Actuarial Outpost
 
Go Back   Actuarial Outpost > Actuarial Discussion Forum > Pension - Social Security
FlashChat Actuarial Discussion Preliminary Exams CAS/SOA Exams Cyberchat Around the World Suggestions

2016 ACTUARIAL SALARY SURVEYS
Contact DW Simpson for a Personalized Salary Survey

Reply
 
Thread Tools Display Modes
  #1051  
Old 07-31-2017, 06:00 PM
campbell's Avatar
campbell campbell is offline
Mary Pat Campbell
SOA AAA
 
Join Date: Nov 2003
Location: NY
Studying for duolingo and coursera
Favorite beer: Murphy's Irish Stout
Posts: 79,406
Blog Entries: 6
Default

KENTUCKY

http://nelsoncountygazette.com/?p=33129

Quote:
Bluegrass Beacon: Actuarial integrity key to repairing pension bridge

Friday, July 28, 2017 — Any retiree who worked as an engineer in building and repairing Kentucky’s buildings, highways and bridges should concur with a hearty “Amen!” for structural integrity, which indicates the ability of a structure to withstand a certain amount of intended weight without failing, fracturing or otherwise weakening.

If Kentucky is to fix its pension mess, then “actuarial integrity” must become to its defined-benefit system what structural integrity is to its physical infrastructure.

....
When the Kentucky Employees’ Retirement System was established in 1956, it was created as a linear system whereby actuaries determine each year’s benefit levels based on several factors, including anticipated investment returns, salary and payroll-growth rates, life expectancy, retirement age and attrition.
When beneficiaries reached retirement, their pension payments would come from a fully funded, actuarially sound system.
However, by allowing the load placed on Kentucky’s retirement bridge to increase by raising benefits established and funded in previous years, actuaries – pension-systems’ engineers, if you will – have compromised the integrity of our entire retirement system.
.....
Similarly, retirees and current beneficiaries in the commonwealth’s pension plans increasingly rely on a structurally deficient system to provide for them the rest of their lives.
A main contributing factor to this structure’s weakness is the poor performance of actuaries who work for Kentucky’s retirement systems and have given their wink-and-nod blessing to increasing the weight on our pension bridge without a corresponding expansion of its capacity critical for handling the heavier load.


Legislators too often have enabled this to happen without the proper understanding, oversight and questioning critical to protecting their constituents who pay for such shenanigans.

Actuaries know that ensuring the long-term sustainability of the systems requires strict adherence to the original benefits that were fully funded with normal cost payroll contributions.

Enriching these benefits after the fact may represent the worst assumption of all: future employers will have unlimited funding to pay the principal and interest required to fund unaffordable and retroactive benefit enrichments.

But who wants to bear such bad news to the folks who sign your checks, even if not doing so ends up being a large contributing factor to an entire state’s growing pension crisis?

The impact of an outside audit by the PFM Group on addressing the pension plans’ structural weakness likely will be as limited as the scope of its review.

By evaluating the systems only back to 2004, PFM’s audit simply cannot include the impact that increasing benefits and then applying those benefits retroactively in each of Kentucky’s retirement plans for years has exerted on weakening the integrity of our pension systems.

We’re still waiting on PFM’s final recommendations.

Perhaps the firm’s auditors will offer meaningful help in returning our retirement system to one based on actuarial integrity rather than debt, unfunded liabilities and unreasonable expectations by beneficiaries.

To do any less would be the equivalent of giving their own wink-and-nod – consciously or not – to weakening Kentucky’s pension bridge, in which case taxpayers should demand a full refund.
__________________
It's STUMP

LinkedIn Profile
Reply With Quote
  #1052  
Old 07-31-2017, 06:04 PM
campbell's Avatar
campbell campbell is offline
Mary Pat Campbell
SOA AAA
 
Join Date: Nov 2003
Location: NY
Studying for duolingo and coursera
Favorite beer: Murphy's Irish Stout
Posts: 79,406
Blog Entries: 6
Default

Pension cuts related to legal actions

http://www.northjersey.com/story/new...cut/512138001/

Quote:
Paterson cop in $2M sex case appealing pension cut

PATERSON – A former police officer who spent nine years on paid leave after being accused of forcing a woman in custody to perform oral sex on him is fighting a state board’s decision to cut his pension.

The former officer, Manuel Avila, is attempting to get a $72,000 annual pension, which would include credit for six years while he was suspended, according to public records. A state board has approved a reduced pension excluding those six years, which would give him an annual pension of $50,000, the records show.

