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


Upload your resume securely at https://www.dwsimpson.com
to be contacted when our jobs meet your skills and objectives.


Reply
 
Thread Tools Search this Thread Display Modes
  #1221  
Old 09-05-2017, 12:24 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: 84,106
Blog Entries: 6
Default

Quote:
Originally Posted by campbell View Post


https://www.dmagazine.com/frontburne...tment-advisor/

Quote:
Dallas Police Fire Pension Files Suit Against Townsend Investment Adviser
The pension claims Townsend screwed up to the tune of $580 million.

No idea why the Dallas Police and Fire Pension System would file a suit like this on the Friday before a long holiday weekend, but whatever. The Pension isn’t happy with its former adviser, Townsend Holdings (Richard Brown and Martin Rosenberg (and, from Strasburger & Price, Gary Lawson)). The Pension claims that the adviser’s bad work with real estate investments cost the Pension $580 million. I’ve got about 40 Game of Thrones episodes to watch this weekend, but as soon as I’m done, I, like you, will dig in.


another link to the filing:
https://www.dmagazine.com/wp-content...2017.08.31.pdf

Some excerpts:
Quote:
DALLAS POLICE & FIRE PENSION
SYSTEM,
Plaintiff,
v.
TOWNSEND HOLDINGS, LLC d/b/a
THE TOWNSEND GROUP, RICHARD
BROWN, MARTIN ROSENBERG and
GARY B. LAWSON,
Defendants

....
B. NATURE OF ACTION
2. This is an action to recover damages caused by breaches of contract, breaches of
fiduciary duty and professional negligence committed by DPFP’s outside investment consultant
(Townsend) and outside general counsel (Lawson)

3. DPFP brings this action for damages against Townsend based on Townsend’s
multiple breaches of contract, breaches of fiduciary duties owed to DPFP, and on Townsend’s
negligence in providing real estate investment consulting services to DPFP. In summary,
Townsend failed to advise DPFP to diversify its investments to minimize risk of large losses, failed
to assess the “value added” by investment managers under Townsend’s watch, failed to disclose
material information and advice to its client – the DPFP Board of Trustees (referred to as “DPFP”
or the “Board”), and failed to advise DPFP regarding allocation of its assets. These actions caused
DPFP to suffer losses and write-downs of nearly $580 million – losses on assets under Townsend’s
oversight that should have been safeguarded for the benefit of Dallas’s loyal and hardworking
police officers, firefighters, and their families.
4. Despite touting itself as an expert in providing real estate investment consulting
advice to public pension systems, Townsend repeatedly failed to adequately advise DPFP regarding
itsreal estate investments. Under Townsend’s supervision, DPFP’s real estate portfolio was heavily
over-weighted in high-risk, speculative, undiversified investments – investments of a kind not
typically pursued by public pension systems. For years, Townsend allowed investment managers
under its oversight to run amok, plowing DPFP funds into wildly inappropriate investments,
disclaiming their statutorily-mandated fiduciary duties, and over-allocating funds towards
investment in real estate. All the while, Townsend failed to assess whether these investment
managers actually added value to DPFP’s investments – even though it promised to do so.
Moreover, at various times when Townsend possessed information that was likely to adversely
affect DPFP, it failed to convey such information to the DPFP Board, in breach of its contractual
and fiduciary obligations. Rather than “rock the boat” by providing unpopular advice to the DPFP
Board, its client – and thereby risk losing itslucrative relationship with DPFP – Townsend chose to
quietly sit back, while the investment managers under its watch steered DPFP deeper into risky
territory. In short, Townsend:
a. Failed to act as a prudent investment consultant would act under similar
circumstances;
b. Failed to ensure diversification of DPFP’s investments to minimize the risk of
large losses, as required by the Texas Government Code;
c. Failed to assess the “value added” of the investment managers under its
purview;
d. Failed to ensure that its advice was provided to DPFP’s governing Board of
Trustees;
e. Failed to advise the Board that DPFP was over-invested in un-appraised real
estate investments, in contravention of its investment policies; and
f. Failed to place the interests of Dallas’s police officers and firemen above its
own.

