Archive for the ‘Actuarial Math’ Category

Pension Black Magic

What you get out of this discussion on Reporters Roundtable this morning about the scheme to move the New Jersey lottery into the pension system is confusion about how this will save any money:


  • black magic
  • counterintuitive
  • found money

Not really. Here’s the deal…..

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Puerto Rico: Pay-As-You-Exit

Actuarial reports, especially for public plans where they are available online, wind up being similar not only as to funding gimmicks but also appearance. When an actuary comes up with an idea that reduces contributions or imbues the presentation of a hopeless situation with a sense of normalcy others pick up on it.

The June 30, 2015 actuarial report for the Puerto Rico Government Employees Retirement System (PRGERS) presented such a challenge for Milliman and here is how they stepped up:

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EA4: Interest Perspective

Much more on the 2017 Enrolled Actuaries meeting in the next week of blogs, including the situation with church plans and cities that tried going from DB to hybrid plans, but first a game-changer for me on interest rates.

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EA3: Pensionmania

406 – Current Events in Public Plan Funding Policy
April 04, 2017 11:00 AM – 12:30 PM

The Conference of Consulting Actuaries’ (CCA’s) Public Plans Community’s white paper “Actuarial Funding Policies and Practices for Public Pension Plans” has been a resource for actuaries for over two years. Many public sector retirement systems have implemented new funding policies based on actuarial principles similar to those in the white paper. Alternatively, an interpretation of financial economics on funding may look much more like private sector plan funding. Speakers discuss these different approaches, as well as how they may or may not align with the objectives of the plan sponsors.

In one corner, from parts unknown, it was Ed Bartholomew of Building Better Pensions espousing the Financial Economics position and his tag-team partner Bob North, former chief actuary for New York City where he pioneered the inclusion of  alternate liability values (MVABO) in NYC actuarial reports and CAFRs.

Opposing them are the Actuarial Realists who are working public plan actuaries: Paul Angelo from California and Sherry Chan, the current New York City chief actuary who took Bob North’s MVABO numbers out of the NYC actuarial reports.

Let’s get ready to rumble:

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NJ Actuarial Report Contributions

The July 1, 2016 actuarial reports for the New Jersey Retirement System plans are out and their main practical purpose is delineating the contributions for the fiscal year ended June 30, 2018. That total contribution amount would be $6,768,969,201 except we have laws that bring it down to $4,260,031,483 ($2,508,937,717 by the state and $1,751,093,766 by localities) with public workers expected to contribute another $1,977,904,061.

By far the largest portion of that total calculated contribution (84.6%) is the 30-year amortization of the underfunding which comes to $5,724,532,942 and develops through a combination of missed contributions and absurdly understated liability values.  Here are two worksheets taken from contribution exhibits with some observations:

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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:

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Actuarial Organizations’ Plans

All the actuarial organizations I know of are non-profits which means their 990 forms are on and their 5500 forms, if they have pensions, are on Going over this data two things stand out.

1)  These places pay pretty well judging by the salary of the highest paid official from each:

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