The six years in question represent the time Avila remained suspended with pay after he was acquitted of the criminal charges in the case.

The New Jersey Police and Firemen’s Retirement System board ruled in March that Avila should have resumed working after he was cleared of the criminal charges and that he should not get credit for that time in his pension.

But Avila is contending that he tried to return to work at the conclusion of the criminal trial. He has asserted that the city would not allow him to do so.

City officials have said they kept Avila on paid suspension after the criminal case because a lawsuit and departmental charges against him were pending. The civil case was resolved in the summer of 2011 and the departmental charges eventually were dropped by the city in 2016, when Avila filed his retirement papers.

The Avila case has cost Paterson taxpayers more than $2 million, including legal fees, the settlement of the woman’s lawsuit, and the pay he received for not working. Shortly before the alleged sex incident in 2007, a psychiatrist had deemed Avila unfit to carry a weapon, according to court records.

But city officials decided to allow him to stay on the job for another six months so he could reach a 20-year pension milestone, court records show. Avila was assigned to the prisoner holding cell area, where he would not have to carry a gun, the records show.



http://www.baltimoresun.com/news/mar...728-story.html

Quote:
Former Baltimore County fire captain loses pension benefits following sexual harassment investigation

A former Baltimore County fire captain who was terminated after an investigation found he sexually harassed subordinates and created a hostile work environment won’t be able to collect his pension.

The Maryland Court of Special Appeals ruled Thursday against Theodore C. Priester Jr., who was appealing the county’s denial of his pension benefits.

Priester had worked in the department since 1982 and was in charge of Station 18 in Randallstown when he was terminated in 2013 after an investigation found he violated department policies, including the county’s sexual harassment policy, the opinion said

Priester’s application for pension benefits was later denied by the Board of Trustees of the county’s Employees’ Retirement System because he had not offered “honorable and faithful service as an employee,” which is required by the county code. He appealed the ruling up to the Court of Special Appeals, which affirmed the board’s decision.

“Simply put, a reasoning mind could conclude that a fire officer’s service was not honorable or faithful if he was found, over the course of several years, to have abused his authority by violating the rules that he was obligated to enforce and sexually harassing subordinates, who were unable to complain precisely because of his position of authority,” the Court of Special Appeals opinion said.

Priester’s attorney, John M. Singleton, said he is unaware of any other cases in Maryland or across the country where a worker lost their pension without being convicted on criminal charges or held responsible in a civil case.


http://www.freep.com/story/news/2017...dal/520790001/

Quote:
Convicted former Detroit principal loses portion of pension

A former Detroit principal who was convicted in a $2.7 million kickback scheme that snared a dozen school administrators and a vendor will lose a portion of her pension.

Attorney General Bill Schuette announced in a news release this afternoon that he had secured the forfeiture of the state-paid portion of the pension held for Josette Buendia, formerly the principal at Bennett Elementary School.

She was convicted in December. In June, she was sentenced to two years in prison and ordered to pay $45,775 in restitution for approving fraudulent invoices for supplies that were paid for but never delivered.

In all, she took more than $45,000 in cash and gift cards from millionaire vendor Norman Shy, who scammed the Detroit school district out of $2.7 million with her help.

A judge earlier this month gave her until Sept. 11 to get her affairs in order before reporting to prison.

Schuette has gone after the pensions of the 13 school administrators who were caught up in the kickback scandal.

“These individuals were entrusted with the education and well-being of their students and teachers,” Schuette said in the release. “Instead of doing the job they were given, these individuals selfishly stole money to line their pockets while robbing those children of better opportunities.”

__________________
It's STUMP

LinkedIn Profile
Reply With Quote
  #1053  
Old 07-31-2017, 06:05 PM
campbell's Avatar
campbell campbell is offline
Mary Pat Campbell
SOA AAA
 
Join Date: Nov 2003
Location: NY
Studying for duolingo and coursera
Favorite beer: Murphy's Irish Stout
Posts: 79,406
Blog Entries: 6
Default

OREGON
EXPECTED RATE OF RETURN

http://registerguard.com/rg/news/loc...tions.html.csp

Quote:
Oregon PERS board cuts pension-investment expectations

TIGARD — The board of the Public Employees Retirement System voted unanimously Friday to lower the assumed rate of return on the pension fund’s investments to 7.2 percent a year.

The reduction, from 7.5 percent, will add an estimated $2.4 billion to PERS’ $22 billion unfunded liability — worsening the retirement system’s already-dire long-term outlook.


