailout after the mid-term election when Democrats get back in. And speaking of rigged government, tomorrow my free speech (and that of everyone in Union County) will be put to the test.

Excerpts from both below:

Leading the Collapse of Public Pension Funds

Bloomberg View has an article predicting that in “the next decade, and probably within five years, some large states are going to face insolvency due to pensions, absent major changes.”

Their poster-boy state:

NJ Investment Council Turnover

Pursuant to N.J.S.A. 52:18A the New Jersey State Investment Council, which oversees the investments of the state retirement system, is comprised of sixteen (16) members. Nine members are appointed by the Governor. As of January 26, 2018 there were twelve (12) members with four (4) vacancies, all governor appointees. Under new governor Phil Murphy there will be a total overhaul, according to David Wildstein:

EA18 (8) Highway to PBGC Premium Explosion

Per Pension & Investments:

Sharply higher Pension Benefit Guaranty Corp. [PBGC] premiums resulting from the new federal budget deal will push more employers to shrink or terminate their defined benefit plans, moves that also will further erode the agency’s shaky finances, industry observers said.

Two session at the 2018 Enrolled Actuaries meeting touched on that subject.

Pew Ranks – 2016

Last week the Pew Charitable Trusts released their annual funding gap study based on data from the CAFRs of over 230 public pension plans.  I did a review of last year’s study noting data glitches but it is a worthy project for the Pew people to undertake for academic reasons. However, for practical purposes, here is why it is useless.