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  #91  
Old 01-18-2017, 10:35 AM
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OHIO

http://www.thenews-messenger.com/sto...sion/96661754/

Quote:
Damschroder | How to protect your state pension
John Damschroder, Columnist

.....
The retirees badly want to believe their pension leaders, but they all realize the Ohio public workforce is now paying more into the retirement system for benefits that are less generous than they were several years ago. Good old Sandusky County common sense tells them multi-billion dollar benefit cuts and contribution increases that add billions to the investment pool over the years are not indications of financial strength.

If Sandusky County PERI members doubt the claims from Columbus that the pension system is “rock solid,” what can this small group do? Here are four suggestions:

1. Know the Numbers: The facts revealed in the very recent Ohio Comprehensive Annual Financial Report (CAFR) provide the basis to ask tough questions. The 2016 CAFR shows all Ohio public pension funds ended fiscal 2016 with less money than they started with in fiscal 2015. The Ohio pension funds went from $194.2 billion to $185.1 billion in a year. Because two-thirds of the money to pay the retirement benefits to future generations of PERI members must be generated by earnings on investments, this is a signal that Ohio leaders are misrepresenting the financial status of Ohio’s pensions. The state’s required accounting shows the unfunded liability for these pensions increased by 40 percent in 2016, while pensions leaders were proclaiming their financial strength in columns and letters submitted to The News-Messenger.

2. Know the Implications: Ohio’s pensions assume that the massive power of compound interest will work for their members and provide the funds to secure their retirement. But anyone who’s ever carried a credit card balance knows compound interest can work against you, too. Ohio’s market-lagging investment returns are falling way behind the future obligation that is incurred each year, meaning despite contribution increases and benefit cuts, the gap is growing — fast.

3. Know the Risks: Ohio pension funds are quick to tell you the big number on the dollars they control and the dollars they pay. The funds are huge — combined they total more than 30 percent of Ohio gross state product. The $15 billion they paid in benefits last year carries the same impact as a payroll for that amount would, but if the money pipeline should run dry the people collecting the pensions have little chance of replacing the dollars by getting a job. Ohio’s pensions are shifting quickly out of hedge funds, eliminating $20 billion from that asset category, but the pensions have more than $22 billion in real estate and more than $19 billion in venture capital. A recent change by the Government Accounting Standards Board GASB-72 requires the state to shine some light on the dark alternative investment values, and the early results are brutal. Ohio shows real estate assets with a fair market value of $9.2 billion that are valued at only $1.2 billion in the active market for identical assets, causing Ohio to declare $8 billion in real estate value that is based on significant unobservable inputs. Venture capital investments with a fair market price of $1.4 billion show $794 million of unobservable inputs, as quoted prices for identical assets are valued at just $657 million. Reading between the lines, Ohio has huge dollars invested in assets that are currently worth less than the original purchase price.

4. Hold Leaders Accountable: The people who hold top positions in Ohio’s retirement funds and the political leaders who are responsible for all of the operational parameters of these funds are misleading PERI members about the funds' status and results of their stewardship. Strong pensions don’t cut benefits and increase contributions when they are meeting investment return objectives. Ohio’s retirement funds have increased their risks and decreased their returns which would normally be cause for immediate termination.

.....
John Damschroder, a Fremont native who worked in Gov. George Voinovich’s administration, writes about business and economic development in Sandusky County.

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  #92  
Old 01-18-2017, 11:07 AM
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LOS ANGELES, CALIFORNIA
(potentially) CRIMINAL RETIREE

http://unionwatch.org/convicted-not-...t-big-pension/

Quote:
Convicted or Not, L.A. Sheriff Baca Will Collect a Big Pension

Leroy “Lee” Baca, the man served for 16 years as L.A. County’s top cop, has admitted to charges of lying to the FBI in a coverup of inmate abuse at the county jail. But even if convicted, the retired Los Angeles County Sheriff will continue to receive retirement benefits – today valued at more than $342,000 annually.

A conviction would put him in a unique position to corner the prison commissary.

