NJ Pension Asset Data

The New Jersey State Investment Council held their bimonthly meeting today at which June 30, 2016 plan-year-end asset data was released with this lead:

Officials reported the fund lost 0.87 percent in the fiscal year that ended in June, based on unaudited figures.

Not only were the numbers unaudited but the June, 2016 Investment Reporting Package left out much (primarily payouts) that would provide some perspective so, piecing together information from different sources, here is where the New Jersey pension system might stand (in billions):

6/30/15 value: $79

Deposits: $5.4

Payouts: ($10)

Expenses (0.8)

Earnings ($0.7)

6/30/16 value: $72.9

And some observations:

  • Twice as much is leaving the plan in benefit payouts and expenses as is coming in from deposits and about $2 billion of those deposits are member contributions that will need to be returned upon plan bankruptcy.
  • Had the trust made 7.9% it would have meant $6 billion in gains instead of 0.7 billion in losses.
  • With $21 billion of those assets in Alternative Investments and another $30 billion in equities this pension system is one market correction (or Trump victory) away from having only enough assets remaining to pay back member contributions.

24 responses to this post.

  1. Posted by anonymous on September 29, 2016 at 2:35 am

    OK, but why the assumption that “member contributions will need to be returned upon plan bankruptcy”? It’s not at all clear that members have an unalienable right to the amounts they paid in, in the event of BK. Seems to me that they’ll plead their case to the BK judge, and the judge’ll decide whether anyone gets out whole versus who takes a haircut and how much.

    Reply

  2. Posted by skip3house on September 29, 2016 at 8:35 am

    hunter

    am I missing something here? If it was worth 79 billion and now it’s 73 billion, that’s a loss of 6 billion right? wouldn’t that be a loss of around 7 1/2%? where do they get .87%?……..comment in nj.com

    Reply

    • Posted by skip3house on September 29, 2016 at 8:41 am

      Shmoe

      @hunter some of the valuation change is due to lpayments to recipients, not all market change……….comment in nj.com

      Reply

  3. Posted by Anonymous on September 29, 2016 at 11:32 am

    Wouldn’t state and local employer contribution amounts be needed for a correct calculation? Legally only a certain percentage of the funds can be invested. So is this a scenario or actual?

    Reply

  4. Posted by George on September 29, 2016 at 11:36 am

    ” one market correction (or Trump victory) ”

    The die for the next President have been cast as the cliche goes:

    The Donald Nailed It: “We Are In A Big Fat Ugly Bubble”
    http://davidstockmanscontracorner.com/the-donald-nailed-it-we-are-in-a-big-fat-ugly-bubble/

    You are investing too much hope in one person, whatever will happen is going to happen. Not to mention Pres. Clinton might actual keep up her belligerent ways only this time actually succeed in provoking a war with a major power. Both in the Ukraine and Syria she or similar type ladies (Nuland and Powers, and earlier Rice and Albright) came fairly close to an actual confrontation between the US and Russian military. So in short I think Clinton will just make things much worse than they need to be. But you never can tell.

    Reply

  5. Posted by Javagold on September 29, 2016 at 12:49 pm

    Tick Tock. Public Takers. Tick Tock.

    Reply

  6. Posted by S Moderation Douglas on September 29, 2016 at 1:27 pm

    For what it’s worth. In California, five percent of every check was deducted for CalPERS (now ten percent). Every year, CalPERS sent me a statement showing how much I had contributed that year, how much interest I had earned*, and my total balance.
    If I had quit (or was fired) before vesting (5 years), all that money, including interest, would have automatically been returned to me. Once I had vested, they still sent the statements. If I quit after ten years, fifteen, whatever, I had a choice of withdrawing all that money, including accumulated interest, to roll over into an IRA, or pay taxes and penalties and spend as I see fit. It was considered MY money. If I chose to leave the funds in the system, I could then begin to draw a pension at age 50 or later. (1% times FAS at 50, or 2% times FAS at 60, with no retiree healthcare).

    *Interest earned was 6.2% annually. I never saw a written requirement for that figure, but that’s what it calculated to, every year, through boom or bust.

    I don’t know the law on New Jersey, but I assume all those workers with a balance would like to get back AT LEAST what they put in, plus interest.

    Reply

    • Posted by anonymous on September 29, 2016 at 5:02 pm

      I’m gonna get my courage up and ask my 401K-manager for these terms (if investment returns disappoint, you pay me back AT LEAST what i paid in, plus interest at a rate that far exceeds the current market rate for riskless savings.) I’ll let you know how that conversation goes. But seriously, while this may well be the CalPERS terms that an individual could take when times were good, it’s not clear how it would be handled if everyone tried to claim these terms (it’d effectively be a bank run on CalPERS, who wouldn’t have the assets, liquid or otherwise, to make good)

      Reply

      • Posted by S Moderation Douglas on September 29, 2016 at 8:00 pm

        I suspect contributions to your 401 (k) are not mandatory; deducted automatically from your salary every payday.
        And does your 401 (k) manager have the courage to tell you that, by the way, there’s a good chance you may never see some or all of your contributions, but you have no choice but to continue contributing ten percent anyway.

        Reply

        • Posted by anonymous on September 29, 2016 at 9:53 pm

          I see your points, but don’t fully agree. There are instances in which employees are forced to pay in to a DC plan, whether or not they wish. I also take your point about risk, but in the case of a 401K, (or 403B, etc.) the employee is the one taking all the risk; even if the market-value crashed to zero the employee would have no legal recourse whatsoever. Whereas it sounds like even in the event of plan-bankruptcy, each NJ public worker retains a legal right to all of the principal deducted (albeit involuntarily) from their paychecks plus generous interest-rate assumptions. I think this is what you and “dentss dunnigan” were describing above in earlier comments — am I interpreting correctly? Am I mis-understanding your point about who bears what risk?

          Reply

  7. Posted by Anonymous on September 29, 2016 at 4:44 pm

    Doesn’t appear to be relevant to public pensions. Especially considering most of the private pensions filing for BK reference on this blog had plan assets well below employee contributions for some time?

    Reply

  8. John,

    Do you have a guess as to when the depletion dates will be for the biggest funds? (let’s assume a 0% average investment return)

    In 2014 Moody’s said PERS would zero-out in 2024 and TPAF would zero-out in 2027.

    But the dates must be closer now, right?

    Reply

    • Posted by Anonymous on September 29, 2016 at 7:39 pm

      I think TPAF depletion date is earlier than PERS (State). But with the previous post on apparent underfunded transfers probably need to look at funds a one pot of money? Pending lawsuits of course.

      Reply

  9. Posted by boscoe on October 2, 2016 at 12:04 am

    I try to be a voice of reason, but no matter how you slice and dice it, this is some scary shit.

    Reply

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