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  #351  
Old 05-15-2011, 07:45 AM
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http://powip.com/2011/05/public-pens...dline-edition/

Spoiler:
It's deep into publication deadline season for me (working on life reinsurance! Woo! This weekend! Awesome! Not!) so my editorial comments will be at a minimum.

Yeah.

Right.

EUROPE

Greece: their finances suck. Response? You know. The experts do not see this ending well, not just for Greece, but the entire eurozone (I like the restructuring option built into the bonds to begin with - if you were a sucker to trust Greece, or expect a bailout, you get what you deserve.)

UK: public employees to hold a more restrained set of strikes over pension cuts. Guys, doesn't matter if you go the violent route or the civilized route -- you're not getting your goodies. Because there's no one to pay for them.

Ireland: not doing so well, either. What are they going to do? Tax private pensions. A 60-basis point tax on assets. Per annum. "Temporarily". Uh-huh. Pull on the other one, it's got bells. Oh, but some people get better treatment than others. Surprise.

Some reactions to the Ireland plan. Pension professionals not pleased - well, duh, it would kill many private pensions. Leo Kolivakis rounds up more, and is also skeptical of how useful this will be.

The Irish people have been told to shut up and not to whine, because FISCAL ARMAGEDDON would result if they didn't go with the EU-IMF bailout. IMF, huh? Those guys have a good reputation, don't they?


OUR UNDERPAID PUBLIC SERVANTS

California lifeguards, making over 200K.

Illinois assistant superintendent of Education making over 300K, making 60K more than his supposed boss.

High-paid public employees is not just a U.S. thing. What was that about austerity in Ireland again -- evidently not everyone gets hit.

A public hospital CEO given $4M in pension benefits.

SOCIAL SECURITY

A report came out. Social Security is in the red from now on...til something changes. And something will change. The problem is now, not when the lie that is the Trust Fund is depleted.

GENERAL PENSION STUFF

USPS ain't doing so hot - it's not just a pension thing, but hey -- it's a big part of their problem.

Remember the injustice that the Wisconsin public employees were having their God-given rights to collectively bargain yanked away by harsh, unfeeling Republicans? Well, weep for this group of government employees who have never been given this right, and who might get their pensions cut.... federal workers.

Oh, and it's not just undercontributions and overgenerous benefit designs that got us into this mess. There's also pension fund corruption.

Just take a look at this graph... the horizontal axis is only a 11-year period, so why would that slope be so steep? Think about what's going on there.



Oh, all this public pension foo-fa-raw is pure envy on the part of the have-nots. Hmmm. What was that about class war, again? Didn't expect to be in the "have" class, now did we, union agitators?

CALIFORNIA

CHiPs get real and negotiate, bumping retirement age up to the ancient 55 years old. Hey, it's better than their prior eligibility age at 50. (and 3% per year? Holy crap, that's generous at any age.)

San Jose mayor declares fiscal emergency, pensions play large role.

A review of the pension pain precipice in Santa Cruz.

Cutting police and jail services to pay for pensions.

Sacramento County must hand over pension info to media, says court.

UC system benefit perk still paying out when it can least afford it (WARNING: NYT link).... this will play out interestingly.

CONNECTICUT

Step up, ladies and gentleman, and let me introduce you to your next version of Prichard, Alabama. I do not see the pensioners of Hamden, CT, doing well over the next five years. Why, do you ask?

Quote:
The town’s pension is 25% funded, and the mayor only allocated a <strong>$3 million contribution</strong>, or around 15% of the $19.85 million recommended by the town’s actuaries, for the upcoming fiscal year. The pension was closed to new enrollees in 2008, but supports 664 retirees and 568 active employees. The fund has only <strong>$75 million in assets</strong> and $242.3 million in unfunded liabilities. The pension <strong>pays out around $20 million each year to current retirees</strong>.
Yeaaaaaaaah. That's what we call unsustainable. This is a completely foreseeable disaster. It does not take fancy math to see that the money will run out in short order.

We see this on a relatively small scale - a town with a less than a couple thousand people impacted by the money running out. So what do we do when it's Illinois or New Jersey? Prichard retirees have not gotten bailed out, Hamden employees will not get bailed out, and when it's order of magnitude larger -- it's not going to get bailed out because there's no money of. Tough shit.