The move will translate into more long-term budget pain for Oregon school districts and other public agencies.

Lower assumed investment returns mean public employers have to pay more into the overall system every year to make required pension payments to retirees. Actual returns from the stocks and bonds that PERS funds are invested in are used to cover the balance of those benefit payments.

Money that government agencies pay from their property and other tax receipts into PERS reduces the amount the agencies have available to fund services to the public, from teachers in the classroom and police on the streets to library hours and parks maintenance and safety.

Because of limits the PERS board has set for how fast public employers’ pension costs can grow, however, Friday’s decision is unlikely to substantially increase individual agencies’ payments into PERS until 2021 or 2023.

The system’s big unfunded liability means agencies already were facing PERS cost increases of the current maximum allowed of 20 percent of total payroll costs in 2019 and likely in 2021, as well.

.....
But court rulings have greatly hamstrung cost-curbing ideas. Because of legal restrictions, more than 80 percent of PERS’ total liability is basically untouchable by lawmakers, lawyers on both sides of the issue agree.

Reforms that are legally viable would primarily hit younger, newer public employees, who already are in line for less generous pensions because of previous reforms.

The 2017 Legislature punted on the PERS issue entirely, passing no substantial changes.


https://www.usnews.com/news/best-sta...t-expectations

Quote:
Portland Treasurer Jennifer Cooperman said the board missed an opportunity to take more aggressive action.

"The city of Portland strongly supports recognizing the full PERS liability," she said. "The city has no interest in pretending that the PERS liability is any less than it truly is. The city has always paid our full actuarially required contribution and intends to keep doing so, in compliance with ORS and internal city policy."

The new assumed earnings rate, which takes effect in 2019, also falls short of the Oregon Investment Council's recommendation of 7.1 percent. The citizens panel that oversees PERS investments had adopted an internal estimate of 7.1 percent, based on projections by a consultant that does the most detailed analysis of Oregon's investment portfolio, as well as those of four other consultants. But its recommendation is not binding on the PERS Board.

The Oregon Legislature adjourned earlier this month without making changes to the state's pension system.

House Republican leader Rep. Mike McLane, R-Powell Butte, called today's vote a "sobering reminder" for lawmakers.

"As our pension debt continues to explode, so does the burden placed on our schools and local governments," he said. "We cannot ignore this problem any longer. It is well past time for us to act. If our current cast of politicians in Salem are unwilling to confront this problem head on, then perhaps it is time for new leaders to take their places."
__________________
It's STUMP

LinkedIn Profile

Last edited by campbell; 07-31-2017 at 06:18 PM..
Reply With Quote
  #1054  
Old 07-31-2017, 06:12 PM
campbell's Avatar
campbell campbell is offline
Mary Pat Campbell
SOA AAA
 
Join Date: Nov 2003
Location: NY
Studying for duolingo and coursera
Favorite beer: Murphy's Irish Stout
Posts: 79,406
Blog Entries: 6
Default

CHICAGO, ILLINOIS
BUDGET
CONTRIBUTIONS

http://civicfed.org/civic-federation...ved-part-state

Quote:
Chicago Municipal and Laborers’ Pension Funding Changes Approved as Part of State Budget

July 28, 2017

Included in the budget legislation approved by the Illinois General Assembly over the veto of Governor Bruce Rauner earlier this month were provisions to change the way the City of Chicago must fund two of its four pension funds. The changes, which will gradually and significantly increase the amount of funding Chicago taxpayers must contribute to the Municipal and Laborers’ Funds, are intended to prevent the imminent insolvency of both funds. An actuarial projection of whether the increased funding will prevent further deterioration in pension funding levels has not yet been made publicly available but if the previous contribution schedule had continued, the Municipal Fund was projected to become insolvent in 2025 and the Laborers’ Fund in 2027.

This blog post will provide an overview of how the changes became law and a summary of the provisions included in the legislation.