Baca’s legal saga is a circuitous one. In February 2016, he accepted a deal with the U.S. Attorney under which he would plead guilty to one count of making a false statement to federal authorities. In July, a federal judge threw out the agreement because Baca’s maximum six-month sentence “would trivialize the seriousness of the offenses” he acknowledged committing.

Baca withdrew his plea, and his trial in December ended with a hung jury. In addition to a possible retrial, Baca still faces a second trial on two other counts.
.....
After a series of further investigations and lawsuits (including one in which he was found personally liable for an inmate beating), Baca resigned as Sheriff in 2014 and began collecting his generous pension.

.....
So, if Baca was convicted of official corruption in Arizona, he would lose his entire pension. In California, he will face only a slight reduction of benefits since his alleged crimes were committed near the end of his career. By the time of his alleged misconduct, he had already put in more than 30 years as an unelected Sheriff’s department employee.

Similarly, Undersheriff Paul Tanaka, who has already been convicted and incarcerated for his role in the jail beating scandal and coverup, should be able to continue receiving almost all his retirement benefits – which totaled $229,000 in 2015.

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Old 01-18-2017, 11:08 AM
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HOUSTON, TEXAS
FIREFIGHTERS

http://www.chron.com/news/politics/h...g-10863306.php

Quote:
Firefighters on pension reform: Let's keep talking

Lawyers at the Capitol in Austin are busy turning Houston's landmark reforms to the police and municipal pensions into legislation, but negotiations between Mayor Sylvester Turner and the firefighters' pension fund have not reached that point.

The fire pension board, having cancelled a special meeting to discuss the reforms last Friday, didn't do a whole lot to clear up their timeline at a Tuesday meeting. The board did, however (with city appointee Arif Rasheed opposed) approve the following motion:
"The fund's objectives are (A) to give appropriate support to measures to accomplish reasonable benefit reductions and member contribution increases that can lessen the fractional part of total firefighter benefits costs contributed by the city consistent with providing secure benefits, and (B) to continue to discuss with the city the possibility of reaching agreed terms and legislative language that would legally and constitutionally accomplish the objectives stated in Part A of this motion."

That's a mouthful, but it seems the most relevant six of those 73 words are "continue to discuss with the city."

Fire pension board chairman David Keller said there are significant issues that need to be resolved between the two sides before it can be said a final deal has been reached, but he stressed that his board has continued to negotiate in good faith.

"There was this big expectation that there was some nefarious thing going on," Keller said. "We'll continue to discuss it with them as long as they're willing to discuss it with us."
......
Just as fire pension leaders have felt stymied by the city in negotiations ("They're not being as cooperative on the language as we'd expect them to be," fire board vice chairman Stephen Whitehead said), city officials have thought fire pension leaders have moved sluggishly.
It's not clear exactly how long the mayor is willing to continue talks before deciding whatever language is in progress must be turned into legislation, but he did express a sense of urgency after last week's council meeting on the topic.
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Old 01-18-2017, 11:09 AM
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SAN JOSE, CALIFORNIA

http://www.mercurynews.com/2017/01/1...ayment-fiasco/

Quote:
Editorial: Fixing San Jose pension overpayment fiasco

San Jose’s pension overpayment fiasco — with mistakes going back some 20 years — is doubly frustrating because there’s nobody around to blame.

Here’s who is not to blame, however: The retirees.

The city council and retirement boards need to keep that in mind when they decide how to handle the overpayments — some in the hundreds of dollars, some in the thousands and a few in the tens of thousands, totaling around $1 million.
Public money paid improperly is supposed to be returned by law, but sometimes a payment demand doesn’t seem quite right. The Pentagon learned this last year when it tried to recover bonuses California National Guard recruiters had used improperly to persuade soldiers to re-enlist during a war. Congress intervened to let the veterans keep the money.

The city case is different — retirees here weren’t given the extra money to go risk their lives — but rules sometimes need a human touch in enforcement.