.....
Failure to Advise DPFP to Diversify Investments
26. Throughout the course of its relationship with DPFP, Townsend continually failed
to fulfill its statutory fiduciary duty to advise DPFP to diversify its investments to minimize large
losses. Townsend’s failure led to losses and write-downs for DPFP in the hundreds of millions of
dollars.

.....
Failure to Assess “Value Added” by Investment Managers
38. In the ICAs, Townsend explicitly promised to “[a]ssess the ‘value added’ by [IMs]
in their pursuit of investment strategies[.]” In other words, Townsend was asked to conduct
ongoing diligence and monitoring of the IMs under its oversight by evaluating whether these IM’s
services were materially helping to advance the projects or increase the value of the investments
they managed. Despite its contractual obligation to do so, Townsend repeatedly failed to assess the
“value added” by the real estate IMs under its watch. Services provided by CDK, Land Baron,
Knudson, and Criswell Radovan – IMs under Townsend’s oversight – are instructive examples;
investments managed by these four IMs were written down or written off by more than $400
million.

.....
Failure to Disclose Material Information to the DPFPBoard
54. On information and belief, Townsend feared former DPFP Administrator Richard
Tettamant. Because of this dynamic, Townsend repeatedly lost sight of who its client really was –
the DPFP Board of Trustees. Instead, Townsend repeatedly failed to advise its client, for fear of
speaking out and of jeopardizing its lucrative contract with and continued receipt of fees from
DPFP.

.....
Failure to Advise DPFP Regarding Over-Investment in Real Estate
62. With Townsend’s guidance, DPFP developed real estate investment procedures
and guidelines, including “recommended guidelines with respect to overall portfolio structure,
levels of risk, diversification, return targets, asset allocation within the amounts allocated to real
estate, and property specific acquisitions and all other matters appropriate for such documents.”
2004 ICA, p. 5.

http://www.wfaa.com/news/local/dalla...vice/470122283

Quote:
....
The Dallas Police and Fire Pension System nearly collapsed earlier this year under the weight of years of risky real estate investments.

This past legislative session, city leaders and state lawmakers reorganized the pension system, which is beginning to recover. Meanwhile, Dallas police and fire employees had been retiring and quitting in near record numbers over concerns over their retirement benefits.

The pension fund hired Townsend in 2001, the lawsuit states. They oversaw CDK Realty Advisors, which managed the largest percentage of the pension fund’s nearly $1 billion real estate portfolio, the lawsuit states.

In 2015, the pension fund fired CDK after speculative real estate investments in Idaho, Hawaii, Phoenix and Napa Valley, CA lost millions, the lawsuit states. The pension system recently settled with CDK for $2 million, according to published reports.

The pension fund fired Lawson in December 2015. The fund fired Townsend in February 2016.

__________________
It's STUMP

LinkedIn Profile
Reply With Quote
  #1222  
Old 09-05-2017, 03:19 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: 84,106
Blog Entries: 6
Default

Quote:
Originally Posted by Life View Post
The article says:


What does a pension settlement agreement look like? I read something about Chapter 9 but have no idea what that it.
There was no Chapter 9, iirc. The actual municipal bankruptcy was disallowed in Prichard's case. (They tried, but were denied.)

The Prichard pensioners were suing for their benefits, so it was a regular old litigation & court settlement at the end. I don't know what the settlement terms were.
__________________
It's STUMP

LinkedIn Profile
Reply With Quote
  #1223  
Old 09-05-2017, 04:18 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: 84,106
Blog Entries: 6
Default

Quote:
Originally Posted by Life View Post
Thank you. I'm just beginning to learn about these topics and have little background knowledge. The takeaway I got is that reducing distributions and increasing taxes are ways to fund underfunded pensions. If that doesn't help, then retirees are left with welfare and maybe social security.
Some current public plan retirees are not covered by Social Security. You will often hear this in discussions about cutting public retiree benefits.

