Scariest numbers from New Jersey’s 2015 Pension Reports

You might have your own but based on this spreadsheet, created by pulling off pertinent valuation data from each of the July 1, 2015 actuarial reports for the New Jersey retirement system with tabs for similar data going back to 2012 and 2000, here are mine:

$91,097,676,080: Value of benefits payable to retirees

$82,423,535,588: Market value of assets

Even considering the:

  • phony assumptions used to value liabilities,
  • reported asset values down to $70 billion,
  • which includes about $25 billion in self-valued ‘alternative’ investments:

there are not enough inflated assets to cover the undervalued benefits for current retirees ALONE.

442,827 public employees have nothing in their pensions but IOUs and their $1.9 billion in annual contributions (and roughly $30 billion in accrued contributions) are going into a black hole that Christie is not about to plug.*




* This is a long overdue update of a 2013 blog that made exactly the same point. Please, play around with the spreadsheet and find your own scary numbers.  It is particularly striking that according to the 7/1/2000 reports there was less than one-third of the money being paid out to retirees as there was in 2015 but the asset values are about the same.  In the most basic bit of actuarial ball-parking for defined benefit plans, assuming no plan termination or radical changes in the census, the asset values should have followed along and been up in the $210,000 range now.  They’re not.

Another interesting change is in the average annuity factors for retiree payouts which was 10.34 in 2000 and 9.41 in 2015.  The elimination of all future COLAs in the assumptions would account for some of the drop but not all of it when you consider mortality improvements and all the younger retirees with higher benefits.

25 responses to this post.

  1. Posted by Tough Love on April 4, 2016 at 4:41 pm


    Are the Benefit Values (Liabilities) for the 7/2015 report under GASB 67/68 standards ?


    • No those are valuation assumptions. – 7.9% and all the rest.


      • Posted by Tough Love on April 4, 2016 at 5:41 pm

        What a useless Group GASB is ……… that “official” Gov’t entity financial Reports can ignore the Financial Standards (that supposedly) govern their operation.

        If a Public Corporation ignored FASB, lawsuits would fly, heads would roll, and jail occupancy would likely rise.

        Taxpayers are so incredibly sucked by this entire structure ….which promises WAY too much, materially understates the true cost (and then only funds a small share of that low-balled cost BECAUSE it it too generous to actually pay for), puts in place law that prevent even FUTURE service reductions (that are both legal and routine in Private Sector pension Plans), and lets judges with a conflict of interest (by being participants in such Plans) adjudicate legitimate challenges to these grossly excessive promises.

        Taxpayer have WAY more than the moral justification and legitimate reasons to renege on MORE THAN 50% of these absurd promised pensions (AND benefits).


  2. Posted by Anonymous on April 4, 2016 at 8:32 pm

    Refresh my memory… If according to these calculations there is not nearly enough to continue to pay current retirees just where is the money coming from for those currently receiving pension checks?


    • Posted by Anonymous on April 4, 2016 at 9:20 pm

      According to Trump, we’re going to get Mexico to pay for it all – all in all it’s just another brick in the wall.


  3. Posted by PatB on April 4, 2016 at 10:51 pm

    John, you often talk about returning the members contributions before closing a fund. Under what circumstances could this happen, legal and otherwise? I ask because on the PERS report for the state fund, page 19:

    “As of June 30, 2015, the ratio of market value of assets to the prior year’s benefit payment is 5.8. This is an approximate indication of the number of years that the assets can cover benefit payments, excluding future State and member contributions, and investment income. This ratio decreased by 10.8% from the previous year’s ratio of 6.5. If ASF assets are excluded, since they represent accumulated contributions from active and inactive members, the ratio is 2.0.”

    Does this mean about 15 months before they start spending the member contributions? And a drop-dead date of about 2020?


    • It’s academic. NJ will pay as little as they can get away with, put in as little as they can get away with, and use whatever money is available to make the payments they can’t walk away from. In the private sector this happened around 10-20 years ago for a lot of companies with Defined Benefit plans where the principals froze accruals and developed plans to pay down the underfunding so that pension debt wouldn’t sink the company. There is no such incentive for politicians and public plans.

      As for the value of those employee contributions, it’s hard to tell based on what we have. In the Teachers report (page 6) it lists:

      Annuity Savings Fund ** 11,199,306,391
      ** Accumulated active and inactive member contributions.

      That’s about 43% of assets which the reports totaled at about $82 billion. That comes to $36 billion in accumulated employee contributions as of 7/1/15 but it’s not clear if retirees who have not gotten back all their contributions are included. In any case if that $35 billion were returned to active participants and alternative investments were valued honestly there are 4 years of payments left even with new money coming in and without COLAs (3 years with COLAs back).


      • Posted by Tough Love on April 5, 2016 at 12:15 am

        Quoting ….

