Who’s Stealing From Whom Within NJ Pension?

Millenial Moola thinks it’s teachers from the police but the reality is a lot more complicated – and it may even be the other way around.

Moola was looking at the last page of the April, 2016 Investment Report Package from the New Jersey Division of Investment which showed:

april16

Since then the May, 2016 report has come out (which is the latest) with more of the same:

may16

But this looks like a true-up as in the July, 2014 report we had transfers going the other way:

july14

But when you look at the June, 2015 plan-year-to-date amounts:

june-15-ytd

a real discrepancy pops up as the actuarial reports for the plan year ended June, 30, 2015 show different contribution amounts being credited:

compare-15

These differences are not readily explainable.  If the Division of Investment reports $2,352,920,000 as being credited to the Teachers Plan then why is the valuation report only crediting that plan with $1,625,838,428? And why is the Police & Fire plan being credited with $1,300,599,795 when the Division of Investment has it getting $719,433,000?

To understand this a little better you need two other bits of information:

  1. Additional money coming into a plan helps the funded status and reduces the amount of the contribution developed.
  2. The numbers in the actuarial report match fairly closely to those developed for the ARC in the July, 2013 valuation (after adjusting for the state’s arbitrary reduction of the ARC for the plans they are responsible for funding):

njarc

That’s as far as I get.  Those transfer amounts that the NJ Division of Investment is putting out appear to be meaningless.  If not, then what are they used for and who benefits?

11 responses to this post.

  1. Posted by Anonymous on September 24, 2016 at 7:16 pm

    Well it’s comforting to know there’s no grey area when it comes to the numbers – just black and white in a sea of red! Maybe the numbers would be clearer in a bankruptcy situation as nobody would want to purposely mislead the court with their financial filings?

    Wonder how the Feds play on numbers would look for their trillions of dollars in beleaguered pension funds?

    Maybe the Carpenters’ (union) got it right: Sing, sing a song, sing out loud, sing out strong….LOL

    Reply

  2. Posted by Anonymous on September 24, 2016 at 7:22 pm

    John: Why don’t bond rating agencies hold States accountable for not meeting their obligations and how come bond holders don’t take a haircut when State pensioners take a haircut. Why do the Goldman Sachs keep getting bailed out for lack of due diligence.

    Reply

    • Posted by Anonymous on September 24, 2016 at 7:50 pm

      Oh didn’t you know that’s different, they’re not part of the “so-called” intergenerational inequity that governmental (State & Local) DBP are being accused of.

      Conviently the accusers justify excluding Federal pensions, specifically military. Yet, no disrespect, there’s been no draft for years so enlistments are purely a matter of personal choice. Knowing the risk/reward and deciding accordingly.

      Sounds peculiarly like what’s being discussed here BUT yet again somehow the accusers justify it’s different…..

      Reply

  3. Posted by Anonymous on September 24, 2016 at 11:02 pm

    Sounds like it’ll save a bit of work on future burn rate calculations because you won’t need to separate the funds anymore – it’s share and share alike…

    Reply

  4. Posted by George on September 25, 2016 at 12:37 pm

    FWIW they have a contact page and they do answer questions in a timely manner, for example I asked them a very basic question:

    I understand that you are seeking a better understanding of the report and its exhibits that the Division of Investment provides on monthly basis to the State Investment Council.

    By way of background, there are five active public pension systems: the Judicial Retirement System, the Police & Firemen’s Retirement System, the Public Employees’ Retirement System, the State Police Retirement System and the Teachers’ Pension & Annuity Fund. The assets of these pension systems are invested through Common Trust Funds (Common Pension Fund D and Common Pension Fund E, “Common Pension Funds”) in accordance with N.J.S.A 52:18A-90.1. The assets of the Common Pension Funds are invested by the Division of Investment. Each Common Pension Fund is composed of units of participation and each unit of participation represents an equal beneficial interest in the fund. On a daily basis, the net asset value per unit of each Common Pension Fund is calculated as the net assets of the fund divided by the total number of units outstanding.

    Each pension system receives employer and employee contributions. Each system contributes its monies into the Common Pension Funds for investment, and purchases units at the net asset value per unit on that day. When a pension system makes benefit payments, it withdraws monies from the Common Pension Funds, thereby reducing the number of units it owns. All units of participation for each pension system in each Common Pension Fund, representing net capital contributions to the fund together with any income thereon, are evidenced by records maintained by the Division of Investment. The value of the units of participation for each pension system are accounted for on its separate books and records. The audited financial statements for fiscal year 2015 can be accessed at http://www.state.nj.us/treasury/doinvest/pdf/AnnualReport/Fiscal2015AuditedFinancialStatements.pdf. The investments in the Common Pension Funds of each of the pension systems are summarized on page 13.

    Each system contributes and withdraws monies independently based on contributions and required benefit payments as summarized in the monthly Director’s Report located at: http://www.state.nj.us/treasury/doinvest/directorsreports.shtml.

    I asked the following questions
    1) What are “Contributions to Common Funds from Pension Funds for the Month”?

    This represents the purchase of Common Pension Fund units by the pension funds.

    2)What are “Withdrawals from Common Funds to Pension Funds for the Month”

    This represents the sale of Common Pension Fund units for the purpose of meeting the obligations of a specific pension fund.

    3) Do you publish monthly payments to beneficiaries of NJ State pensions and monthly payments by the state into the pension funds?

    Information related to pension payments made to pensioners is available on the Department of the Treasury’s Transparency Center website, http://www.yourmoney.nj.gov/.

    The State makes payment into the pension funds on an annual basis, typically at the end of the fiscal year. The latest public information can be found in the 2015 audited financial statements published by the Division of Pensions & Benefits. Please see page 7 (page 10 of the electronic document) of the document at this link: http://www.state.nj.us/treasury/pensions/pdf/financial/2015divisioncombined.pdf

    So you might just use their contact form and ask them what the transfer of ‘common fund units’ between the two funds was about. I would suggest posting any answers you get online so that people don’t ask them the same questions over and over.

    New Jersey Divison of Investments contact form:
    https://www.state.nj.us/treas/doinvest/contactus.shtml

    Reply

  5. Thanks for pointing out the discrepancy in their numbers. My thought is that the teachers’ system is in the worst shape bc it doesnt have local contributions like the police and fire pension does. I still see the state taking common resources like the transportation money from the turnpike and using it primarily to shore up the weakest pension funds, thereby removing any financial cushion for the better funded ones. If they aren’t moving money to the teachers’ fund and less towards the better funded police and fire funds, then what exactly do these reports mean if anything? They’re always 3 to 4 months late btw. It’s incredibly poor reporting unless you look at the fire pension in chicago with a 20% of assets burn rate a year. They seem to publish a year behind. Scary times we live in

    Reply

    • Posted by Anonymous on September 26, 2016 at 7:27 pm

      Does anyone really think the State is treating the pension fund money as fungible? I’m not a lawyer but I think it might be illegal! Sort of like Bridgegate, guess the Gov will swear he knew nothing about either….

      Reply

  6. Posted by Anonymous on September 27, 2016 at 1:09 pm

    So how will those found guilty in Bridgegate pensions’ be affected?

    Reply

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