Overview

Prior to the passage of Public Act 100-0023, the City’s annual pension contributions to the Municipal and Laborers’ Funds were set in state statute as a multiple of employee contributions made two years prior. The multiple used for the Municipal Fund was 1.25; this means that annually the City contributed 1.25 times the amount of employee payroll deductions made two years prior to the Fund. The corresponding multiple for the Laborers’ Fund was 1.0. These multiplier contributions do not adjust according to the actual cost of providing the benefits, so even though the City has made its required contributions under state law, they have been insufficient for the actual needs of the Municipal and Laborers’ funds for many years. Statutory underfunding is one of the biggest contributors to the funds’ huge unfunded liabilities, which the new funding plans are intended to address.
what the MEABF contribution pattern looks like:


Quote:
....
Funding and Benefit Change Provisions

The employer funding provisions for the Municipal and Laborers’ Funds laid out in P.A. 100-0023 are similar in structure to those already in effect for the City’s Police and Fire Funds. The increased contributions to the Police and Fire Funds are funded by a multi-year increase in property taxes. All four funds now have five years of increasing payments and then another 35 years of actuarially calculated annual payments to raise the funded level to 90% for a total 40-year funding plan. This five-year ramp to a 35-year plan to 90% funded was also the outline of the funding plan included in the Municipal and Laborers’ pension reform legislation that was struck down by the Supreme Court.

Other provisions of the legislation provide for the Illinois Comptroller to intercept state funding to Chicago to make pension payments if the City fails to make its contributions and create a third tier of benefits for new employees that would increase employee contributions and reduce the retirement age for new employees to 65 from the Tier 2 level of 67. Tier 2 employees can choose to join the new tier and access the earlier retirement date if they agree to increased contributions.

The amount the City must contribute each year to each fund on that five year ramp is specified in dollar amounts in the legislation. Projections of the contributions that will be made under the actuarial calculations starting in FY2023 have not been made available. The following chart compares the projected contributions that would have been made under the old multiplier law in fiscal years 2018-2022 to the specified contributions under Public Act 100-0023.


Quote:

It is important to note that since the City’s contributions in FY2018-FY2022 are laid out in statute, they will not adjust should the funding needs of the pensions change due to lower than expected investment returns, changes in actuarial assumptions or other deviations from actuarial expectations. If the funds experience unfavorable results in the next five years compared to actuarial expectations, contributions will not compensate for those changes during the ramp and could possibly lead to a fall in funding levels. Additionally, the magnitude of the increase in funding that will be necessary in FY2023 when the City begins to fund at an actuarially-calculated level is currently unknown and no plan for funding that increase has been made public.

The experience of the Police Fund demonstrates the problems associated with inflexible pension funding. Since the new 40-year funding schedule was implemented for the Police and Fire Funds, the Police Fund has made changes to its actuarial assumptions and the Illinois General Assembly provided enhanced benefits in Public Acts 99-0506 and 99-0905. According to the Police Fund actuary, these changes increased the FY2016 pension liability by $1.23 billion and contributed to a fall in the actuarial funded ratio from 28.2% to 23.7%. In an actuarially calculated funding system, such a change to liabilities would require an increase in employer contributions in the next several years. However, since payments through FY2020 are laid out specifically in statute, the City will not immediately be required to start making increased payments to the fund to offset the increased liabilities. In fact, the fund’s actuary recommends that the City, “seriously consider making additional contributions (in excess of the minimum statutory requirement) to ensure that there are sufficient assets available in the fund in all years to pay the promised benefits.”

For the Municipal and Laborers’ Funds, neither the old statutory payment schedule nor the new payment schedule allowing 40 years to reach 90% funded with a five-year ramp are best practice funding schemes from an actuarial perspective. There is no best practice for an acceptable funded ratio other than 100%.[1] The Civic Federation understands the City of Chicago’s wish to increase its pension funding levels without overburdening residents, but it is important for all stakeholders to recognize that stretching payments out over 40 years and significantly backloading them means pushing more of the cost of today’s employees and retirees onto tomorrow’s taxpayers and impairs intergenerational equity.

The Civic Federation urges the City of Chicago, the Illinois General Assembly and the Municipal and Laborers’ Funds themselves to publicly release any actuarial studies that show how the funding levels of the Municipal and Laborers’ funds will be impacted by the legislation, especially once the ramp is over and actuarially-calculated funding begins in FY2023. It would be particularly helpful if better and worse case scenarios for funding were also explored so that the City and stakeholders understand what might happen to funding levels if fund experience strays from expectation.
__________________
It's STUMP

LinkedIn Profile
Reply With Quote
  #1055  
Old 07-31-2017, 06:36 PM
campbell's Avatar
campbell campbell is offline
Mary Pat Campbell
SOA AAA
 
Join Date: Nov 2003
Location: NY
Studying for duolingo and coursera
Favorite beer: Murphy's Irish Stout
Posts: 79,406
Blog Entries: 6
Default

CALIFORNIA

http://www.mercurynews.com/2017/07/3...t-in-the-room/

Quote:
Steve Westly: California pensions are its $206 billion elephant in the room

Jerry Brown has been a strong governor and a moderating force on budget issues. But when it comes to pensions, the new state budget projects that California has nearly $206 billion in “unfunded liabilities” for the state’s two public pension funds.