I believe there may be public plans with new entrants where they're not covered by Social Security (and then there's the whole "windfall tax" thing, which I still don't understand). But I haven't looked deeply into it.

One of the issues with public plans is that some still have retirement ages below 62. So some retirees wouldn't be eligible for SocSec old age benefits even so.
__________________
It's STUMP

LinkedIn Profile
Reply With Quote
  #1224  
Old 09-05-2017, 06:58 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: 84,106
Blog Entries: 6
Default

here are my prior blog posts on Kentucky:

http://stump.marypat.org/article/600...-a-compilation

some recent ones:

http://stump.marypat.org/article/663...asing-is-awful

http://stump.marypat.org/article/748...y-ers-to-death


As for the early retirements, this also happened with other, similar "reforms". It happened with Detroit, it happened with Dallas Police & Fire, etc.


This is why I have these various "watch" threads on the AO. For the types of disasters going on here, it takes years, if not decades, to develop. And while I could do news searches, a lot of links/stories go stale.
__________________
It's STUMP

LinkedIn Profile
Reply With Quote
  #1225  
Old 09-10-2017, 04:33 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: 84,106
Blog Entries: 6
Default

SOUTH CAROLINA

http://www.wistv.com/story/36256123/...or-pension-fix

Quote:
Changing retirement age, moving to 401(k): Firefighters, public employees fight suggestions for pension fix

COLUMBIA, SC (WIS) -
South Carolina's unfunded liability in retirement to state employees is estimated at some $20 billion; that's money the state does not have.

For more than one year now, a committee of lawmakers has been working on a plan to right the system and keep the debt from growing. Now, Governor Henry McMaster is offering some ideas for fixes. However, public employees like firefighters aren't on board with all of his suggestions.

McMaster wrote to the panel of lawmakers trying to fix the problem, to consider converting South Carolina's pension plan to a 401(k) style plan, along with suggestion like raising the retirement eligibility age.

"We all need to understand every action is going to have a reaction,” Lugoff Fire-Rescue Chief Dennis Ray says.

Chief Ray stands against replacing the state’s pension plan promise with a 401(k) process like many private sector employees have. He says the salaries of public employees simply are too low for that to ever secure them in retirement, and that uncertainty on what’s to come has people second-guessing a career in fire service.

"It is very disheartening to hear that there are people working in our business, public safety - that’s fire, law enforcement, EMS, you can put Department of Corrections in there - who’s hurting tremendously. You can put EMS in there. It is sad to hear people in our line of work telling their family members, telling their friends, ‘Don’t even go into government service,'" Ray says.

McMaster says the pension system in place now has just become too costly for the state.

But those like Ray, and Carlton Washington with the SC State Employees Association suggest finding a new source of revenue to put toward the pension, like a tax or fee.

“I mean, we’re on the verge of putting state government in crisis mode. Not doing right by employees, but more importantly, it’s the citizens of South Carolina that will be affected by the actions that we take," Washington says.
__________________
It's STUMP

LinkedIn Profile
Reply With Quote
  #1226  
Old 09-11-2017, 09:52 AM
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: 84,106
Blog Entries: 6
Default

MAINE

https://bangordailynews.com/2017/09/...ension-system/

Quote:
What Mainers need to know before voting on a proposed change to the state’s pension system

Question 4 on the Nov. 7 ballot requests a technical change in how the Maine Public Employees Retirement System stewards the money that thousands of government employees, teachers and retirees count on for their senior years.

It’s deep in the weeds of how the system manages a fund worth billions of dollars to support retirement payments to all those people for decades into the future, but since the system’s parameters are defined in Article 9 of the Maine Constitution, it requires an amendment referendum.

“There was not an iota of opposition to this,” said Sen. Roger Katz, R-Augusta, who sponsored the bill requesting the change this year in the Legislature. “It’s pretty basic.”

Here’s the question as it will appear on the ballot: “Do you favor amending the Constitution of Maine to reduce volatility in state pension funding requirements caused by the financial markets by increasing the length of time over which experience losses are amortized from 10 years to 20 years, in line with pension industry standards?”