ILLINOIS

There's been a lot of politicking by state employees lately in Illinois. I don't think it's going to work -- because the hole is too big. But let's take these things one by one.

Don't break pension promises, say those from the public union side.

A TRS trustee writes a letter and Bill Zettler has some pointed questions to ask those on the teachers union side. (I will pick only a couple):

Quote:
4. Why are teachers allowed 2 years of sick leave credit when they retire adding enormously to the pension cost? No one in the private sector has that.
....
9. If pensions are reasonable how can a 54 year-old Music teacher retire on a pension of $130,000 after working only 33 years and contributing only $193,000? Since he retired in 2009 he has already received more than he contributed ($225,000). That does not seem reasonable to the 95% of IL workers who are not in the state pension system. The cash value of his pension is 8 times what Social Security would be for the same salary and years worked. Why does any public employee deserve more than 8 times Social Security?
There is a lot more at the link.


A police union leader again reiterates that pension promises must be kept.

From the business side, a call for reality -- and explains measures he had to take to make his private pension plan sustainable.

Overview of proposed pension changes, the main change being that employees would have to contribute a lot more to the pension fund...and the unions claim this to be unconstitutional. Oh, this should be interesting.

Picking low-hanging fruit: cutting a benefit for local pols.

KANSAS

Making the case that Kansas police retirees have a modest pension benefit. I'm going to go all actuary on your ass for a moment:
Quote:
Our retirees live to an average age of 72 — six years below the national average, according to the Centers for Disease Control and Prevention.
Let's go to the life tables, shall we? Life table for 2006 from the CDC, and historical life expectancy (go to table 22 if it doesn't take you there automatically). Now, these are general population mortality tables, which includes all sorts of sick people, but let's assume it's okay. First thing that's deceptive about his statement: I bet most of the retirees are male. There is a major life expectancy gap between males and females to begin with, which makes for a couple years difference between the general population life expectancy and male life expectancy. Secondly, that 76-ish life expectancy in the general population is 1. from birth and 2. assuming you were born after the 1990s (so it involves guesswork on mortality patterns). Well, were you?

In any case, the life expectancy stats include people who died in infancy and childhood and is not the proper number to compare against for pension plans. You should either use life expectancy from age you enter the plan (say, age 25 or 30), or retirement age (say 50 or 55).

Now, I don't have enough info to do a good comparison of the life/death stats on that pension plan and other pension plans/general population. I don't know what time period that life expectancy was calculated over... but more to the point, it might be irrelevant.

Sir, your retirees might die young, but I bet many of them have spouses/ex-spouses who get joint benefits. What are their ages? What have their death age distributions been like? You can have a policeman die at age 60 and his widow collects full benefits til she's 95. Let's talk relevancies.

Ok, enough actuary talk for this post. And if I screwed up any of the details above, I'm sure one of my fellow actuaries will set me aright.


MICHIGAN

Looks like that pension tax (oh, sorry, "curb on pension tax breaks") passed. Let's see what happens.


NEBRASKA

Not a generic public pension issue, but interesting trivia: criminal's pension protected from being garnished to pay for money he owes sexual assault victim. This is an ex-state patrolman child molester, if one wants to get more specific.

NEW HAMPSHIRE

Employees rush to retire. But hey guys, just saying -- being a retiree won't necessarily save you from fiscal pain.

Why are they rushing to retirement? Because of ongoing pension reform discussions.


NEW JERSEY

John Bury notes that New Jersey needs minimum funding rules on its pensions, and supports the passing of PEPTA, a federal bill requiring greater
transparency in public plan reporting.

Of course, even without those requirements, the bond markets are waking up to their risks.

And the various NJ unions are trying to remain relevant and hold onto what they've got in this debate. Good luck with that.

RHODE ISLAND

Pension reform goes out with a whimper... I guess when they run out of money will be the bang. More on the death of reform efforts this year. Pony up, taxpayers.

Looks like investigations into possible disability pension fraud is ongoing, though.
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  #352  
Old 05-15-2011, 10:46 AM
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http://www.post-gazette.com/pg/11133/1146244-53.stm

Quote:
Pittsburgh's pension fund is 33 percent funded, but city Controller Michael Lamb said it has closer to 57 percent of the funds it needs when city council's December pension bailout legislation is factored in.