Over the last eight years, we added $100 billion in unfunded retirement liability for these funds. This is the elephant in the room of state finances, and it is time we got serious about it.
You probably haven’t heard much about the looming pension crisis because elected officials don’t like talking about it and it’s easy for them to kick the can down the road: they can make promises to public employees now that won’t come due until they’re out of office.

But the slow creep of pension costs is crowding out investments in other areas, including education, environmental stewardship, social services, and public transportation. In essence, the state is being forced to default on its social obligations to pay for its pension obligations. If you’re a progressive, fixing this problem may be the most important issue facing the state.

California’s state employees’ pension fund (CalPERS) manages close to $330 billion, making it the largest public pension fund in the nation. Unfortunately, it’s only funded at 65 percent of the amount needed for its commitments to retirees. And this is with the stock market at historic highs. If there is a downturn CalPERS could find itself with a much larger shortfall.

When pension shortfalls occur, Californians are on the hook to cover the unfunded liabilities. That will require us to draw on the state’s general fund: state money that would otherwise pay for education, health care, roads and other public services.

We’re already seeing pension liabilities crowd out other spending. General fund revenues have grown 28 percent over the past six years, but the share available for discretionary spending outside of public safety has declined from 21 percent of the budget to 12 percent. Over the same time frame, spending on pensions increased 99 percent.

We’re also pushing some pension obligations onto the next generation: This year alone, we’re deferring $4.5 billion in obligations. Without changes, millennials and their children will face an enormous tax burden or severe cuts in public services.

The solution is easy to understand but hard to do. Elected officials have three choices: raise taxes, reduce pension benefits or raise the retirement age. These are tough decisions that few politicians want to touch, but we need to make hard choices now. The alternative is finding ourselves with worse options down the road.

Meanwhile, there is a simple first step we can take: lower the assumed rate of return on pension investments. When we lower the rate of return that we expect from investments, we require those who receive pension benefits to pay more up front.

Since taking office, Brown has taken laudable steps to push the assumed rate of return down from 7.75 percent to 7.0 percent. In anticipation of a potential market downturn, however, we should push the rate lower. We would then pay more up front, but we would ensure that we can cover our liabilities down the road.

The 2013 annual report for Detroit’s general retirement system said the city’s pension plan was “stable and secure.” Less than two years later, the system was in default. We can do better in California, if our politicians can show courages—but we need to act now.

Steve Westly is the former California State Controller and served as a fiduciary on the boards of CALPERS and CALSTERS. He lives in Atherton and is Managing Director of the Westly Group, a sustainability venture capital fund. He wrote this for The Mercury News.

__________________
It's STUMP

LinkedIn Profile
Reply With Quote
  #1056  
Old 07-31-2017, 06:36 PM
campbell's Avatar
campbell campbell is offline
Mary Pat Campbell
SOA AAA
 
Join Date: Nov 2003
Location: NY
Studying for duolingo and coursera
Favorite beer: Murphy's Irish Stout
Posts: 79,406
Blog Entries: 6
Default

KENTUCKY

http://www.kentucky.com/opinion/op-e...164381282.html

Quote:
State must honor its pension obligations

The retirement security of public employees across Kentucky is under siege.

Gov. Matt Bevin and lawmakers are threatening to switch newly hired public employees into a defined contribution 401(k)-style retirement plan. Others, including the Bluegrass Institute, are urging them to cut retirement benefits for current firefighters, nurses and teachers.

After years of Frankfort politicians underfunding our state’s public pension systems, we do have serious challenges to address. But making draconian cuts to retirement security won’t solve the funding issue and it will cause economic harm to folks around the state.

I’ve been a public employee for eight years, working for the city of Lexington. Every morning, I leave for a job that I love. As a resource recovery operator, I don’t make a big salary; I make a modest amount to support my family and me. When it’s time to retire, I’ve been promised a secure retirement through my pension, which I’ve paid into my entire career. I’ve paid my share, while for years Kentucky hasn’t paid theirs, leaving the state with underfunded pension systems. Now, the state wants to harm the retirement security of future public employees with risky 401(k)s and possibly even come after the retirement I paid for.