There are pension problems for two groups of San Jose retirees. For non-public safety workers, 25 were promised or paid more under the retirement plan formula than the IRS allowed. That seems like the fault of the plan, although the retirement board is suing the city to make up the difference. A dozen retirees were overpaid.

The public safety plan’s problem is greater and more complex, affecting 300 of the 2,000 safety retirees. Going back nearly 20 years, some city finance staffers — most or all of them probably long gone — miscalculated pension payments for retirees.

For public safety, take-home pay can include overtime and a whole range of other add-ons, some of which should not be used in pension calculations. The potential problem showed up in a 2009 audit, but it took seven years to sort out, staff says, because all 2,000 retirees’ numbers had to be checked through complex records–many on paper–and because the period coincided with drastic budget cuts in the city, leaving the finance staff stretched paper thin.

Pension payments will be adjusted going forward, but the city and the boards are still pondering how to deal with recovering overpayments to make the pension plans whole.

Some say the retirees should have known their pensions were off. But if the formulas are so complicated that city finance staff couldn’t keep them straight, how could retirees? Probably a few had an inkling they were getting a little extra, but it wasn’t like finding an extra million dollars in your checking account and just going out to buy a yacht.

The boards and the city need to work with retirees individually on reasonable repayment plans. That appears to be happening. There may already be hardship cases, particularly for older retirees, that require creative financing — or even some measure of forgiveness, if that can be done without entitling everyone to a free ride.

In the abstract, every penny should be paid back ASAP. But taxpayers are human. They may understand the value of cutting some slack for folks facing hardship because of mistakes others made long ago.
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Old 01-18-2017, 11:24 AM
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UNITED KINGDOM
JUDGES

https://www.theguardian.com/law/2017...im-against-moj

Quote:
Judges win pensions discrimination claim against MoJ
More than 200 judges whose entitlements were cut argued they suffered age, gender and race discrimination

More than 200 judges whose pension entitlements were cut significantly have won their claims for age, sex and race discrimination against the Ministry of Justice.

The employment tribunal ruling, which may extend similar pension protections to employees in other parts of the public sector, could cost the government up to 118m if lost benefits are fully restored.

The case was brought by six high court judges along with 204 crown court judges, district judges, sheriffs and tribunal judges.

The six high court claimants were Sir Nicholas Mostyn, 59, Sir Roderick Newton, 58, Sir Philip Moor, 57, Dame Lucy Theis, 55, Sir Richard Arnold, 55, and Sir Rabinder Singh, 52.



They alleged they were discriminated against on the basis of age following the 2012 introduction of new judicial pensions that required employee contributions. Theis and Singh additionally claim gender and race discrimination respectively.

The previous, generous judicial pensions provided an income of a 40th of a judge’s final pensionable pay multiplied by his or her length of service. It also gave a lump sum on retirement after the age of 65 of two-and-a-quarter times the annual rate.

The employment tribunal judgment found that the MoJ and the lord chancellor, who is now the justice secretary, Liz Truss, had discriminated against younger judges by requiring them to leave the judicial pension scheme in April 2015 while allowing older judges to remain in it. That discrimination could not be justified, the tribunal judge Stuart Williams concluded.
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Old 01-18-2017, 11:25 AM
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http://www.teacherpensions.org/blog/...on-liabilities

Quote:
What Are the Options for States Dealing With Unfunded Pension Liabilities?

.....
1. Wait and see. This is the approach most states are taking. They’re essentially hoping that stock market returns will surpass their assumptions and allow their investments to grow enough to wipe away their debt. This hope isn’t without precedent. Around 2000, at the end of the dot-com boom in the 1990s, the typical pension plan was fully funded (see Figure A here). Unfortunately, state legislators acted as if those market returns were the norm, and they proceeded to dramatically cut contributions and enhance employee benefits retroactively.

.....
2. Restructure the debt. This is another common choice for states. Rather than dealing with the debt, they might just change the time period for when they have to pay it off. Imagine you have a 30-year mortgage on your house. After a couple years, you decide that you can’t meet the full monthly payments, so you take out a 30-year loan on those monthly payments as well. This may sound crazy, but some states do this automatically every year, while others revisit their decisions every couple years and promise to really, seriously, finally, make their payments this time. Generations of politicians have all made the same promises.