At the city's Comprehensive Municipal Pension Trust Fund quarterly meeting Thursday, the city's pension advisers reported the fund had a balance of $333.56 million at the end of March, which is against roughly $1 billion in long-term liabilities owed to retirees and current employees. To avoid state takeover, the city has to prove it has at least $500 million in the fund.

Mr. Lamb, a pension board member, made a presentation showing that council's bill dedicating a portion of parking taxes over 31 years to the fund would generate a present value of $238.6 million, which should vault the fund to $572 million. Mayor Luke Ravenstahl's budget director Scott Kunka was not ready to confirm that number, saying it is subject to further study.

A final determination on the fund's status is not due to the state until September.

....
A look at the fund's performance by managers at Mercer Investment Consulting showed the fund's market value treaded water in the first three months of the year, growing 1.9 percent. Mercer is getting out of the municipal pension business, so the pension board voted to replace the firm with Marquette Associates of Chicago.
I never did hear what that screw-up was on the valuation on that last-minute calc EOY 2010...I still bet it was some stupid spreadsheet thing.
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  #353  
Old 05-19-2011, 05:46 AM
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Dont' know if anyone has posted this yet but:

Quote:
USPS warns of default on retiree benefits

The U.S. Postal Service will begin to default on its financial obligations just over four months from now unless Congress takes action to relieve it of its obligation to pre-fund retiree health care accounts, its leader told lawmakers Tuesday.

etc ...
Spoiler:
The U.S. Postal Service will begin to default on its financial obligations just over four months from now unless Congress takes action to relieve it of its obligation to pre-fund retiree health care accounts, its leader told lawmakers Tuesday.

USPS expects to post a net loss of $8.3 billion for this fiscal year, nearly as much as it lost last year. And with its $15 billion debt limit due to be reached this year, more borrowing is not an option, Postmaster General Pat Donahoe said in testimony before a subcommittee of the Senate Homeland Security and Government Affairs committee.

"Despite our aggressive cost cutting and revenue generating efforts, we are in serious financial predicaments today," he said. "As things stand, we do not have the cash to make the $5.5 billion prepayment for future retiree health benefits due on September 30. And we may be forced to default on other payments. This could extend to operational expenses."

USPS contends the prepayment for future retirees is a financial obligation that none of its competitors, nor any government agency, has to live with. The requirement came along with a 2006 postal reform bill that was passed when mail volume was at its peak.

Officials say the payments were also based on what was then a much larger employee base. USPS has cut its workforce by 113,000 since then. Donahoe said in written testimony to the subcommittee on federal financial management that not only can USPS not afford the future retiree health bill this year, but that without Congressional action, it's inevitable that the organization will eventually default on payments to employees and suppliers as well.

After the hearing, he told reporters that was a last resort, and skipping the retiree health payment this year would provide at least some breathing room.

"The last thing we would do would be to negatively disrupt the delivery of mail, because it's tremendously disruptive to American commerce," he said. "There's trillions of dollars that go through the mail. 52 percent of Americans still pay their bills through the mail versus online."

The postal service also wants Congress to refund up to $75 billion it says it has overpaid into the Civil Service Retirement System (CSRS), and another $7 billion in overpayments into the Federal Employee Retirement System (FERS). It would use that money to finish off its retiree health benefit prepayments and pay down its accumulated debt.

But Donahoe said those were short term fixes. Longer term health for the postal service, he said, means more management flexibility, including the option to go from six-day to five-day delivery.

He said USPS is also working to cut more costs by removing excess capacity from the postal system, including the politically-sensitive subject of closing post offices themselves.

"In some small offices, we're looking at consolidation because what we're finding is that many of these offices don't even have an hour's worth of work in a day," he said. "If it's close to another office, a mile or so, we can consolidate. In other cases, many towns have three businesses: a general store, a gas station and a post office. What we're looking for is to talk to the general store or the gas station to take a contract to provide postal services. There are many options, and we want to hear from people, but we have to move on these things."

Sen. Tom Carper (D-Del.), the chairman of the subcommittee, has introduced legislation that would give the postal service what says it needs. It would allow USPS access to the excess FERS and CSRS funds it has paid so it can pay off its retiree health benefits once and for all.

Carper said it would also let USPS management run the organization with less Congressional interference.