401(k)s are risky and do not provide for a secure retirement. 401(k) plans are subject to the whims of the market and if there’s a recession like in 2008, working people can lose much of their retirement savings. Unfortunately, when it comes time for retirement, many workers aren’t prepared with 401(k) accounts. The average savings in these accounts in Kentucky is only $32,499 — not nearly enough to retire securely. 401(k)s also have much higher fees, putting workers’ hard-earned money in the pockets of Wall Street executives.

Current public employees should be fearful as well. As reported in the Courier-Journal, some in Kentucky are looking to make cuts to our future retirement benefits. Our average annual pension benefit is extremely modest — $23,791 to be exact. This won’t give us the opportunity to build a custom-made yacht and travel around the Caribbean; we’re talking about a small amount that will help public employees support themselves in retirement. Cuts to our retirement may very well push many public employee retirees below the poverty line, which is $24,600 for a family of four. Is that how we want to treat our public employees who dedicated their lives to serving our communities?

Before even thinking about making these cuts to future retirees, lawmakers should also look at the positive economic impact pensions create. According to the National Institute on Retirement Security, state and local pension plan benefits support 33,748 jobs in Kentucky, making up 1.76 percent of the labor force. Additionally, each $1 in taxpayer contributions to Kentucky’s state and local pension plans supports $5.36 in total economic output in the state. If the state decides to cut pension benefits or eliminate pensions for newly hired employees, the unemployment rate will climb gradually and economic output in our cities and towns will decline.

I encourage every state lawmaker and the governor to look around — public employees and current retirees are all around you. They are your kids’ Little League coach, the person standing behind you in the grocery store and sitting beside you in church. Gutting Kentucky’s pension systems will hurt people in your own communities.

Think about this and come up with a better solution rather than destroying the retirement security of thousands of current and future public employees.

Dion Henry works for the Lexington-Fayette Urban County Government.
__________________
It's STUMP

LinkedIn Profile
Reply With Quote
  #1057  
Old 07-31-2017, 06:37 PM
campbell's Avatar
campbell campbell is offline
Mary Pat Campbell
SOA AAA
 
Join Date: Nov 2003
Location: NY
Studying for duolingo and coursera
Favorite beer: Murphy's Irish Stout
Posts: 79,406
Blog Entries: 6
Default

NORTH CAROLINA
GOVERNANCE

http://www.newsobserver.com/opinion/...164127982.html

Quote:
Folwell has too much power over N.C.’s $93.9 billion pension plan

One person, the State Treasurer, makes the investments for North Carolina’s $93.9 billion public pension. We are one of four states where a sole fiduciary has this responsibility. It is time to make a change and vest investment authority in a board of trustees.

Our new Treasurer, Dale Folwell, has come into office with a number of sensible ideas for improving performance and efficiency and cutting costs. However, in his first important set of decisions, Mr. Folwell has cost the pension far more than he has saved and provided compelling evidence that North Carolina needs to move investment authority from the State Treasurer to a board. In recent days, the state’s chief investment officer, Kevin SigRist, tendered his resignation. His departure reinforces the need to change the governance of the state pension plan in order to promote continuity.

Over the first six months of his tenure, Mr. Folwell has terminated 13 equity managers representing $7.3 billion in pension assets. Instead of reinvesting the proceeds in equities, the treasurer moved the money into fixed income and money market securities. This maneuver reduced the pension’s equity exposure well below its long-term target and represents one of the most elementary mistakes in investing: market timing. Clearly the treasurer is hoping the stock market will fall at some point and that he will be able to reinvest the proceeds at lower prices. Warren Buffet has called market timing a big mistake and commented on the maneuvers in his most recent annual letter:

“Ever-present naysayers may prosper by marketing their gloomy forecasts. But heaven help them if they act on the nonsense they peddle. Many companies, of course, will fall behind, and some will fail. Winnowing of that sort is a product of market dynamism. Moreover, the years ahead will occasionally deliver major market declines – even panics – that will affect virtually all stocks. No one can tell you when these traumas will occur – not me, not Charlie [Munger, Berkshire Hathaway’s president], not economists, not the media.”

And I’d add, not the state treasurer. The pension plan must earn 7.2 percent in order to avoid additional contributions from taxpayers or state employees. When the treasurer materially reduces equity exposure, which according to the Treasury Department’s own assumption should earn about 8 percent over long periods of time, Mr. Folwell is sacrificing hundreds of millions in future performance.