3. Cut benefits. State pension debts are promises to retirees, and it might be tempting for some state leaders to try to trim the debt by cutting those promises. That could involve anything from reducing cost-of-living adjustments given to retirees or altering the formula for current workers. While these approaches could lead to large cost savings, and there are some approaches that would only affect teachers with many more years left in the profession, as a general rule I would caution states against cutting benefits. There's big financial gain, but large potential downsides in terms of political, legal, and moral backlash.

4. Offer pension buy-outs. Another way to reduce pension liabilities is to get people to voluntarily opt out of them. By offering upfront cash payments, states may be able to induce some teachers to switch from the current defined benefit plan, with large and unpredictable debt costs, to more predictable defined contribution plans. When presented with such a choice, we don’t know if teachers would make smart financial decisions, or if there might be some perverse incentives for people who take up the buy-out offers, but judging by places that have tried similar efforts, there might be large portions of teachers who would prefer upfront cash payouts over long-term pension promises.

5. Issue bonds. State pension debt is flexible, and legislators have a tendency to shirk their long-term pension funding responsibilities in favor of other, more immediate spending priorities. That pattern has led us to where we are today, where states have over-promised and under-saved. States could decide to commit themselves to a more tangible payment schedule by issuing “pension obligation bonds.” Bonds would force states to make regular payments, and, in theory, they offer the state a way to reduce their obligations. After issuing bonds paying interest at, say, 5 percent, they would invest the proceeds and hope that they could earn a higher rate of return over the life of the bond.

.....
6. Find new revenue. This is perhaps the best option, but I haven’t seen many states try it (with some exceptions). There are lots of choices here, though. My personal preferences would be for states to impose a new consumption tax on something that’s bad for the world, like gambling or carbon emissions or sugar or cigarettes, but states could also impose a special tax on millionaires or rent out some state asset (like highways or parking lots). The specific solutions would vary by the state, but the important thing would be finding a new source of revenue to pay off pension debts.

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Old 01-18-2017, 11:32 AM
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DALLAS POLICE AND FIRE
HOUSTON FIREFIGHTERS
TEXAS

http://www.dallasobserver.com/news/t...ut-now-9090709

Quote:
Fine. Any day now Dallas is going to go hat-in-hand down to the Texas Legislature, that famous factory of therapeutic thinking, and ask it to cure the city’s police and fire pension problems. Me, I’d just as soon walk into the bus station and ask if anybody could help me count my money, but then it’s not my say-so, is it? So down to Austin we go, heigh-ho.

.....
A study by the Kinder Institute for Urban Research, a think tank housed at Rice University, found that Houston’s three pension systems had a total unfunded liability of $7.8 billion. Comparing that to our own unfunded liabilities in Dallas is a bit of an apples/oranges problem, because we haven’t been lumping our civilian employees pension fund in with the two uniform funds, police and fire, in talking about shortfalls. But if we did, our total unfunded liabilities would be about $5.92 billion.

I get that number by taking the unfunded liability amount described in the mayor’s lawsuit against the police and fire pension fund, $3.77 billion, and adding it to the unfunded liability amount for our civilian fund, $2.15 billion. We took care of the civilian fund in November by voting to approve a reform package, but – stick with me – I’m just making a point: total liabilities in Houston are substantially higher than ours. We have to fill a $3.77 billion hole. Houston must fill a $7.8 billion hole.

So the therapeutic thinking committee should be happy to see us, right? We have way less of a problem. Heck, they could fix two of us for one of Houston.

No. Wrong. Houston doesn’t have a problem. In Houston, Mayor Sylvester Turner, an experienced politician, has crafted a fix for the city’s pension funds that looks as if it won’t cost Austin a nickel. Houston is taking total responsibility for its own issues, fixing its own pension funds, and people at Houston City Hall are not suing each other or calling the cops on the cops the way they are at Dallas City Hall. We’re the ones with a City Hall process that looks like Sarah Palin’s family picnic, while the process in Houston so far, by comparison, looks like church.