What is the pension system?

It’s Maine’s retirement plan. It provides retirement benefits for nearly 40,000 active employees and more than 34,000 retirees. In fiscal year 2016, the system paid $728 million to government retirees, with an average annual payment of about $21,000 per person. Employees who pay into the pension system do not contribute to Social Security and don’t receive Social Security income when they retire.

......
So what would the referendum do?

It doubles the length of time Maine has to replenish funds lost because of dips in the worth of Maine’s pension fund. Constitutional provisions require the system to recoup and pay off any losses in the fund’s value within 10 years. That provision was created in a 1995 referendum aimed at solving a crisis in the pension system, which in the 1980s was only 28 percent funded and worth less than $3 billion. That means it had only 28 percent of the funding it had promised to eventually pay in retirement benefits. The plan is now 80 percent funded and worth around $10 billion. This year’s referendum would extend the time the system is allowed to recoup losses from 10 to 20 years. That amortization period is recalculated on a rolling basis.

The math is complicated, but a longer amortization period will dampen big swings in what the state has to pay year after year. That’s because it would effectively smooth the impact of increases and decreases in the fund’s value over a longer period of time. Sandra Matheson, executive director of the retirement system, estimated that if the 20-year amortization period were already in place, the state’s contribution over the current two-year biennium could be as much as $79 million lower. Matheson estimated the change proposed in the November referendum could reduce the state’s liability by $55 million in the next biennium.

Matheson said the longer amortization period has the potential to cost more over time, but that stabilizing contributions in the short term would reduce year-to-year impacts on the state budget.

“Think of changing a 15-year mortgage to a 30-year mortgage,” she said. “You pay greater costs over time in exchange for a lower monthly payment.”

Part of the reason for the big swings is the growth in the size of the fund. When it was worth $2.5 billion, a 1 percent dip in performance, for example, had an impact of $25 million. Now that the fund is worth closer to $10 billion, a 1 percent fluctuation in market returns is worth $100 million.

“The bottom line is that 20 years is more in line with actuarial standards than 10 years,” said Matheson. “This holds even more for well-funded plans like the state/teacher plan where market volatility creates significantly greater losses and gains.”
__________________
It's STUMP

LinkedIn Profile
Reply With Quote
  #1227  
Old 09-11-2017, 09:53 AM
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: 84,106
Blog Entries: 6
Default

CALIFORNIA
CALPERS
PRIVATE EQUITY

https://www.ai-cio.com/news/calpers-...ets-blackrock/

Quote:
CalPERS to Outsource Private Equity Assets to BlackRock

The California Public Employees’ Retirement System (CalPERS) is seeking to outsource its private equity business to BlackRock, according to anonymous sources quoted by Reuters and Bloomberg.

The reported discussions between the largest US pension fund and the world’s largest asset manager to oversee some or all of CalPERS’s private equity investments are at an early stage, which may not result in an agreement, according to Reuters. For the past two decades, private equity has been the $327 billion CalPERS’s best-performing asset class and accounts for roughly $26 billion of the fund’s portfolio.

“No decisions have been made. We are still looking at models to bring back to the board,” a spokeswoman for CalPERS told CIO in an email.

In the event of a deal, BlackRock would win big, as the move would assist it in expanding its alternatives business, a footprint the $5.7 trillion money manager has been trying to grow to increase fee revenue and meet client demand for investments with little stock and bond market ties, according to Bloomberg, who first reported BlackRock’s talks with CalPERS Thursday.


https://www.nakedcapitalism.com/2017...blackrock.html

Quote:
CalPERS Goes for Secrecy Over Returns; Exploring Paying Additional Layer of Private Equity Fees by Outsourcing to BlackRock
Posted on September 8, 2017 by Yves Smith

....
CalPERS will pay more in fees with BlackRock and there is no reason to expect improved performance. As the former Chief Investment Officer for North Carolina, Andrew Silton, stressed, CalPERS is such a large investor in private equity that is unlikely to achieve better than index-like returns. And it’s a no-brainer that introducing another intermediary means more fees and costs.