The treasurer has repeatedly publicized the $60 million in savings that he’s achieved so far by terminating and negotiating with equity managers. However, he has failed to account for the transactions costs that are being incurred to liquidate the equity portfolios, invest in bonds and money market instruments and eventually sell those positions so he can reinvest in stocks. In the end, the treasurer’s laudable objective of cutting management fees will cost the pension multiples of the fee savings. The pension cannot afford this kind of savings program.

In the coming months Mr. Folwell will tackle the far more complex issue of restructuring and reforming the pension’s hedge fund, real estate and private equity exposure, where the real performance, risk and fee issues reside. Over the last several years, the fees associated with these alternative investments have soared into the hundreds of millions of dollars. These asset classes deserve scrutiny, but any changes need to be done slowly and thoughtfully. Real estate and private equity can play a meaningful if modest role in the pension program. However, if the state treasurer does not act with care, he could produce more damage than good.

One person should not have the unfettered power to shift $93.9 billion in assets. I was the chief investment officer during Treasurer Richard Moore’s first term, and I appreciated the efficiency and decisiveness of advising a sole fiduciary. However, as the years have gone by, and the treasurer’s position has moved from Richard Moore to Janet Cowell and now Dale Folwell, I’ve seen the costs and risks in the pension rise as priorities change. Overall investment responsibility should not be limited to those who are tied to the election cycle. It’s time to vest a board with the job of investing the pension’s assets. Admittedly, a board of trustees is not a perfect form of governance. Boards have all sorts of potential idiosyncrasies and politics that can affect performance and risk management. However, a board provides the stability, continuity and institutional memory necessary to make sure that the pension’s investments aren’t jerked in one direction or the other every four to eight years.

Treasurer Folwell is a reformer. I hope he pursues the ultimate reform of the state’s public pension plan by relinquishing the power of the sole fiduciary in favor of an investment board.

Andrew Silton of Chapel Hill is a former chief investment officer of the North Carolina state pension fund. He writes the blog Meditation on Money Management.
__________________
It's STUMP

LinkedIn Profile
Reply With Quote
  #1058  
Old 07-31-2017, 06:41 PM
campbell's Avatar
campbell campbell is offline
Mary Pat Campbell
SOA AAA
 
Join Date: Nov 2003
Location: NY
Studying for duolingo and coursera
Favorite beer: Murphy's Irish Stout
Posts: 79,406
Blog Entries: 6
Default

Quote:
Originally Posted by campbell View Post
http://www.azcentral.com/story/opini...dry/498468001/

Quote:
Bisbee mayor: Public safety pension costs are bleeding us dry


Mayor: We're drowning in pension costs, lawmakers are turning a blind eye, and the Public Safety Personnel Retirement System board is woefully mismanaged.

Bisbee, a former mining town, with a present population of 5,400 residents that has morphed into a tourist art and culture attraction, is on the verge of economic collapse.

A single reason is present for this impending doom – the Public Safety Personnel Retirement System. While cities and counties in Arizona groan under the weight of this growing burden, the Legislature turns a blind eye.

Take a good look at us. In 2006, Bisbee had a PSPRS asset balance of $5.8 million and an unfunded liability of $5.9 million. Over the next 10 years, our PSPRS employees and the city paid $16.8 million into the fund.

We pay more in pensions than salaries

Today, our asset balance is only $1.8 million (a decrease of $4 million), and the unfunded liability has risen to $17.9 million (an increase of $12 million). The rate of return for the PSPRS funds over that 10-year period was a mere 3.67 percent.

Publicly, PSPRS explains the dismal return as being the result of the “perfect storm” in which the investments were victimized by the dot-com crash and the economic downturn. It should be noted that the S&P 500 yielded an average return of 7.88 percent over that same timeframe.

The result of this problem is that presently Bisbee is paying 22 percent of its annual General Fund budget into this failed investment pool. The city contribution rate for a Bisbee firefighter is 83.71 percent and a police officer is at 134.5 percent, meaning that for every $100 we pay an officer in salary, we pay PSPRS $134.50.

Under the present environment we can expect another 80 percent increase in the next five years. In addition to the “just money” issue, the quality of life of our citizens is affected.

.....
We blame the PSPRS board

How did we get here and who do we blame? We can simply put the burden of blame on the PSPRS board for (the kindest term) “being asleep at the switch while the train was coming.”

I believe, however, the blame can be spread much further. The PSPRS board has no oversight by the state Treasurer’s office, as opposed to the other retirement funds, all of which are financially stable.