"No business, facing the kind of challenges the postal service faces today, would survive very long if they were told how many retail outlets they should have or where they should be located, or if they were prevented from making operational changes or taking advantage of the resources they have at their disposal," Carper said. "Yet that's what Congress does to the postal service."

Carper believes USPS needs to think of new ways to generate revenue, and his legislation would let it sell or provide non-postal products and services, as long as they're in the public interest.

His legislation also would let USPS ship alcoholic beverages for the first time.

"We think it's an excellent idea," Donahoe said."What the Postal Service brings is convenience in that whole industry. We've seen other posts—Australia Post for an example has done that—and that's one of their biggest growth products."

He said carriers would not deliver alcohol directly to a home, but would require an adult to pick the package up at a post office.

Several lawmakers expressed concerns about the five-day delivery idea, particularly members representing Hawaii and Alaska, where delivery times are longer, and residents, particularly in remote areas, are heavily reliant on mail.

And Sen. Claire McCaskill (D-Mo.) said USPS might be surrendering its biggest competitive advantage.

"If you were looking at this through the very cold lens of just a pure business model, you're giving away the major advantage you have when you give away that sixth day," she said. "What keeps us from going to four? If we go to five, aren't we really talking about the beginning of a death spiral here?"

Donahoe doesn't believe so.

He said Saturdays are easily the postal service's lowest volume day, because commercial advertising customers don't want their mailings to arrive on Saturday, when people are busy doing other things. Nonetheless, he said he was not particularly excited about eliminating Saturday delivery.

"We do not want to go to five day delivery," he said. "Financially, we're in a situation where we've got to take that as an option. It is tied directly to the loss of first class mail volume. America's changing. People are paying bills online. Every time a bill's paid online, that's 18 cents (of profit) we can't use to cover six-day delivery and a number of these small post offices."

On the subject of small post office closures, lawmakers heard some pushback from labor organizations. Mark Strong, president of the National League of Postmasters, said USPS spends less than one percent of its overall budget on the smallest one-third of its post offices. He said the organization should find new ways to use its physical locations, rather than shutting them down and contracting out their services.

"Post offices are where the American flag flies in every community in this country," Strong said. "To take those flags down and replace them with grocery stores or gas stations should be the last alternative. We should be putting more government services into those postal facilities."

In addition to Carper's bill, Sen. Susan Collins (R-Maine) has introduced a separate postal reform proposal that would order the Office of Personnel Management to recalculate USPS's contributions to federal pension accounts to prevent future overpayments.

Donahoe said USPS supported that bill, but without the extra management flexibility the Postal Service is asking for, he said leaders will be back before Congress next year, facing another looming payment default.

http://www.federalnewsradio.com/inde...35&sid=2387275
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Old 05-19-2011, 06:16 AM
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Thanks, Abnormal.

We've had a USPS post above, but there's always room for more.

It's like a zombie movie -- I've never heard complaints that someone put in too many zombies.
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Old 05-20-2011, 02:43 PM
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Quote:
Originally Posted by campbell View Post
It's like a zombie movie -- I've never heard complaints that someone put in too many zombies.
That was awesome.

Thanks for keeping the thread updated.
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Old 05-22-2011, 01:30 PM
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I'm just getting lazy. I'm not going to strip out the non-pensions stuff anymore, because all of this stuff is interacting now. [and cf the laziness thing]

http://powip.com/2011/05/sunday-chil...ons-22may2011/

Spoiler:
Sippin' on tea, the kids watching Dangermouse....got a little too much sun yesterday which doesn't mesh well with someone as pale as I.

Yeah, I'm logy.

But these posts pretty much write themselves, don't they?

PUBLIC FINANCE AND THINGS FALL APART

Greek bonds downgraded (warning: NYT link), and not by a little -- Fitch dropped them down three notches, which is a rather large movement. Sure, they were already in the junk range, but still. Things aren't going well there, and for all the whining over DSK's troubles being behind this -- no. Greek's clusterfark (attendant with pro-sucking-on-govt-teat-"anarchists") has nothing to do with Mr. Strauss-Kahn's belt issues, for all we'd like to say "entitlement" yadda yadda yadda. Even without DSK, this crap would have happened.

