Public Pension Poll – Right Answer

The question was:

While there has been recent progress, over the past few decades, the state has fallen behind on paying the full contribution needed for long term funding of pensions of public sector workers, like teachers and police officers. Some people say that it’s important to honor the commitments the state made to these workers; others say that the promised benefits were too generous, and we can’t afford to pay for them.

The unscientific poll we had here mirrored what the FDU poll people got and the top two answers were both wrong:

State should make full pension paymentsOverallMurphyCiattarelli
Should Pay Full Amount738263
Shouldn’t Have to Pay201330
DK/Ref757

Given the information supplied in the question the only reasonable response is “Don’t Know/Refused to Answer”.

“Full contribution” is not defined and, if it were, the definition would either be (a) the ridiculously understated amounts that actuaries are forced to come up with that will not meet the full commitments and continue to increase unfunded liabilities under honest assumptions or (b) what would be needed to properly fund accruing benefits and make up past shortfalls which would triple the contributions currently being made.

With that information a few answers should change. To what depends on which definition is provided.

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Another great clip related to My Dinner With Andre:

4 responses to this post.

  1. Posted by Ray Shorter on October 22, 2021 at 11:40 pm

    Local 707 had their application redacted, what does that mean?

    Reply

    • I got that email (pasted below) but did not think it rose to putting up a blog on. Main thing it means is that someone at PBGC is reviewing the file. 707 used the wrong table in their filing (though they blame PBGC instructions) and they have to refile to get around $2 million less than they originally applied for. Main question is whether the reapplication would start a new 120-day period.
      Incidentally, the SFA website has put the actual submissions for the first 3 plans filed up. 707 is 425 pages:

      Click to access road-carriers-local-707-sfa.pdf

      Don’t plan at looking at detail yet but another plan was added to the listed so there will be a blog on it later today.

      Email from 707 that was sent out 10/21/21:

      Several weeks ago the Fund received notification the PBGC discovered an issue with the guidance they supplied Funds to apply for Special Financial Assistance (SFA). Without getting too technical, the amount of SFA is based on the amount of the Fund’s liabilities calculated using the Third Segment Rate as defined by IRS tables. These Tables measure corporate Bond Yields over time and are used to by the Statute to determine the amount of money we receive as a lump sum for liabilities over 30 years. The mistake in the guidance was the IRS table we were directed to use, included interest rate stabilization rules. The correct table does not include interest rate stabilization rules. By using the wrong table the Fund would receive an additional $2 million.

      As this was the PBGC’s error we expected the PBGC to make the adjustment and proceed processing our application. Recently, the Fund was contacted and advised we need to withdraw and refile our application using the correct IRS table, despite the fact we followed the guidance the PBGC supplied.

      Originally, we expected to quickly withdraw and refile. After discussing with the PBGC we all agreed to allow PBGC to continue reviewing our application to determine if there may be other adjustments needed to our application. The PBGC assured us progress on reviewing our application will continue and gives us the opportunity with their input to enhance our application without needing to refile our application more than once. With technical assistance from the PBGC, the Fund already identified areas that can increase the amount of Special Financial Assistance that would have required withdrawal and refiling of our application to take advantage of.

      Although, the 120 day clock technically begins again when we refile our application, we believe there will be no delay in approving our application.

      Our Fund was the first to file an application and still fully expect our Fund to be the first application to be approved!

      I will continue to keep you updated as our application proceeds through the application process. Feel free to email me with any questions you may have.

      As always thanks again to Senate Majority leader Chuck Schumer for his continued support.

      Reply

  2. […] problem PBGC has with this filing appears to be that an interest rate of 5.32% was used for valuing liabilities which happens to be […]

    Reply

  3. […] The problem PBGC has with this filing appears to be that an interest rate of 5.32% was used for valuing liabilities which happens to be 2% plus the first HATFA Segment Rate when it is the third PPA Segment Rate to which the 2% should have been added. Per the IRS website (scroll down a little to Funding Table 3), that rate would likely have been the April, 2021 rate of 3.52% which would have made 5.52% the rate to be used for valuing liabilities (thus lowering the liability value as the higher the interest rate the lower the value). The tricky part is that the PPA third Segment Rate has been going down and is now 3.34% as of October, 2021. […]

    Reply

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