BlackRock would effectively be a dedicated fund of funds manager for CalPERS, an approach that is typically used only by small fry, like high net worth individuals and and smaller institutional investors, or for bigger players, to achieve adequate diversification for small, niche-y strategies (say if CalPERS decided to make an allocation to infrastructure in Latin America).

It is remarkable to see CalPERS consider outsourcing, since going in the direction of increasing its cost flies in the face of prudent investment management. It also contradicts the approach CalPERS takes in all other strategies in which it invests, where it has a strong focus on expense reduction and manages many of its investments in house because it is cheaper.

....
BlackRock’s substantial conflicts mean it would be a less vigorous advocate for CalPERS with private equity fund managers. Regular readers of this site know that the private equity industry is rife with dubious conduct. The SEC said in 2014 that more than half the firms it had examined had engaged in serious compliance violations, including what in other lines of work would be called stealing. Even after the SEC fined major firms including KKR, Blackstone, and Apollo, limited partners like CalPERS almost without exception took no meaningful steps on their own regarding these revelations.

.....
CalPERS would have much less ability to get private equity fund managers to divest problematic holdings. CalPERS has a strong commitment to socially responsible investing. Even though it is tricky to figure out how to reconcile this goal with CalPERS’ objective of achieving sparkling investment returns, one important way to square this circle is to be able to exit particularly rancid investments. That’s already difficult with private equity given its long investment time horizons.

But even so, CalPERS’ Sacramento sister CalSTRS decided to ditch investments in the manufactures of firearms that were illegal to be sold in California. That included a stake in Remington Outdoor via a Cerberus fund. After a two-year effort by Cerberus to sell the company at a sufficiently attractive price, CalSTRS obtained an economic exit from its position.

CalPERS is regularly exposed to controversies like this. For instance, a campaign is underway to get CalPERS and other limited partners to stop funding Trump’s violation of the Emoluments Clause of the Constitution via its investment in CIM Fund III, a real estate fund. Among other things, CIM is an investor in Trump International Hotels Management, LLC which among other things manages Trump SoHo Millennium.
.....
Is This Move a Hedge Against a Private Equity Reformer Mike Flaherman Winning a Board Seat?

The CalPERS board elections are underway. Two reform candidates are running for each of the two seats up to a vote this year: the aforementioned Mike Flaherman for an open seat, and Margaret Brown, who is contesting the incumbent Michael Bilbrey. You can watch Flaherman’s candidate statement here and Brown’s statement here.

Flaherman’s extensive research into private equity abuses has served as the foundation for major stories in the Wall Street Journal and the New York Times. He has also worked regularly with JJ Jelincic on private equity issues.

Even though CalPERS should welcome Flaherman because he could help improve their private equity program, its staff seems to regard him as a threat. Flaherman is vastly more knowledgeable than Eliopoulos or his deputy Wylie Tollette. Flaherman could also readily expose any dodgy ideas that more savvy private equity group members were trying to fob off on the board.

Thus it’s not inconceivable that one of the motivations for the idea of moving private equity over to BlackRock is that the spotlight that CalPERS has already found too hot to handle would get even brighter if Flaherman (and/or Brown, who is not as expert as Flaherman but has good general finance knowledge and won’t be rolled) were elected.

Eliopoulos was correct when he said last June that CalPERS might not have the governance structure to handle private equity. But he’s reached the wrong conclusion. It isn’t private equity that needs to be extracted from CalPERS. It’s him.


