Posts Tagged ‘actuary’

Enrolled Actuaries Meeting 2014 – Miscellany

Among the noteworthy pieces of information that I got out of this week’s Enrolled Actuaries meeting which, though not the views of any employer of the speakers, I believe for the most part to be factual (except for maybe the first one which seemed like a joke):

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Detroit’s Official Valuation Reports are “No Proof”

The judge’s written decision to allow the Detroit bankruptcy is a fascinating read.  I am on my twentieth scan of pages 11 thr0ugh 16 which purportedly explain the COPs and Swaps Transactions and am still looking to unlock the mysteries of those words.  But it is the reference to the supposed $3.5 billion unfunded pension obligations on page 8 that validates a point that I have been trying to make here for years:

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The actuary as fall guy

According to Bloomberg New York City’s  chief actuary is recommending that the city’s $115.2 billion pension plans lower their assumed annual rate of return on assets to 7% from 8%, which would open a funding gap of at least $2 billion next year.  They go on to say that the city has already set aside $1 billion for the fiscal year beginning July 1 to cover an increase in its annual pension contribution.

So this sensible interest rate change will cost $2 billion and the city has $1 billion of that.  What about the other billion?

For that we turn to the New York Post which reports that, in addition to revising the rate of return, North is also recommending a change in key accounting practices which would allow the city to pass some of the costs to Bloomberg’s successors citing sources involved in the pension analysis who said North’s staff was concerned that too big a hit all at once could cause a budget catastrophe at City Hall.  “The impact would be too great,” said one analyst involved in the discussions between the actuary and the administration. “You have to look at the [city’s] ability to pay.”

No you don’t!

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Facilitators of the Retirement Heist

Accountants load the gun and actuaries pull the trigger which is what I’m getting from reading a new book by Ellen Schultz, ‘Retirement Heist’.

Ms. Schultz has obviously put herself through a grueling research regimen that would daunt Sebastian Junger to obtain her information.  No trips to the Kornegal Valley or Kosovo so far (I’m only up to page 81) but plenty of references to actuarial conference transcripts that led her to the conclusion that benefits consultants “played a huge and hidden role in the death spiral of American pensions and benefits.”

Here’s how they did it.

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Why Public Employee Unions Love Collective Bargaining

They own the table.

Perhaps it’s more obvious in Union County with less citizen oversight and solid one-party rule but here the governing body openly roots for greater benefits for their staff (even when they’re not family members).  For example, in February of this year Union County fully subsidized retiree health insurance for future non-union retirees (they had been 41% subsidized) with the rationale that those employees had forgone raises for a couple of years.  They gladly accepted an actuarial study showing a correlation between providing this $102 million benefit and the forgone raises.  This is the county’s negotiator:

On page 8 of the study Mr. Salemme refers to there is a spreadsheet showing savings for one year’s worth of salary increase forgone.  The second column starts with the number $968,375.45 (even extending to the penny for the appearance of exactness) which represents 3% of the average salaries of the 541 employees impacted.  The rest of the column simply multiplies that first number by 1.03 finally getting to $2,027,563.14 in year 25.  The third column accumulates the numbers to arrive at a ‘savings’ of $52,716,641.74 which is being touted as the total savings over 25 years of forgoing that 3% raise in 2011.  Total bullshit.

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New Jersey needs minimum funding rules

At the last Enrolled Actuaries meeting there was a session on public plans where the suggestion was made that pension actuaries in New Jersey should get more involved and speak out.  I disagreed and recommended an ERISA-type law for public plans.  Here’s how that played out:

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