Under the Turner deal in Houston, the unions have agreed to take a haircut on pension benefits that will amount to $2.6 billion or exactly a third of the unfunded liability. Turner has agreed to back a special bond election to produce a $1 billion cash infusion for the fund. That will take Houston’s total unfunded liability down to $4.2 billion, which the city says it can get rid of over 30 years within the amount it spends now to maintain the fund.

You will recall that Dallas police and fire officers rejected a similar haircut deal in a union election last month. But that was in the context of the mayor suing them over lump sum withdrawals. The vote to reject the deal also came after the mayor, speaking to the State Pension Review Board in Austin, said the idea that Dallas City Hall should kick in $1.1. billion to help fix its own pension mess was a “ridiculous suggestion.”

.....
So let’s say it’s Rawlings and Turner representing their cities, and Turner gets to go first because his city is bigger. He puts his deal on the table, tells the committee his city is on the hook for $1 billion, tells them it’s taken care of, maybe shows them the note for the bond issue, tells them they don’t have to put in a nickel, and asks them to sign off at the bottom of the last page.

Scratch, scratch, scratch. Signed, sealed and delivered. “Next!”

Rawlings goes in, puts his deal on the table, tells them he’s suing his own cops and firemen, plus he sicc’d the Texas Rangers on them, plus they got pissed and rejected a compromise, plus he needs the committee to give him a check for a billion dollars … please.

See what I mean?

In this world, you don’t just ask for a billion dollars in a vacuum. It turns out that lots of people would like a billion dollars. I personally would accept much less than that. If Rawlings succeeds in getting that billion, I’m going to down there and find that same committee and ask for $100. My argument will be that it’s not that much.

To be halfway serious about this, I can’t imagine how Dallas could even allow itself to get into its current situation knowing what kind of compromise package has been put together by Houston, the city’s closest peer and competitor. It’s an example of a peculiar persistent disinclination on the part of the city’s old leadership to look beyond the city walls for guidance and context.

......
We got here the same way Houston did. We screwed up. We made some mistakes. The whole question now is how we fix it. And that will require real political wisdom and true political leadership, not bully-pulpit posturing.

I guess there’s always the chance I’m just wrong about Austin and somebody down there will shrug and say, “Yeah, what the hell, give Rawlings his billion. It won’t break us.” But if that does happen, I’ll tell you what: I’m going to change my mind and ask for a full $200 for myself.


http://www.valuewalk.com/2017/01/dal...ust-beginning/

Quote:
The Dallas Pension Fiasco Is Just the Beginning

The recent blow-up of the Dallas Police and Fire Pension System was entirely predictable. Whilst it is tempting to blame unusual circumstances for the recent lock-up of redemptions and likely substantial reductions to pensions for those still in the fund, many other American pension funds are heading down the same road. The combination of overpriced financial markets, inadequate contributions and overly generous pension promises mean dozens of US local and state government pension plans will end up in the same situation. The simple maths and political factors at play mean what happened at GM, Chrysler, Detroit and now Dallas will happen nationwide in the coming decade. So, what’s happened in Dallas and why will it happen elsewhere?


.....
Dallas Pension – The Interplay of Political Decisions and Financial Reality

The factors that led to Dallas pension fiasco are all too common. Politicians and their administrations often make decisions that are politically beneficial without taking into account financial reality. A generous pension scheme keeps workers and their unions onside, helping the politicians win re-election. However, the bill for the generosity is deferred beyond the current political generation, with unrealistic assumptions of future returns enabling the problem to be obscured. As financial markets tend to go up the escalator and down the elevator it is not until a market crash that the unrealistic return assumptions are exposed and the funding ratio collapses.

This is when a second political reality kicks in. In the case of Dallas, there are just under 10,000 participants in the pension plan compared to 1.258 million residents in the municipality. Plan participants therefore make up less than 1% of the population. If the Dallas municipality chose to fully fund the Dallas pension plan it would be require an enormous increase in taxes from the entire population in order to fund overly generous pensions for a very small minority of the population. For current politicians, it is far easier to blame the previous politicians and the pension board for the mess and see pensions for a select group cut by half or more than it is to sell a massive tax increase.