Reality hits Spain as well, as its social welfare system is unsustainable. I find it interesting how Socialists are in charge when the culmination of their systems have hit a demographic wall....and people get sour as the promises can't be fulfilled. Can get dangerous as other populists try to ramp up the promises, which are still undeliverable, sorry. You can't create 30-year-olds from thin air. Except in sci-fi novels.

Let's not get too uppity about European social welfare programs. Ignoring the whole "adult baby" brouhaha this week, there's something more structural awry given we are paying benefits for dead people in significant amounts.

From the WSJ, Jason Zweig writes why holders of U.S. Treasury bonds should be concerned about the possibility of different kinds of default. I think everyone is going to get a lesson in what structural default, technical default, outright default, etc. are in very short order. Bondholders should already know about this, but I'm sorry to say that those holding government bonds are not necessarily the most sophisticated of investors.

Uncertainty is what makes muni bond buyers bonkers

Joe Mysak calls Meredith Whitney to task about the very specific predictions she made re: municipal bonds, as Whitney goes to the pages of the WSJ to remind people that the muni armageddon is still to come, and that, yes, there are many ways to default. Going back to Mysak, I'm pulling this quote:

Quote:
In the modern era, there is little to suggest that serious public officials will shirk their duty to bondholders.
AH HA HA HA. "serious public offiials" Owie. Oh my side. Yeah. Serious public officials. You mean the ones who fashioned the back-DROP benefits? Those serious public officials? The ones who "funded" the plans with pension obligation bonds? Are those the serious public officials we're talking about? Do tell.


UNIONS SHTUFF

Right-to-work to make inroads into New England?



Unions remind Dems who's the boss. Or they hope they do. Dems may realize the unions are outnumbered by other voters at this point in history. But hey, cutting off the money can hurt.

How do unions affect state budgets? The duh conclusion:

Quote:
“The main differences between public and private sector come from economics,” said Norcross. “Private sector unions can raise their wages, but not their employment. By contrast, public sector unions can increase both wage and employment outcomes.”
Well, yeah, in the short run. But when fiscal reality hits, you can get a massive readjustment of those outcomes, as in Costa Mesa, California. Recently, after looking into a budget abyss, the city council laid off nearly half the current city workforce and outsourced their functions. And note, that doesn't mean a 1-to-1 replacement of jobs. And definitely not necessarily a replacement with a union job. Funny how assumptions can get altered in a hurry when reality hits and the money runs out. Rent-seekers have to be careful, otherwise they create their own destruction.



GENERAL PENSION ISSUES

U.S. Postal Service warns of potential default on retiree obligations

After all the fun beating up on state workers and their benefits, it's the federal workers' turn to become punching bags! And then a guy whose main constituents are federal workers objects! Shocker! Another shocker: federal employees aren't happy about it. I like how people mention that cutting benefits will make government jobs less attractive, as if that's a bad thing.

National teachers union realizes that spiking and double-dipping makes them (and DB pensions) look bad, so they say that it should be looked into.

ALABAMA

Finally. Pensioners in bankrupt Prichard have gone almost 2 years without payments, and there may be a deal on the table. They will probably never get their full promised benefits, but at least it's not zero.

CALIFORNIA

The Golden State Blues: George Will on how it fell apart in California

Request for investigation into disability pensions in that cesspit of government corruption, Bell, Calif.

It's going to be an interesting November in San Fran as Mayor Ed Lee says he's putting a pension reform proposal on the ballot with or without union agreement. Other groups have their own competing proposals they intend to get on the ballot.

Capitola working on lowering pension costs ahead of contract negotiations in 2012. Watsonville looking at its own costs. Ventura County has some eye-popping numbers itself. It's like it's some sort of widespread problem or something.

Steven Greenhut says yeah, it's kind of a widespread problem. And while it may look puny compared to the state budget, it's outsize for local budgets.

Seeking to cut down on pension spiking


ILLINOIS

So there's a lot of politicking going on in Illinois re: pension reforms. And, surprise surprise, there are dirty tricks. Some stuff on the actual bill under consideration.

Rahm was sworn in as Chicago's non-Daley mayor. Can he deal with the fiscal issues, and the pension problem in particular?

Consultant says retirees should pay more for their health benefits.

KANSAS

Pension reform bill goes to governor, but questions linger about to what limits reform can be taken.

MICHIGAN

Emergency financial manager's blanket powers in Benton Harbor bring spotlight and cries of oppression.... oppression of the fiscally inept. Poor babies.

