Admitting Insolvency Risk

Any objective observer with even a minimal understanding of pension funding has to recognize that if New Jersey continues funding pensions the way they have been doing there is a significant risk of insolvency within a relatively short period of time.  But with the release of the June 30, 2014 actuarial valuation reports we now have an actuary for the state making this statement in bold print in the first paragraph of their comments:

This report summarizes the results of the actuarial valuation of the Teacher’s Pension and Annuity Fund (TPAF) as of June 30, 2014. This valuation reflects deviations from the anticipated State contributions for the fiscal years ending June 30, 2014 and June 30, 2015 incorporated in the 2013 valuation. These contribution amounts are much less than the expected phased-in contributions, representing no more than 18% of the full statutory contributions. Continued funding at these levels would put TPAF at significant risk of insolvency within a relatively short period of time. The impact of these deviations is discussed further below.

TPAF 6/30/14 actuarial valuation report, page 8

Milliman does the Teachers plan while Buck does the PERS, PFRS, State Police, Judges, and two closed plans.  For the Buck reports, all signed by Aaron Shapiro, FSA, EA, MAAA, the only foray into opinion was one paragraph in the cover letter to the valuations:

In my opinion, the actuarial assumptions used are appropriate for purposes of the valuation and are reasonably related to the experience of the System and to reasonable long-term expectations. These assumptions were selected in accordance with applicable Actuarial Standards of Practice published by the Actuarial Standards Board.

Funded ratios for the State portion of the PERS and PFRS plans as well as the Judges’ plan are in the same ballpark as the TPAF plan yet no mention is made by Buck of any “risk of insolvency within a relatively short period of time” (for either the plans or Buck).

17 responses to this post.

  1. Posted by Anonymous on April 23, 2015 at 7:36 pm

    Taxes need to be raised on Millionaires, they need to pay the same percentage of their income as everyone else, no more loopholes, etc.


    • Posted by Tough Love on April 23, 2015 at 10:03 pm

      Or, just replacing a few words …………

      “PENSION need to be REDUCED on WORKERS, they need to get the same percentage of their income as Taxpayers, no more loopholes, etc.”


    • Posted by dentss dunnigan on April 24, 2015 at 9:20 am

      Just 50 high-earning individuals in New Jersey pay 5 percent of the entire state income tax bill. That means the exit of just two or three top-earners can cost the state tens of millions of dollars in lost tax revenue…….I can almost hear the millionaires say …”go ahead make my day”


    • Posted by george on April 27, 2015 at 2:29 am

      “Millionaires” are mostly people who never earned a million dollars until they sold a business or a home. And they do that once in a lifetime.


  2. Posted by Pamela on April 23, 2015 at 8:00 pm

    @ anonymous:

    What exactly does that mean–pay the same %? I believe many pay more than others that make less. What are you trying to say?


  3. Posted by javagold on April 23, 2015 at 9:24 pm

    significant risk of insolvency within a relatively short period of time.

    And what seems to be the problem ??????


    • Posted by Tough Love on April 23, 2015 at 11:42 pm

      None ….. as long as pension payouts are reduced to a level supportable with CURRENT tax levels.


  4. Posted by Eric on April 23, 2015 at 9:46 pm

    The top 10% of the income scale in the US pays 68% of all federal taxes. The bottom 50% of the income scale pays only 3% of all federal taxes. These are the latest figures which have been released by the feds which is for the year 2011.
    The loophole is for the low wage earners not the high earners. You cannot tax that which is not there.
    The unfortunate people who are Walmart greeters or Shop-Rite baggers do not carry the tax burden. I feel deeply sorry for these people, but they are not “carrying” the so called rich.


    • But…they didn’t build “that”


    • Posted by PatB on April 24, 2015 at 12:30 am

      Actually they do, in a nickle and dime kind of way. It may take a thousand wall mart greeters to pay as much tax as one millionaire, usually by paying a greater percentage of their income than the the millionaire in taxes (as Warren Buffet points out in comparing tax rates with his secretary). Who would you rather be?


      • Posted by Tough Love on April 24, 2015 at 1:45 am

        It’s really simple.

        Marginal FIT rates hit 25% for individuals at “taxable incomes” of $36,900 and $73,800 for Individuals and Married-Filing-Jointly respectively.

        Add maybe $10-$25K to each of those figures (to account for exemptions and deductions) to get at realistic “Gross Income” where you’ll START paying FIT at the 25% rate.

        The VERY rich pay a lower percentage because MOST (sometime almost all) of their income is from dividends and Capital Gains which cap out at a 20% tax rate.

        If you want to go after “millionaires” do it the right way… persuade Lawmakers that Dividends and Capital gains should not be so highly tax preferenced.

        Believe it or not, I’ve often felt it odd that the tax rate on wage income (from your daily labors) is HIGHER than the tax rate on Dividends and Capital Gains (for which you basically do nothing ….. some of whom are nothing but Trust-Fund babies).


        • Posted by dentss dunnigan on April 24, 2015 at 9:41 am

          That dividend is already taxed once before the individual see it at the company level so that 1.00 perhaps should have been 1.25 before corporate tax. The investor has already been taxed by seeing lower dividend income to start with .


        • Posted by Anonymous on April 24, 2015 at 1:17 pm

          1% whinning, nice to see you got the 99%’s back. You’re missing the expenditure side of things, what % of lower wage earners support the GNP relative to their net earnings/wealth, etc. Remember food chain works in reverse.


          • Posted by Tough Love on April 24, 2015 at 2:00 pm

            NET or GROSS of their entitlement collections …. sourced from the taxes of productive workers (including the wealthy).

            P.S. I’,m NOT in the 1% by either measurement … income or assets.

  5. Posted by Jim on April 24, 2015 at 5:03 pm

    “risk of insolvency” – Are’nt they already insolvent?


  6. Posted by Anonymous on May 23, 2015 at 7:31 pm

    TL and devout followers; individuals presenting a right wing conservative perspective based on half-truths and lies.

    TL continual posts repetitive misinformation citing sources with extreme ideology. Yet sumarial dismisses other posts with conflicting opinions and sources.

    Specifically, purposely misstated the tax status of public pensions in the following post; When called to task tried to double talk their way out of it. Standard operating procedure for most of their commentary.

    Fair and equal for all is the mantra. Fair enough, but not when I suggest Federal workers and members of our beloved Armed Forces be part of the bigger conversation. The response, they’re different. But why, because they risk their lives like first responders at home. Their DBP are paid with Federal tax dollars as opposed to State or Local. Everyone knew the job risks when they accepted employment. But they also knew what their salary, pension, and benefits were supposed to be.

    To blame and demonize public workers for the current situation is unfair and untrue. Do politicians make “deals” with unions that don’t always have the taxpayers best interest? I think everyone knows the answer to that is yes. But politicians are always making “deals” it’s what they do. Just ask the various segment market corporations; defense spending (lucrative contracts), farming (subsidies) and the list goes on and on.

    Your bully tactics and demeaning attitude only motivate me more to push back your parties ridiculous vision for NJ and America. Yes I’m sure John knows all of our IP address, so you and your business name can be exposed as well.

    The purpose of continually posting this comment is to allow the counterpoint perspective to be heard. I will no longer personally engage your comments tit for tat.


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