Archive for the ‘Actuarial Math’ Category

Muoio the Same for NJ Pensions

Acting New Jersey Treasurer Elizabeth Maher Muoio, a lawyer and politician, made news by raising the funding interest rate for the worst-funded state pension system. She defended the action to Michael Aron:

With no relevant financial experience in general, and certainly nothing with pensions, we get inanities like this…. Continue reading

Ill. Idea: More POBs

Having the state with the lowest credit rating for a U.S. state, ever, sell $107 billion in Pension Obligation Bonds (POBs) is an idea that will take an extraordinary amount of salesmanship. Here is the pitch by Professor Runhuan Feng (University of Illinois) in conjunction with State Universities Annuitants Association presented yesterday to the Illinois legislature.

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Accounting, Politics and Public Pensions in the US

The latest issue of Accountancy, Business and the Public Interest, Vol. 16, p. 87-107 includes a paper that begins:

This paper reviews the political rationale of public pensions and implicates the accounting profession in facilitating the accumulation of public pension debt through complex technical jargon and flexible reporting practices. Using theories of political economy, we explain how defined benefit pension plans offer politicians a convenient way to satisfy public employee demands while providing the means to defer budgeted cash payments and obscure the accumulation of public debt from taxpayers.

More excerpts:
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The American Legislative Exchange Council (ALEC) came out with a report last month based on their review of the latest available actuarial valuations of more than 280 state-administered pension plans and adjusting the discount rate from an average of about 7.37% to a ‘riskless’ rate of of 2.142%. Unfunded liabilities came in at $6 trillion.

Today the National Association of State Retirement Administrators (NASRA) rejected ALECs report, saying its findings contain “serious flaws.”

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Phonier Actuarial Assets

It is called asset smoothing and public plan actuaries use it to pretend that their clients have more money in their funds so they can contribute a little less. They call it ‘actuarial’ (as opposed to ‘market’) value and in the latest set of Statutory Funded Ratios for their Retirement System New Jersey goes beyond what anyone ever did to phony up assets.

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NJ Pension Contribution Calculations – 2017

The interest rate in the latest set of actuarial reports for the New Jersey retirement system was lowered from 7.65% to 7% and those responsible for the FY19 budget had some qualms in part because:

The move added billions of dollars to the state’s dizzying pension debt and more than $800 million to the contributions actuaries recommend employers make in the fiscal year beginning July 1, according to an NJ Advance Media analysis of actuary reports released Tuesday.

I also did an analysis:

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NJ Actuarial Reports – The Believable Numbers 6/30/17

The June 30, 2017 actuarial reports for the New Jersey Retirement System are out and there are a few numbers therein that can be taken seriously (none involving liabilities or even the market value of assets considering all those self-valued alternative investments). The main purpose of these official actuarial reports is to determine the ‘required’ contributions which practically all parties have a vested interest in understating so we get a bunch of fanciful numbers where possible. However, these numbers you can’t pretty up:

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