Archive for the ‘Actuarial Math’ Category

417(e) Barometer

The 417(e) segment rates for April, 2022 were just released and two takeaways:

  1. 50 basis point increase in one month indicates that lump sums being paid out of Defined Benefit plans will be greatly decreased in 2023 from 2022; and
  2. The economy is in a recession similar to 2008-9.
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NJ OPEB Update – 2020

There are three separate reports for state, local government, and local education which throw a lot of distracting numbers at you but, when added up, show that after an amazing 1/3rd reduction in the total OPEB Liability (from $110 billion as of 6/30/16 to under $74 billion as of 6/30/19) the state actuaries sharply reversed course.

Here is how they did it.

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NJ OPEB Partial Update – 2020

Per The Center Square:

New Jersey officials have disclosed a roughly $27 billion increase in liabilities for retiree health benefits, according to an analysis from Moody’s Investors Service. According to the Moody analysis, the state said its Education Retired Fund liability would increase from $41.7 billion to $67.8 billion. The liabilities for retiree health benefits – known as OPEBs – were largely driven by “higher projected medical costs,” Moody’s said.

However, there is more to the story and a full update is coming when the state website releases the reports for the State and Local Government portions. In recent years these values have been dropping primarily due to assumption changes but apparently the state is changing course to make these benefits appear costlier – for some reason.

Here is the partial update.

 

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SFA Bailout: 0% = $6.1 Million

The Carpenters Industrial Council of Eastern PA Pension Fund is asking the government for $14,137,881 under the multiemplolyer bailout program. Template 4 of the application is where the requested amount is calculated. The PBGC provides that template and here is what I get from making up my own sheet* using the plan’s data with a 5.38% assumed interest rate for future earnings instead of 0%.

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My SFA Blunder, But….

In reviewing the amounts that insolvent multiemployer plans were asking from the government under the PBGC Special Financial Assistance program I noticed that the Carpenters Industrial Council of Eastern PA Pension Plan was looking for much more money when compared to their RPA liabilities then every other plan. I assumed this was a mistake in the 6/1/19 Schedule MB filing where the interest rate used for valuation purposes was left blank so 0% was used in the application calculation.

I now see my mistake. 0% was the interest rate they intended to use for the 6/1/19 valuation but how they got there makes what they did much worse, primarily for other actuaries.

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SFA First Withdrawal

The PBGC Special Financial Assistance program for troubled multiemployer plans now has 19 applicants as the first plan to apply became the first to withdraw:

Road Carriers Local 707 Pension Plan08/13/2021WithdrawnPDF

Here is how Local 707 explained it in an email blast and what I think happened.

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Nailing SFA Rate Blunder

In comparing how much bailout money insolvent multiemployer plans are asking from the government to what they reported as unfunded liabilities on their latest 5500 filings some substantial differences come to light.

For example, one plan asked for $14 million when their unfunded liabilities are $6.5 million. Now that I understand how these calculations are done that mystery is cleared up.

Here is a listing of those 20 plans with what they requested, what they reported as their unfunded liabilities using RPA rates (about 3%), the percentage of that unfunded liability that the requested bailout would cover, and the interest rate used to calculate the SFA liabilities that the request was based on.

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SFA Update and Detail

No new filings but the Teamsters Local 641 Pension Plan application was posted, coming in at a record 920 pages, so here is a listing of those 20 plans in the pipeline with what they requested, what they reported as their unfunded liabilities using RPA rates (about 3%), the percentage of that unfunded liability that the requested bailout would cover, and the SFA interest rate used to calculate earnings.

Then let’s look at how Local 641 arrived at their requested amount.

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Interesting SFA Rate Blunders

In comparing how much bailout money insolvent multiemployer plans are asking from the government to what they reported as unfunded liabilities on their latest 5500 filings some substantial differences come to light. Now that most of the applications are online and the interest rates used for valuing SFA liabilities have been divulged the idiocy of the method the PBGC forces these plans to use comes into focus.

Here is a listing of those 20 plans with what they requested, what they reported as their unfunded liabilities using RPA rates (about 3%), the percentage of that unfunded liability that the requested bailout would cover, and the interest rate used to calculate the SFA liabilities that the request was based on.

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SFA Bailout: Tracking the Actuaries

Nineteen insolvent plans using 7 different actuarial places have now applied for the SFA bailout. In theory the calculations should come out the same whichever actuary you use but, in practice so far, there are differences among actuaries in how much bailout money plans are requesting compared to the unfunded liabilities they reported on their Schedule MBs.

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