The legal position remains murky and it will take some time to clear up. The municipality is paying 37.5% of employee benefits into the pension plan, the maximum amount required by state law. Without a change in state legislation, it seems likely that the Dallas pension plan will have to bear almost all of the financial pain through pension reductions. If state legislation was changed to increase the burden on the municipality years of litigation could ensue with the potential for the municipality to declare bankruptcy as a strategic response. The appointment of an administrator during bankruptcy could see services reduced and/or taxes increased, but pension cuts would be all but a certainty.

....
Dallas Pension – Will be Reduced, but Bondholders Will Fare Worst

The playbook from the Detroit bankruptcy is likely to be used repeatedly in the coming decade. When a bankruptcy occurs and an administrator is appointed a very clear order of priority emerges. Firstly, services must be provided otherwise voters/taxpayers will leave or revolt. There may need to be cuts to balance the budget but if there is no police force, water or waste collection the city will cease to function.

Secondly, pensions will be reduced to match the available assets quarantined to meet pension obligations and the ability of the budget to provide some contribution. If the budget doesn’t have capacity or the legal obligation to contribute more to pension funding, pensioners should expect their payments to be cut to something like the funding percentage. For Dallas and the Dallas pension plans in Illinois this means payments cut by more than half.

Third in line are financial debtors. Bondholders and lenders don’t vote and they are seen as a bunch of faceless wealthy individuals and institutions who mostly reside out of state. They effectively rank behind pensioners, who are people who predominantly reside in the state and who vote, even though the two groups technically might rank equally. This makes state and local government debt a great candidate for a CDS short as the recovery rate for unsecured debt is usually awful in the event of default.

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Old 01-18-2017, 11:33 AM
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SEC
PAY-TO-PLAY

https://www.sec.gov/news/pressrelease/2017-15.html

Quote:
10 Firms Violated Pay-to-Play Rule By Accepting Pension Fund Fees Following Campaign Contributions
FOR IMMEDIATE RELEASE
2017-15
Washington D.C., Jan. 17, 2017 — The Securities and Exchange Commission today announced that 10 investment advisory firms have agreed to pay penalties ranging from $35,000 to $100,000 to settle charges that they violated the SEC’s investment adviser pay-to-play rule by receiving compensation from public pension funds within two years after campaign contributions made by the firms’ associates.
According to the SEC’s orders, investment advisers are subject to a two-year timeout from providing compensatory advisory services either directly to a government client or through a pooled investment vehicle after political contributions were made to a candidate who could influence the investment adviser selection process for a public pension fund or appoint someone with such influence. The SEC’s orders find that these 10 firms violated the two-year timeout by accepting fees from city or state pension funds after their associates made campaign contributions to elected officials or political candidates with the potential to wield influence over those pension funds.

“The two-year timeout is intended to discourage pay-to-play practices in the investment of public money, including public pension funds,” said LeeAnn Ghazil Gaunt, Chief of the SEC Enforcement Division’s Public Finance Abuse Unit. “Advisory firms must be mindful of the restrictions that can arise from campaign contributions made by their associates.”
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Old 01-18-2017, 11:34 AM
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https://www.ft.com/content/0bf48242-...c-f253db7791c6

Quote:
Health of US public pension funds improves
State and city retirement systems are starting to close a $3.4tn funding hole



The health of public pension funds in the US has improved markedly, according to new research. This will reduce fears that ailing retirement plans could push cities across the US into Detroit-style bankruptcies.





According to figures from the National Conference on Public Employee Retirement Systems, a trade body for public pensions, US state and city retirement systems are closing a huge funding hole that has emerged since the financial crisis.

The average funding ratio — a measure of assets to liabilities — of US public pensions increased to 76 per cent in 2016, up from 74 per cent in 2015.

