New Disclosure Rules Expose Bad Actuarial Finance; Obscures Trillions of Public Pension Debt

An article by Larry Pollack, a consulting actuary with his own take, focuses on the problem:

The Actuarial Standards Board (ASB), which defines professional standards for actuaries, finally acknowledged the criticisms and adopted a requirement for actuaries to calculate and disclose – starting with funding reports to be published (mostly) in 2024 – a liability measure more consistent with finance principles. The new measure provides valuable information not previously available, although it is not perfect, and, importantly, it will not affect actuarially-determined contributions or financial accounting. Further, many prominent and influential public pension actuaries are rejecting this opportunity to educate their clients and the public about how much worse the funding of public pensions is versus what’s commonly reported. Instead, these actuaries have aligned with major public pension advocacy groups in developing a toolkit as part of a campaign to help actuaries and public officials divert attention from the significance and implications of the new figure.

So what is it the ASB wants actuaries to disclose?

Pew Ranks – 2021

The Pew Charitable Trusts released their annual funding gap study based on data from the CAFRs of over 230 public pension plans.  Of interest:

Trends in State and Local Pension Funds

Marketwatch saw reason for worry in a report put out by economics professors Oliver Giesecke and Joshua Rauh of Stanford University based on a study of 647 state and local pension plans that pegged the market value of the unfunded liabilities of these plans at approximately $6.5 trillion.

Excerpts follow.

ALEC Has It At $8.2 Trillion*

The American Legislative Exchange Council (ALEC) came out with a report today based on reviewing the latest available actuarial valuations of more than 290 state-administered pension plans and adjusting the discount rate from what was an average of about 7.71% last year to a ‘riskless’ rate that might be 1.13%.

The Labor Guide to Retirement Plans (II)

A book to educate labor people to argue for keeping their underfunded defined benefit plans with Social Security as the gold standard. Throughout my reading/skimming I often wanted to challenge the author on some points* including this one about cash balance/401(k) combo plans in the private sector:

The Labor Guide to Retirement Plans (I)

A book to educate labor people to argue for keeping their underfunded defined benefit plans with sprinklings of propaganda.

Tap Into Taxpayer Apathy

As is the case in many large organizations, the staff provide direction to the board, rather than vice versa.

Jeffrey C. Hooke – The Myth of Private Equity (pages 10-11)

The quote refers to public pension boards, specifically in Maryland, but applies equally to government boards like the Union County Board of Commissioners who define the art of rubber stamping. This time a media outlet, Tapinto Westifield, noticed possibly on account the massive size of the raises the honchos employed at Union County are giving themselves (throwing in a little something for the board members as well).

For example, at this rate of salary increase, you may be interested to know what year County Manager Ed Oatman will be making over a million dollars in annual salary.

State of Pensions 2021

The Equable Institute released a report on the “current status of statewide public pension systems, put into a historic context” focusing “on the largest statewide retirement systems (measured as those with at least $1 billion in promised benefits)” which has some interesting charts but suffers from the failings most of these think tank summaries have in that they take CAFR numbers seriously.

Pew Ranks – 2019

Yesterday the Pew Charitable Trusts released their annual funding gap study based on data from the CAFRs of over 230 public pension plans.  Of interest:

Teacher Retirement Systems: A Ranking of the States

Bellwether Education Partners is a “national nonprofit focused on dramatically changing education and life outcomes for underserved children. [They] do this by helping education organizations accelerate their impact and by working to improve policy and practice.” And making good money* doing whatever that means.

Apparently this think tank got some interns to go through official teacher pension data reported by the 50 states and the District of Columbia to come up with rankings. New Jersey was not last overall (probably on account of the ARP money that went into the pension this year) but Medium-term and Long-term New Jersey did come in last…..and by a lot.