Smoothing the Truth (NJ TPAF)

The New Jersey Teachers’ Pension and Annuity Fund (TPAF) is abysmally funded which necessitates a certain amount of lying so as to keep contribution amounts down and the people who might make trouble reasonably quiescent.  One of the more pernicious machinations the actuarial profession has condoned is asset smoothing which in the case of the July 1, 2016 TPAF actuarial valuation means pretending to have $27,169,758,348 in assets in the plan when you really* only have $23,732,571,086. Milliman brings this $3.4 billion into existence thusly:

Yes, they pretend that the trust will make 7.9% regardless of what actually happens (with a modest 20% adjustment in the differences that emerge). Drawing from calculations over the last few years shows that the actuarial values have consistently been much higher than the market values:

  • July 1, 2012: 119.4%
  • July 1, 2013: 113.4%
  • July 1, 2014: 105.1%
  • July 1, 2015: 107.5%
  • July 1, 2016: 114.5%

This was not the original intention of asset smoothing but it is the current role this gimmick plays in the public plan world. What is most striking is that if you project the figures out using reasonable assumptions as to the increase in negative cash flows (something else to note) and $0 earnings (very possible per the footnote below*) this spreadsheet has you winding up no assets in the plan as of July 1, 2021 but the actuaries telling you there is $3.7 billion somewhere. Where exactly I guess will be left for the retirees to figure out.




* No, not really as there are all those Alternative Investments included whose purveyors make more in fees as the value of their products inflate – and they get to value those products themselves.

18 responses to this post.

  1. Posted by truesally on March 7, 2017 at 6:09 pm

    If the %7.9 projected return is dropped to a level that is more attainable ( 6.5%) it would require employees as well as employer to make bigger contributions ….


    • It wouldn’t effect employees in any way as their contribution amounts are arbitrarily set and it would also not impact contributions local or state governments might since, according to the NJ Supreme Court, those can also be arbitrarily set regardless of what the actuaries put out there.


  2. Posted by Anonymous on March 8, 2017 at 6:19 pm

    Hey John (or anyone else out there with the expertise and the ‘Big Kahunas’) when do you think you’ll be ready to tackle this Country’s ‘elephant in the room’ the Federal (pay as you go) pension and benefit deficit?


    • Posted by Anonymous on March 8, 2017 at 9:38 pm


      With few exceptions, you never address NJ’s problems and all of your comments simply try to move the discussion away from NJ (and similar Local and State) pension problems and the rather obvious and necessary solution, that being a significant reduction in these promises.

      No one is fooled.


      • Posted by Anonymous on March 9, 2017 at 8:17 am

        It’s not just NJ. John posts several times regarding private multi employer funds. Who’s fooling who retired Military??


      • Posted by Anonymous on March 9, 2017 at 8:49 am

        Here’s what I find interesting and foolish. All special interests believe they are deservant of what ever it is they were promised and earned. Except for the special interests other than theirs. Each and every special interest has their litany of justifications to substantiate their claim. Which of course is irrelevant to the rest of us.


        • Posted by bpaterson on March 9, 2017 at 3:00 pm

          same sentiments behind the G.R.I.P voter movement gearhardt of 101.5 was pushing. sure others should vote out their incumbant but not mine he is swell. And so the most corrupted state in the nation becomes more corrupted.

          and to the other anonymous, its JB1’s blog, he can blog on whatever factions he wants and is probably most familiar with. There probably is federal pension blogs around for you to mull.


          • Posted by dentss dunnigan on March 10, 2017 at 8:01 am

            Well said sir ….some Hillary voters never give up on bashing trump ….

          • Posted by Anonymous on March 10, 2017 at 8:54 am

            DD you’re pathetic, in BP’s response to anon nowhere was there a bashing of let alone a mention of Trump or Hillary. Just keep up your pattern of deflection and distraction!

  3. Posted by Anonymous on March 9, 2017 at 12:11 pm

    They’re leaving in droves, yup it’s me master of deflection and fake news – The Prez!


    • Posted by bpaterson on March 9, 2017 at 3:06 pm

      wonder if the public pension is considered an asset in this study, which financial consultants do when figuring retirement. At just a $50k/annual pension threshold as a millionaire, that certainly would bigly swell the ranks of multimillionaires in the state. Not good news for the bulk of us working stiffs in NJ that shoulders the burden of cost.


      • Posted by Anonymous on March 9, 2017 at 6:30 pm

        Really come on now, it’s not nor ever based on some future value of an income stream – we all know you can’t take that to the bank, can you?


      • Posted by truesally on March 10, 2017 at 9:24 am

        Oh well easy come easy go …While the household median income in 2015 increased by 5.2 percent nationally, the household median income in New Jersey went from $71,994 in 2014 to $72,222 in 2015.
        That 0.3 percent change in New Jersey was dead last among U.S. states. In fact, the New Jersey median income hasn’t increased or decreased in a statistically significant way since 2011.


      • Posted by MJ on March 10, 2017 at 5:03 pm

        bpaterson, I was wondering the same thing myself…the public workers are the new NJ millionaires with their overly generous pensions, benefits, pay outs, etc. wonder if all of that was considered in this study


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