A combination of lower costs, stronger returns and rising bond yields have helped increase the cash levels of pension funds, although they remain a long way from the 95 per cent funding level reported in 2007.

The funding deficits of public pension funds jumped after the financial crisis, putting enormous pressure on cities and states to cut spending or raise taxes. This led to concerns that some retirement funds might not be able to pay out in future.

Large pension shortfalls have already played a role in driving several US cities, including Detroit in Michigan and San Bernardino in California, to file for bankruptcy.

Hank Kim, executive director and chief counsel of NCPERS, said pension trustees, managers and administrators are working hard to ensure public retirement funds are sustainable.
.....

Four in 10 have also reduced their actuarial assumed rate of return, while 30 per cent more said they are considering doing so in the future.

Last year, Joshua Rauh, a senior fellow at the Hoover Institution, a think-tank, and professor of finance at the Stanford Graduate School of Business, said the “true extent” of the crisis in the US public pension system had been obscured because plans calculate both their costs and liabilities on the assumption that they will achieve returns of between 7 and 8 per cent a year.

According to Prof Rauh’s research, the US’s public pension funds had developed a $3.4tn funding hole.

But Mr Kim said: “All signs point toward continued improvement in increasing public retirement systems’ funded status.”


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Old 01-18-2017, 11:35 AM
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CALIFORNIA

http://www.mercurynews.com/2017/01/1...supreme-court/

Quote:
Editorial: Pension reform in hands of California Supreme Court

The California Supreme Court has an opportunity to correct its mistakes and enable state leaders to rein in excessive public-employee pension costs.

Two appellate courts recently ruled that state lawmakers may alter retirement benefits for current employees. They said workers’ pension rules may be changed during their careers so long as they still receive “reasonable” benefits.
That’s a radical departure from decades of rulings suggesting pension benefits could not be reduced. Once granted higher accrual rates, workers were thought to be permanently entitled to them.

Whether the Supreme Court agrees will profoundly affect California lawmakers’ ability to slow soaring retirement costs strangling state and local governments.

It also might enable practical unions to negotiate changes for current employees, depending upon how broad the decision is.

Before San Jose’s pension reform discussions devolved into a ballot measure-lawsuit morass during former Mayor Chuck Reed’s administration, police union leaders said they’d be willing to negotiate small rollbacks that would save the city millions in the future and still provide reasonable pensions. But they were prevented by law from making that kind of deal on behalf of officers.

As background, remember that pension calculations rely on three factors: an employee’s years on the job, final salary and a multiplier determined by the worker’s retirement age.

The latest appellate court ruling, issued Dec. 30, pertains to years on the job. Under a 2003 law, workers could purchase “airtime,” credit for extra years they didn’t actually work.

“While a public employee does have a ‘vested right’ to a pension, that right is only to a ‘reasonable’ pension — not an immutable entitlement to the most optimal formula of calculating the pension,” wrote Associate Justice James Richman.

The benefit was supposed to be cost-neutral. The California Public Employees’ Retirement System would calculate the airtime price based on how much it expected to earn from investments.

But CalPERS consistently overestimated future investment returns and underestimated the lifespan of retired workers. Consequently, CalPERS did not charge enough for airtime. And workers got a sweet deal at taxpayers’ expense.

The Legislature and Gov. Jerry Brown in 2012 ended airtime. State firefighters sued, claiming they were permanently entitled to the benefit.

.....
The earlier appellate court ruling, issued in August, pertains to the salary used for pension calculations. A separate 2012 bill ended schemes county pension systems had permitted that inflated final salaries.

Marin County workers sued, claiming they were promised they could spike their pensions so they were legally entitled to do so. The appellate court rejected that argument.

“While a public employee does have a ‘vested right’ to a pension, that right is only to a ‘reasonable’ pension — not an immutable entitlement to the most optimal formula of calculating the pension,” wrote Associate Justice James Richman.

The Supreme Court has said it will review that ruling and similar pending cases from Contra Costa, Alameda and Merced counties.

If it agrees with the “reasonable” standard, that could also affect California’s ability to roll back overly generous benefit formulas.

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