Chicago Police Pension: Bungle not Bungie


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“Ok, I don’t like to gear my material to the audience but I’d like to make an exception because I was told that there is a convention of plumbers in San Francisco this week – I understand about 30 of them came down to the show tonight – so before I came out I worked-up a joke especially for the plumbers. Those of you who aren’t plumbers probably won’t get this and won’t think it’s funny, but I think those of you who are plumbers will really enjoy this…

“This lawn supervisor was out on a sprinkler maintenance job and he started working on a Findlay sprinkler head with a Langstrom 7″ gangly wrench. Just then, this little apprentice leaned over and said, “You can’t work on a Findlay sprinkler head with a Langstrom 7″ wrench.” Well this infuriated the supervisor, so he went and got Volume 14 of the Kinsley manual, and he reads to him and says, “The Langstrom 7″ wrench can be used with the Findlay sprocket.” Just then, the little apprentice leaned over and said, “It says sprocket not socket!”

“Were these plumbers supposed to be here this show…?”

Though not as funny as the joke in the actuarial report for the Chicago Police Annuity and Benefit Fund when comparing the Prioritized Solvency Test table to the Projected Funded Ratio table.

It was reported that on Friday an Illinois House committee passed a bill that would reduce Chicago’s contributions to retirement funds for city public safety workers.  Curious about the real funded status of that plan I went to the 12/31/13 actuarial report where I found:

Table 8: showing a history of the plan’s funded ratio from 1999 (when after excluding employee contributions the plan had 99.41% of the money needed to pay out benefits for retirees ONLY) to 2013 (when the plan only had 25.71% of the money to pay retirees ONLY)

Table 3A: projecting a 30.29% funded ratio in 2013 to 90% by 2040.

“Ok, I don’t like to gear my material to the audience but I’d like to make an exception because I was told that there is a convention of public plan actuaries in San Francisco this week – I understand about 30 of them came down to the show tonight – so before I came out I worked-up a joke especially for the actuaries. Those of you who aren’t actuaries probably won’t get this and won’t think it’s funny, but I think those of you who are actuaries will really enjoy this…

“This actuary was told to demonstrate that a plan would go from a 30% funded ratio to 90% in 30 years when, 15 years ago, plan assets would not cover liabilities for just retirees and now they only cover 25% of those liabilities.   To do this he projected 7.75% interest growth and assumed that all contributions would be made by the plan sponsor. Just then, this little apprentice leaned over and said, “You can’t assume all contributions will be made by the plan sponsor of a public plan.” Well this infuriated the actuary, so he went and got Volume 14 of the IRS Gray Book and he reads to him and says, “After years of shortchanging contributions to public plans that put funding ratios into freefall merely enacting a new law will operate as a bungie for future funded ratios.” Just then, the little apprentice leaned over and said, “It says bungle not bungie!”

“Were these public plan actuaries supposed to be here this show…?”

27 responses to this post.

  1. Posted by Anonymous on June 1, 2015 at 9:57 pm

    Not bad for an amateur but don’t quit your day job, lol! Guess there’s no standards for actuaries except keep the client happy. Otherwise most public sector DBP would have a disclaimer opinion.

    Reply

  2. Posted by Anonymous on June 1, 2015 at 10:33 pm

    Come on people it’s not always about NJ!

    Reply

  3. Posted by MJ on June 2, 2015 at 7:03 am

    read an article on Pension Tsunami that there are more retired cops receiving pensions then working cops. Can an actuary explain how this is sustainable?

    Reply

    • Posted by meepbobeep on June 2, 2015 at 8:56 am

      It could be sustainable if the pension were 100% funded.

      Just like your own retirement could be sustainable if you saved up for it and were taking your income out, even though you had no “actives” supporting contributions.

      Needless to say, police pensions tend not to be fully-funded.

      Reply

      • Posted by MJ on June 2, 2015 at 10:02 am

        But it isn’t anywhere near fully funded so can an actuary explain how this is or will ever be sustainable? Sounds like word smithing to me

        Reply

        • Posted by BH on June 2, 2015 at 12:18 pm

          Go read the article on that site about Calpers being funded at 100% in 2007. Bull markets, full payments..etc all make the funds sustainable. When you fail to pay in the required amount and the market shifts…. We all panic.
          Make the payments and watch them be sustainable with another market shift up!!!

          Reply

          • Posted by MJ on June 2, 2015 at 1:12 pm

            But there isn’t any way to make the full payments or it would have beef done already

          • Posted by BH on June 2, 2015 at 4:08 pm

            There is a way!!! Holy cow. If they did not take a pension holiday for decades!!! Stopped with the outrageous subsidies and tax breaks….. And made the dam required payments….. They WOULD be able to because we would never be in this mess!!!!!! So now it’s time for the state to pay up its debt. And if that entails a tax increase. So be it!!!!

      • Posted by BH on June 2, 2015 at 12:20 pm

        And all these idiots seem to use the 7.5% interest rate. What happens when we see another bull market and we see 39-49% rates!!!! The funds become funded overnight!!!! Peaks and valleys!!! We get through them somehow.

