Posts Tagged ‘public’

Jig Is Up for Public Plan Actuaries

Today the New York Times noticed though they framed it as a dispute between two camps.  There is no dispute.  All you need is a working knowledge of annuities and government and the facts of the situation are indisputable.

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Detroit Ramblings

There is so much about the Detroit bankruptcy (even if it doesn’t hold up) that will impact all public benefit plans and government finance in general for decades yet there are several related issues (none worthy of a full blog post yet) that I have not seen addressed:

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Detroit Driven Like Studebaker

Detroit filed for bankruptcy today. The details of how they will default on pension promises to 32,000 people remains a deep dark secret but we do have precedent in the private sector and there may be a silver lining playbook in Detroit.

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Hatching a Bad Idea

“America cannot continue sleepwalking into the financial disaster that awaits us if we do not get the public-pension debt crisis under control,” Mr. Hatch is set to say in prepared remarks on the Senate floor Tuesday. “The problem is getting more serious every day and cannot be remedied merely by fine-tuning the existing pension structures available to public employers.”

Mr. Hatch said his proposal, which would not be mandatory for governments, offers cost certainty for state and local governments and steady retirement income for their employees.

WSJ, July 9, 2013

Acknowledging that there is a “public-pension debt crisis” is a good first step but proposing that insurance companies fix it through deferred annuities is naive and dangerous because it ignores some basic facts:

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Pushing Public Employees to Retire

School superintendents are by far the highest paid government employees in New Jersey, making even more than heads of some Utilities Authorities, though they do need to come to work occasionally.

Governor Christie makes $175,000 in salary so in 2010 he imposed that as a prospective cap on superintendent salaries.

In an article today, a purported blowback example is provided in the retirement of Judith Wilson who has 35 years of service with a salary of about $225,000 and is retiring on a pension of $144,000 at age 56 rather than swallow a pay cut.  What that writer is missing…..

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Not the Path but the Driver

Yet politicians’ current approach to evading such opposition—that of adopting incremental reforms while repeatedly deferring liabilities—is no longer viable.

The structural defects of defined-benefit plans, as well as their implication in a system of decision making impaired by political considerations, necessitate a wholesale shift from defined-benefit to defined-contribution plans.

Fixing the Public Sector Pension Problem: The (True) Path to Long-Term Reform

The quotes come from a well-reasoned paper by Richard C. Dreyfuss setting out the problem, debunking faux solutions, and offering a five-point plan for comprehensive reform that I too advocate as obvious. The problem is not with the proposed reforms, which are viable, but with those who would be charged with implementing them, like this guy:

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New Jersey Pension Reform – A Model for America?

Keith Brainard of NASRA didn’t think so, saying that “New Jersey would make a terrible place on which to base pension policy”:
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whereas our governor in the 30 seconds he devoted to public pensions in his state of the State address sees what New Jersey is doing as a “Model for America”:
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He might be right, but is that a good thing?
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