__________________
It's STUMP

LinkedIn Profile

Last edited by campbell; 09-11-2017 at 06:35 PM..
Reply With Quote
  #1228  
Old 09-11-2017, 09:55 AM
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: 84,106
Blog Entries: 6
Default

MISSOURI
MOSERS
LUMP SUM

https://www.mosers.org/MOSERS-News-A...-Lump-Sum.aspx

Quote:
MOSERS Notifying Former State Employees of Lump-Sum Option
[Posted on 09/05/2017 at 5:30 PM]

Jefferson City, MO - This month, the Missouri State Employees Retirement System (MOSERS) will send letters to 17,000 former Missouri state employees who are eligible for a future monthly retirement benefit. The letters will inform former state employees of their option to cash out their future retirement annuity as a lump-sum payment now rather than wait until they reach retirement eligibility. The program is completely voluntary. The MOSERS Board was authorized to offer the Buyout Program under Senate Bill 62 which was approved by the Missouri General Assembly and the Governor earlier this year.
The program is not available to current state employees or current retirees.

The lump-sum buyout amount will be 60% of the present value of the member’s future normal retirement annuity. The present value is the amount required, as of October 1, 2017, to fund their future benefit payments.

We are sending applications to eligible members and accepting completed applications now. Anyone who receives a Buyout Program Application and decides to take the lump-sum option must have their completed application notarized and returned to MOSERS no later than November 30, 2017. If someone submits an application but later changes their mind, they also have until November 30, 2017 to rescind their application. Payments cannot begin until the deadline to rescind has passed. We will begin issuing payments in December 2017 but applicants should allow up to 180 days for payment.

.....
Below is information about the group of former state employees who are eligible for the Buyout Program:

Average years of service – 9
Average monthly retirement benefit – $450
Average age when left state employment – 39
Average age now – 48
Average age at normal retirement eligibility – 62
Average lump-sum one-time payment – $18,450

https://www.ai-cio.com/news/mosers-o...mer-employees/

Quote:
MOSERS Offers Lump-sum Payment Option to 17,000 Former Employees
Program could save $7 million per year for the fund.


The Missouri State Employees’ Retirement System (MOSERS) is sending letters to 17,000 former Missouri state employees eligible for a future pension, informing them they can cash in early if they choose.

Rather than wait until eligibility, future retirees can opt to collect their benefits in a lump-sum payment. If they’d rather wait it out, they can do that as well. The option is not available to current state employees or current retirees.

The MOSERS Board was authorized to offer the Buyout Program under Senate Bill 62, which took effect in August. SB 62 aims to save the $8 billion system money over the long term by allowing MOSERS to pay out a percentage of a pension’s value over time and avoid administrative fees regarding the tracking of all 17,500 beneficiaries. According to the St. Louis Post-Dispatch, the program could save MOSERS, which is 69% funded, an annual $7 million.

“The lump-sum buyout amount will be 60% of the present value of the member’s future normal retirement annuity,” MOSERS said in a statement. “The present value is the amount required, as of October 1, 2017, to fund their future benefit payments.”

In the letters, MOSERS suggests former state workers consult with financial experts or tax advisors before they make their decision. The letters also note that the system is required to withhold 20% of the taxable potion of a cash distribution for federal income tax. In addition, those younger than 59 ½ may be subject to an additional 10% early distribution federal tax penalty.

__________________
It's STUMP

LinkedIn Profile

Last edited by campbell; 09-11-2017 at 10:08 AM..
Reply With Quote
  #1229  
Old 09-11-2017, 09:58 AM
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: 84,106
Blog Entries: 6
Default

MINNESOTA


http://www.twincities.com/2017/09/08...here-you-look/

Quote:
How healthy are Minnesota’s pensions? Depends on where you look

Minnesota’s pension plans have long had a reputation as safe and solid, especially compared to notoriously underfunded plans in states like Illinois or New Jersey.

But recent data is challenging that reputation. In 2015, Minnesota’s public pensions had enough money to cover 80 percent of expected costs. Last year, under national standards, that plummeted to 53 percent. That’s closer to Illinois than to well-funded Iowa or South Dakota.

Local experts say that dismal picture is misleading, however.

“We’re not among the worst in the nation,” said state Rep. Tim O’Driscoll, a Sartell Republican who’s a vice chair of the Legislative Commission on Pensions and Retirement. “But we have taken steps backwards.”