        “In the private sector this happened around 10-20 years ago for a lot of companies with Defined Benefit plans where the principals froze accruals and developed plans to pay down the underfunding so that pension debt wouldn’t sink the company. There is no such incentive for politicians and public plans.”

        FREEZING NJ’s Public Sector Plans would at at least stop ADDITIONAL future service accruals from contributing to the growing financial hole we are now in.


  4. Posted by Now retired Pat on April 5, 2016 at 12:08 am

    Interesting…what would YOU put as NMV of the alternative investments?


    • Impossible to tell. Since those investments pay higher fees the higher the nominal earnings the values start off inflated and if they’re worth $25 billion on paper, it’s probably closer to $15 billion, especially if they have to be liquidated sooner than anticipated to pay people.


  5. Posted by Eric on April 5, 2016 at 12:24 am

    Since there is a financial problem nationally with pension funding, would a single payer health care system be a monetary help to the pension systems, if the previous health care dollars were funneled directly into the pensions?
    Colorado and Massachusetts are floating this idea. Of course a Hillary presidency would kill this plan in its infancy due to her massive payoffs from Big Pharma.
    The Koch brothers also would not stand for it. They are already lobbying the mentally impaired voters in Colorado.


    • Posted by Tough Love on April 5, 2016 at 12:38 am

      Why “fill them up” beyond the amount needed to fund a pension EQUAL TO that which the typical Private Sector worker gets (as a % of pay) from his/her employer ?

      Are Public Sector workers “special” and deserving of a greater pensions and better benefits ….on the Taxpayers’ dime ?


    • Never going to happen. Insurance companies are in control and they’re not about to dismantle their money machine (even if the politicians they buy turn on them) no matter how many people it kills. This was the issue (repeal McCarran-Ferguson) that got me writing about 30 years ago and nothing has changed.


      • Posted by dentss dunnigan on April 5, 2016 at 5:53 am

        I do the big part of the problem as being ZIRP has killed the anunities ,seniors ,saving and now the pensions …..10 years is a long time to have the rate at zero .


      • Posted by Anonymous on April 5, 2016 at 8:09 am

        How true, you hit the nail on the head. It’s not about doing what’s right but rather what’s easy. Sure we’re a so called “free market” society but does anybody have any doubt the game is seriously rigged? And the public Unions with their DBP is just a small tip of the iceberg. The underlying socio and economic problems plaguing our society will not improve unless we have sweeping Wall Street, Health Care, Energy, and Higher Education reform – the four big mega drains on our Country.


    • Posted by dentss dunnigan on April 5, 2016 at 4:46 pm

      Oh …old news besides ,always people moving into the state to take the place of those that move out ………….or so I’ve been told ..


      • Posted by Tough Love on April 5, 2016 at 6:03 pm

        Really ?

        WHo is moving IN to replace the now departed (to Florida) David Tepper and his $11.4 Billion ?

        I’d bet he paid a bundle every year in NJ taxes.


        • Posted by dentss dunnigan on April 5, 2016 at 6:14 pm

          He said he will will save 45 million a year by the move


          • Posted by Tough Love on April 5, 2016 at 6:22 pm

            Not the Union’s problem ….. just raise taxes.

            NO…. reduce the Future service pensions & benefit accruals of all CURRENT NJ workers ALL THE WAY down to what their Private Sector couinterparts typically get from their employers…………. ALL THEY WAY !

          • Posted by Now retired Pat on April 5, 2016 at 9:32 pm

            45 million to a Bi$$ionare is chump change. He likely did not move to save money. More likely moved back to his estate in Florida for the weather and family.

          • Posted by Anonymous on April 5, 2016 at 10:08 pm

            True but he’s the chimp with the change -LOL. Guess it’ll buy him a modest home he get by in for a while……

  6. Posted by Paul S on April 6, 2016 at 8:23 pm

    The other problem with Alternative Investments is they don’t trade on the secondary market (ie with a Bid and an Ask). The AI will self report a price. Let me repeat that. There is nobody anywhere who needs to attribute a value to an AI, the AI will tell you what it is worth. There is an audit called the PCOAB that they can pay for and have an accountant determine a price but this is an expense (10-30K depending on the size) and entirely up to the AI. Its worth is only what they say it is. Now for sure, there has to be some underlying assets they have invested in but that is also usually speculative (options contracts, futures, real estate, Canadian gold coins, Persian carpets, art, a parking lot… can be anything).

    The end game is this.
    – make unions out to be the bad guy
    – underfund pensions so they are actually impossible to properly fund
    – dump the pension with the PBGC
    – dump the pension on the social security administration
    – tell the taxpayers they can either each kick in $50K to fund pensions or let it go bust.

    Taxpayers are already at the point where we say “these people expect me to fund their retirement and I can’t even afford my own”.

    This is not going to end well, I say this out of no glee or smugness. All public sector employees need to immediately put money in an IRA, Roth IRA and/or 401a.


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