Detroit Mayor Bing proclaims that there are savings in pension contributions because they changed the smoothing period for actuarial losses.... but no. No there aren't. Changing the method of funding the pensions doesn't change the cost of the pensions. You have to change the actual pension benefits to change their costs.

MINNESOTA

Minneapolis pension tension - two closed funds taking an outsize portion of the city budget, and an attempt to fold them into state funds. Minneapolis contribution to these funds would drop a great deal if this occurred.

NEW HAMPSHIRE

Negotiations on pension reforms continue. Both groups agree that public employees should work longer, contribute more to pensions, and for most plans, receive lower benefits. They're just wrangling over details now.

NEW YORK

Will Cuomo truly fix pensions? Let's ask Magic 8 Ball: My sources say no. Changing stuff for new hires does really nothing other than prevent problems from getting worse by too much.

Well, DiNapoli goes for some low-hanging fruit, preventing double-dipping, but that's not really going to save a bunch of money. But double-dipping doesn't make for good PR.

In pensions corruption news, Liberal Party ex-boss Ray Harding avoids jail time.

OHIO

A proposal to yank the pensions of corrupt pols -- I say let's be proactive. No pensions for any pols.

OKLAHOMA

Pension reform bill signed by governor

PENNSYLVANIA

Pittsburgh may have gotten over their math problems, but they still have huge fundedness issues with their pension plan and are trying to avoid being taken over by the state. Still. At some point, you'd think they'd just give up.

RHODE ISLAND

Something to look forward to: a report to be released on Monday by the state treasurer on just how much Rhode Island pension systems suck (just being a psychic here). A think tank already has put out its own report on the suckitude.

How much do they suck? The per capita debt is $30K.

TENNESSEE

Legislature passes bill to curb teachers unions, stripping them of most collective bargaining rights.



I'm going to pull out a particular link from the big pile, though, because it's something I've been following for a long time [yes, yes, I've been following all of this for a long time, but I want to note a recent development]: the bankrupt pensions of Prichard, Alabama:
http://www.fox10tv.com/dpp/news/loca...sion-agreement

Quote:
Pensioners who have gone nearly two years without receiving the pension they expected could soon see a check.

Friday, Mayor Ron Davis signed an agreement that puts some money back in their hands. The City of Prichard is one step closer to change, putting change back into the pockets of its pensioners.
....
The agreement calls for pensioners to receive one third of their payments plus a lump sum to cover a percentage of back pay. It also says one third any new revenue generated by the city must go to pensioners.
....
The agreement makes a lawsuit filed by the pensioners null and void.

Berg said the day is a bittersweet one since several pensioners have died waiting for payments.

"There have been 18 deaths and this week a retiree's wife died. We buried her yesterday it has been a difficult time for all of us," said Berg.

Berg said she knows she may never see the full amount of her retirement, but at least this is a start.

Before pensioners get their first check, a judge must sign off on the deal, but it is possible that pensioners could get their first check next month.

Not all pensioners were required to sign the deal.
So they may actually get some money. I wonder if the estates of the 18 people who died will get some of that.
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Old 05-22-2011, 07:56 PM
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eagerly awaits PPW part 4: the death scream
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Old 05-25-2011, 09:39 AM
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A new thread that is very related to the various stories herein:
http://www.actuarialoutpost.com/actu...d.php?t=217814
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Old 05-26-2011, 01:06 PM
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Default Segal - don't bother me with MVL

http://www.segalco.com/publications/...s/june2011.pdf

As expected, Segal plays to their audience. Market Value of Liability - who cares? These plans will never terminate.

Of course, they also dodged the questions that matter:

How do you expense the losses? Is it ok to have negative amortization?

How do you charge the agencies that encourage spiking?

What is a fair price for air-time?

How do you protect the financial security of the plan so costs are sustainable?
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Old 05-27-2011, 09:40 AM
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Certainly the Segal company is entitled to cater to its clientele.

But the document and its 2009 predecessor are written by actuaries and the collection of half truths may ultimately embarrass the profession.

The ABO assumes that service and pay are frozen at today's levels.
MVL assumes that the plan is terminated.
MVL assumes that the plan invests in Treasury securities.

are all good examples of misleading half truths. They are mechanically accurate but false in implication.
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