The makeup of the PSPRS board of trustees opens the door for questions regarding cronyism, conflict of interest and a multitude of others.

The board, now increased to nine members, has eight sitting members. Four are members of public safety (police and fire) and four are “civilian” members. The ninth member has yet to be appointed by Gov. Doug Ducey, resulting in a stalemate regarding certain decisions.

We're getting a dismal rate of return

The PSPRS talks about their “incredible investment talent;” however, when compared to other state retirement funds, they fall dramatically short. The fund’s dismal rate of return is exacerbated by the “cost of doing business.”

The year 2016 provided a rate of return of 0.63 percent as a reward after paying more than $103 million in investment fees.

We are told that these fees are a result of attempting to provide investments with a greater return, and the heavily front-loaded fees will be returned upon their long-term maturation schedule of up to 10 years. We are likewise told that it is analogous to “turning an ocean liner around in a lake."

Perhaps it is now time to drain the lake.


Without change, cities will be insolvent

Quite honestly, something must give or cities such as Bisbee, Prescott and Flagstaff will be insolvent. Should insolvency occur, that outstanding liability “owed” to PSPRS doesn’t disappear and most likely will become an added liability to those cities still standing.

Some cities, due to a lower contribution rate, have yet to feel the bite. But rest assured, that time will come.

It is of utmost importance that we place blame squarely where it belongs, which is not at the feet of our public-safety professionals. We agreed in good faith to provide them a retirement, and we are bound to that promise.

Blame rests with the PSPRS board, the legislators that allow these practices to occur and us for allowing legislators to neglect their duty.

David M. Smith is the mayor of Bisbee. He is an international fire and explosion consultant and was a police officer for 14 years. Email him at dsmith@bisbeeaz.gov.
__________________
It's STUMP

LinkedIn Profile
Reply With Quote
  #1059  
Old 07-31-2017, 06:42 PM
campbell's Avatar
campbell campbell is offline
Mary Pat Campbell
SOA AAA
 
Join Date: Nov 2003
Location: NY
Studying for duolingo and coursera
Favorite beer: Murphy's Irish Stout
Posts: 79,406
Blog Entries: 6
Default

NEBRASKA

http://www.omaha.com/opinion/editori...36e656b86.html

Quote:
Nebraska’s state pensions are 90 percent funded overall, compared with a 50-state average of 74 percent. Financial experts recommend funding of at least 80 percent to be fiscally sound.

Nebraska’s unfunded state pension obligations are 18 percent of total personal income in the state, well below the 50-state average of 35 percent. The unfunded pension liability figures for some states with the most severe problems: New Mexico, 64 percent of total personal income; Ohio, 62 percent; Mississippi, 58 percent; Illinois, 54 percent.
Harrumph.
__________________
It's STUMP

LinkedIn Profile
Reply With Quote
  #1060  
Old 08-01-2017, 12:05 PM
campbell's Avatar
campbell campbell is offline
Mary Pat Campbell
SOA AAA
 
Join Date: Nov 2003
Location: NY
Studying for duolingo and coursera
Favorite beer: Murphy's Irish Stout
Posts: 79,406
Blog Entries: 6
Default

http://crr.bc.edu/briefs/state-and-l...rs-in-fy-2016/

Quote:
State and Local Pension Plan Funding Sputters in FY 2016

by Jean-Pierre Aubry, Caroline V. Crawford, and Alicia H. Munnell
SLP#56

The brief’s key findings are:

In 2016, the funded ratio of state and local pensions declined under both old and new accounting rules.

This decline reflected steady growth in liabilities and slow growth in assets due to poor stock performance.

More recently, the revival of the stock market is helping plan assets recover, with funded ratios expected to improve in 2017.

But, looking further ahead, funding ratios are projected to remain essentially flat due largely to the current approach of calculating required contributions.

Thus, to achieve more meaningful progress, plans need to establish contribution levels that will actually reduce unfunded liabilities.
brief:
http://crr.bc.edu/wp-content/uploads/2017/07/slp_56.pdf
__________________
It's STUMP

LinkedIn Profile
Reply With Quote
Reply

Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off


All times are GMT -4. The time now is 08:40 AM.


Powered by vBulletin®
Copyright ©2000 - 2017, Jelsoft Enterprises Ltd.
*PLEASE NOTE: Posts are not checked for accuracy, and do not
represent the views of the Actuarial Outpost or its sponsors.
Page generated in 0.23506 seconds with 9 queries