Most of the fall came not from losses in the market or rising claims but from an accounting change: Minnesota lowered its assumptions about how much revenue it would earn from investments decades in the future. The change was driven by standards set by the Governmental Accounting Standards Board, an independent nonprofit.
.....

That’s not to say the pension news is good. Minnesota’s funds lost 0.1 percent last year — far below the 8 to 8.5 percent annual return its standards assume. And Minnesotans are living longer than once assumed — good news for them, but higher costs for the state’s pensions.

These actual setbacks for Minnesota’s pensions helped trigger the drastic accounting changes. Other states also saw their pension health plummet under the GASB standards, but Minnesota saw the biggest fall because it combined the new rules with legitimate setbacks.
.....
Things have looked up since then. While Minnesota’s pension plans lost 0.1 percent during the July 1, 2015, to June 30, 2016, fiscal year, they saw a 15 percent return in 2016-17.

Minnesota’s nine public employee pension plans have around $65 billion in assets between them and cover more than 400,000 retirees and current employees of state and local governments and schools.

.....
“Overall our pension funds are in good health,” said Erin Leonard, executive director of the Minnesota State Retirement System, one of three major statewide pension plans. “We do need to make some adjustments.”
Plan administrators and political leaders agree on the solution: passing what Pappas called a “shared pain bill” setting slightly bigger contributions from current employees and slightly lower payouts to retirees.

In fact, lawmakers have tried to pass just that the past two years. But Gov. Mark Dayton vetoed them both: a 2016 pension bill over concern that one benefit cut was unfair, and a bill this year because of a controversial labor-law provision that lawmakers tied to the pension package.

Dayton said this year that he would have signed the pension reforms had they been a standalone bill, and Frans said the governor supports a similar pension reform bill next year.

“If you are already retired, you have to accept that maybe we can’t give you a (cost-of-living increase) this year,” said Pappas. “If you’re a current employee … you might have to pay another half percent into that pension fund to keep it viable. But I’m not going to tell you to freak out. We have to make these reasonable changes to our pension fund.”

If Minnesota does nothing, O’Driscoll said, the risk isn’t just that the pensions could go bankrupt decades in the future. It could also hurt Minnesota’s credit rating now, raising the cost on taxpayers for highway projects and other public borrowing.


http://alphanewsmn.com/mn-pension-co...omberg-report/

Quote:
MN Pension Commission Balks at Negative Bloomberg Report

ST. PAUL, Minn.- There is a great deal of debate on the health of Minnesota’s State Retirement System (MSRS) following a report showing a significant decrease in the amount of the program being funded. State officials say that the validity of this recent report, however, is questionable.

Bloomberg recently indicated that the MSRS were in serious trouble, through their evaluation of the Government Accounting Standards Board MSRS plan. From analysis of this plan, Bloomberg speculated that “Minnesota’s debt to its workers retirement system has soared by $33.4 billion, or $6,000 for every resident.”

The report expressed that recent lowballing in funding resulted in Minnesota only being able to fund 53 percent of its public pensions. As a comparison, in 2015, Minnesota was able to cover 80 percent of its pensions.

A large part of this problem has been new rules that have lead to a drop in how much public employees are paying into their pensions. Pensions are funded in part from the public employees who make up the fund. The teacher’s fund, for instance, is made up of contributions from public educators, and the amount they contribute is dictated by a set rate, called discount on liabilities. Previously, Minnesota educator’s pension was set at an eight percent discount on liabilities. In the last year, however, this rate was put at 4.7 percent, meaning that public educators were contributing less into the fund. Under these set of assumptions, this lead the amount of liabilities to increase by $16.7 billion.

However, the Executive Director of the Legislative Commission on Pensions and Retirements, Susan Lenczewski indicated that there were two important shortcomings in Bloomberg’s analysis.

“The Bloomberg article focused on the plans’ financial/accounting information, rather than the plans’ actuarial information,” Lenczewski said. “The accounting standards (i.e., GASB) used to produce financial reports produce a bleaker picture of the plans’ status than the actuarial standards. The actuarial reports are what the pension plans and the legislature rely on to determine funding, benefit reforms, and legislative action.”