        Reply

        • Posted by MJ on June 2, 2015 at 1:14 pm

          BH I certainly hope you are being sarcastic about 39-49% returns. I don’t think they are being honest in reporting 7.5% returns

          Reply

        • Posted by Anonymous on June 2, 2015 at 4:11 pm

          The problem is the Great Recession significantly reduced the pension fund assets. Increasing retirees drawing on those assets along with minimal contributions leave too small a base for growth. Even a ridiculous bull market won’t be enough. Never should have let Lehman Brothers go under, cost everybody more in the long run.

          Reply

          • Posted by MJ on June 2, 2015 at 8:05 pm

            Not to mention that pensions were not meant to sustain retirees for 3-40 years after retirement. Just not sustainable economically or financially. What is it that they don’t get? There is no money and taxes are already the highest in the country so that will not be a popular option especially with Sweeney wanting the governship?

        • Posted by MJ on June 2, 2015 at 8:00 pm

          But they didn’t do any of that to make full funding so why should taxpayers of today be responsible for 20 years of shenanigans and be responsible to pay for past services that they did not receive? Holy cow don’t you get it? The money is gone. Doesn’t matter who did what or when, the money is gone never to be coming back again. So what to do? Why are you taking your frustrations out on taxpayers who have nothing to do with it. Do you want to bill the old taxpayers for your very generous pensions?

          Reply

          • Posted by Anonymous on June 2, 2015 at 9:40 pm

            Reality is we’ll all (taxpayers and pension members) pay for the political “shenanigans” of both parties. No one may find it fair or equal but it will be.

          • Posted by BH on June 3, 2015 at 5:23 pm

            So, let’s see you lose social security, your savings and maybe your car. But hey, someone else needs it!!!! Too bad!!!! Sorry. You don’t deserve it!!!! But by the way, you’re gonna keep making those payments all the same!!
            Thank you!!

    • Posted by Anonymous on June 2, 2015 at 9:58 am

      With all the crime & violence there sounds like they need to hire more cops?

      Reply

  4. Posted by meepbobeep on June 2, 2015 at 8:46 am

    I guess you had to be there….

    Reply

  5. Posted by Anonymous on June 2, 2015 at 2:58 pm

    https://www.judiciary.state.nj.us/opinions/jun15.html

    @ writing nothing thru 6/3, guess later is better for?

    Reply

    • Posted by BH on June 2, 2015 at 4:10 pm

      Look- this governor has done nothing right since in office. Not one thing. All he does is take …while making his buddies ritch. It’s beyond obvious. Christ!!! Just by privatizing the lottery, the state will lose millions upon millions!!!! But nobody cares.

      Reply

      • Posted by Anonymous on June 2, 2015 at 4:25 pm

        This R Governor’s NJ legacy will be D dominance. He is and will continue to be nonexistent in NJ planning & policy for the duration. His party “friends” will start to distance themselves for their own self preservation. Typical stuff for both parties when you get a rouge leader!

        Reply

      • Posted by MJ on June 2, 2015 at 8:02 pm

        Agree with you there BH. He had his chance to right the ship with significant reforms, repealing the Abbott district payments, lowering real estate taxes etc and he didn’t. What he did do is take and take and spend and spend and the pension problem still exists.

        Reply

  6. Posted by Anonymous on June 4, 2015 at 9:02 am

    The Commission recommends a “cash balance” hybrid plan. The issue there like the existing NJABP is administrative cost for managing the funds and policy restrictions for distribution of lifetime income. The union’s need to up their understanding of the existing 401a and 403b retirement plans. The true details are in the Summary Plan Documents and the actual insurance policy. In group plans the State of NJ is the actual policyholder. The policyholder agreement determines distribution options. Lifetime income can begin with an interim payment that last up to 60 months. depending on the age of the retiree. The benefit in this timeline goes to the policyholder because there are administrative fee rewards for slowed distributions from an insurance company General Account. I call this a.form of elder abuse, the retiree truly needs a backup revenue source to survive the payout period. The employer/policyholder determines restriction especially the 401a funds for a lifetime income annuity. The insurance company also has restrictions for lifetime income ex.one million dollar a year limit for all income annuities per employer.

    Reply

    • Posted by BH on June 4, 2015 at 2:35 pm

      If anything ever does materialize, a new pension funding formula and actual fund will be created. They won’t use any existing models because none meet the particular parameters required for these careers!! Mark my word, the healthcare will be the first issue tackled, followed by the state pensions. Local pensions will remain solvent and in the same DBP they are in now.

      Reply

      • Posted by Anonymous on June 4, 2015 at 2:45 pm

        Agree with you on healthcare coverage. State v Local pensions is hard to say because TPAF is primarily all “local” yet basically “state” funded. SPRS & JRS which is state funded will not concede to changes without local PFRS being included? That leaves PERS, while significantly underfunded it’s not as bad as TPAF.

        Reply

  7. Posted by Eric on June 8, 2015 at 11:15 pm

    BH:
    For healthcare, we need a single payer system now! Everyone in, and too bad for “Big Pharma.” Hillary and Obama were both paid off and represent the establishment.
    There are no more leaders. None. Not one. Zero.
    Eric

    Reply

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