Archive for the ‘Public Pensions – General’ Category

Employees Paying For Their Own Pensions In New Jersey?


Alicia H. Munnell, director of the Center for Retirement Research at Boston College, in a WSJ blog believes that benefit cuts for New Jersey retirees should not be considered  in part because “New Jersey benefits for current employees are now significantly below the national average and employees pay most of the costs.”

This statement strikes one as odd since the latest valuation reports show employee contributions at $1.93 billion while government contributions are at $2.98 billion but Ms. Munnell is obviously referring to the annual accrual of benefits known as the Normal Cost which, according to the July 1, 2013 actuarial reports, does show employee contributions covering 65% of that Normal Cost for the five largest plans ($1,874,252,148 out of $2,897,259,254 in this spreadsheet).  But there is a reason for that.

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Complaining About Public Plan Actuaries


“This session is not being recorded but you may be quoted in John Bury’s blog”

Lance Weiss kicking off Session 704 – Public Employee Retirement Systems Workshop – today at the  Enrolled Actuaries meeting at which this interesting tidbit came out.

 

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Public Plan Actuaries as the Disease


“The Society [of Actuaries] needs to stop treating its members as some disease that the public has to be protected from.”

Paul Angelo, Public Plan Actuary one hour ago at a session on the Public Pension Plans Blue Ribbon Panel at the Enrolled Actuaries meeting to applause

 

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ASOP 27


The 2014 Enrolled Actuaries meeting kicked off with a review of ASOPs and I had a question about ASOP 27 as it applies to public plans.

 

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Walter Mead Nails 3 of 4 Conspirators


Fox Business is focusing on the public pension crisis and their latest video has Bard Professor Walter Mead describing the conspiracy among government officials, politicians and union leaders that got us here:

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Yet conspicuous by their lack of mention….

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SOA Panel States the Obvious – Though Not to Everyone


The New York Times reported today that a “blue-ribbon panel of the Society of Actuaries — the entity responsible for education, testing and licensing in the profession — says that more precise, meaningful information about the health of all public pension funds would give citizens the facts they need to make informed decisions.”

Basically the report made four very sensible recommendations that most citizens would be amazed had to even be recommended.  Anyone without ulterior motives should have no problem agreeing with three of them:

  • a plan’s funding goal should always be 100 percent
  • disclosure of a “standardized plan contribution” that would be calculated by all plans using the same discount rate and funding methodology
  • not using funding instruments that delay cash contributions (i.e. Pension Obligation Bonds)

Then there is the tricky, though no less valid, recommendation:

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Detroit Pension Cuts


According to a story in the Detroit Free Press:

Orr proposed 34% cuts to the pension checks of general city retirees and 10% to police and fire retirees.

But those cuts would be reduced to 26% and 4%, respectively, if the city’s two independently controlled pension boards agree to support the plan of adjustment.

The difference is probably because retirees in the General City plan likely get Social Security benefits.

The bottom line:

  • Benefit accruals under the current formulas cease as of June 30, 2014
  • GRS benefits cut 34% for retirees and beneficiaries with the July, 2014 check, 34% (and maybe more) for those still working, and no mention of vested terminees
  • PFRS benefits cut 10% for retirees and beneficiaries with the July, 2014 check, 10% (and maybe more) for those still working, and no mention of vested terminees
  • Hybrid plans to be set up for workers to accrue benefits after July 1, 2014 as part of a “hybrid program that will contain rules to shift funding risk to participants in the event of underfunding of hybrid pensions”
  • A bizarre carrot allowing for an undefined “restoration payment” in 2023 if a plan is 80% funded but requiring the interest rate used for valuing liabilities to be 6.25% for GRS and 6.5% for PFRS.

The full text of the plan is out and here are the excerpts relevant to the Detroit GRS and PFRS:

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AAA Punts


It seems every actuarial report prepared for a public pension plan is by an actuary claiming as their qualification for providing such report membership in the American Academy of Actuaries (AAA). So when the AAA came out with an issue brief titled “Objectives and Principles for Funding Public Sector Pension Plans” one would expect it would have some influence……except when it’s this lame.

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PBS Punts


The Public Broadcasting Service (PBS) has recently been doing a series on public pensions in peril which seems to have kicked off around the time that Fox Business began their Pension Crisis: The Gathering Storm series.  PBS put up an infographic,  looked at a global perspective, and focused on Illinois and California providing valuable coverage of the next major bust (which will be on a scale that will dwarf the predatory lending fiasco of the last decade).  However the series will end because the funder has been linked to an agenda (which presumably anyone who funds or advertises on public media needs to be devoid of).

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Rhode Island Settlement and Shifty Actuarials


Rhode Island appears to have reached a settlement agreement with some public employees who are suing them over reforms, including a COLA cutback:

Under the settlement, the state’s unfunded pension liability would fall to $5.05 billion, down from an unfunded liability that approached $9 billion before reform action was taken from 2009 to 2011. The state’s reform had originally called for paring the unfunded liability to about $4.8 billion.

How do we know that these billions of dollars in savings will materialize and Rhode Island pensions will be saved?

Because some actuaries said so in a report using methods consistent with industry standards including the three big lies of public pension actuarial prognostication:

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