Actuarial valuation, which Lenczewski is referring to, is defined as, “a type of appraisal which requires making economic and demographic assumptions in order to estimate future liabilities. The assumptions are typically based on a mix of statistical studies and experienced judgment. Since assumptions are often derived from long-term data, unusual short-term conditions or unanticipated trends can occasionally cause problems.”

A Teacher’s Retirement Association memo seems to reflect this sentiment, stating;

“GASB reporting is not intended to provide a picture of the funded status of a pension plan. Instead, funded status is determined by an actuarial funding methodology, the objective of which is to achieve an ultimate funded status of 100 percent. If the TRA reforms currently pending in the legislature are enacted, TRA will be on that positive funding trajectory.”

Lenczewski also points out that Bloomberg’s numbers were from the 2016 fiscal year, which has less returns on investments (-0.10) than fiscal year 2017 numbers, which will show a 15.1 percent investment return. Lenczewski indicated that this 15.1 percent investment return would certainly increase the percent of the public pensions funded from the 53 percent indicated in the Bloomberg report. Furthermore, the memo indicates that “year-to-year GASB numbers will fluctuate wildly and do not provide appropriate guidance for oversight of pension funding, which is best viewed through a very long-term lens.” It is necessary to point out though that GASB still plays an important role in the decision making of both the school districts and the teachers pension plan, due to state standards.


__________________
It's STUMP

LinkedIn Profile

Last edited by campbell; 09-11-2017 at 10:28 AM..
Reply With Quote
  #1230  
Old 09-11-2017, 10:02 AM
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: 84,106
Blog Entries: 6
Default

PHILADELPHIA, PENNSYLVANIA

http://www.philly.com/philly/news/pe...-20170908.html

Quote:
City's pension 'reform' hits taxpayers, consumers

The Kenney administration claimed victory on pension reform when it announced last month that it signed a $245 million three-year contract with the Fraternal Order of Police.

With that agreement, and one last year with AFSCME District Council 33, the city said it was in a position to fortify its beleaguered pension fund, which has less than half the $11 billion it has pledged to pay retirees.

But much of the so-called reform to stabilize the fund by 2030 is coming from Philadelphia taxpayers and consumers.

Taxpayers will be kicking in upward of $600 million into the fund each year, with 10s of millions of dollars more from sales tax revenue. Even with the increased contributions, the only way the city gets to 80 percent funded – a level considered stable — would be with a 7.7 percent annual return on its investment, pension experts said.

“The consensus estimates is that stock and bond markets are unlikely to earn the assumed 7.7 percent return, so the funding will be much below what is projected,” said Olivia S. Mitchell, executive director of the Pension Research Council at University of Pennsylvania.

The contracts with the police and blue collar municipal workers unions affect about 15,000 employees and their families. With 28,000 employees contributing to the pension system and nearly 35,000 retirees and beneficiaries collecting benefits, the pacts and obligations can instantly shape the city’s financial situation.

Even before the new labor contracts, actuaries predicted two years ago that if the city obtained its assumed rate of return — 7.85 percent at the time — it would reach the city’s pension funding goal by 2031.

....
The city made similar projections before. In 2007, the pension fund was 54 percent funded and the actuaries predicted that by 2019 it would reach 80 percent if it hit the then assumed annual rate of return, 8.75. The recession hit and wiped out a lot of the fund’s money.

Dunn said the 2007 prediction is not a “very meaningful” example because “Any projection from 10 years ago would have been ruined by the market collapse.”

Experts say that’s exactly the point– no one knows what future return will bring.

“The actual funding level will, of course, depend on whether full city contributions are made and how investments actually perform,” said Greg Mennis, director of Pew Charitable Trust’s Public Sector Retirement Systems division.


__________________
It's STUMP

LinkedIn Profile
Reply With Quote
Reply

Thread Tools Search this Thread
Search this Thread:

Advanced Search
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 03:25 AM.


Powered by vBulletin®
Copyright ©2000 - 2018, 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 0.90332 seconds with 9 queries