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  #101  
Old 02-15-2012, 12:55 PM
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Originally Posted by campbell View Post
...how many Illinois governors have gone to prison?

Oh, here we go:
http://en.wikipedia.org/wiki/Governo...ois#Corruption
Nice, but look at the thousands of local and state politicians over the past 12 years who ate well at the public employee table and voted pension increases.
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  #102  
Old 02-15-2012, 01:44 PM
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Nice, but look at the thousands of local and state politicians over the past 12 years who ate well at the public employee table and voted pension increases.
...and then there's New Jersey....
http://www.nj.com/news/index.ssf/200...ummy_post.html

Yes, if one legally sets up promises that mathematically won't be fulfilled, as a public official, you are probably not going to be called up on criminal charges.

But when the bill comes due, and you're still in office when it happens....well, there's a reason Daley stepped down as mayor.

It is difficult to prevent politicians from giving out lots of goodies, when times are good, other than voter vigilance (and giving a crap). Even when times are not good, they'll see if they can still give goodies out.

I am willing to bet that even if the valuations disallowed a lot of the "phasing in" of benefits, and even if the discount rates weren't so high, the various goodie-giving would have continued. The only thing that would have reined them in, is what currently is reining in places like Greece. No one feels like extending more credit to them. And you can't tax what isn't there.

This has happened with governmental bodies multiple times before, borrowing and spending beyond their means, trying to claw back via taxes when the cash starts getting tight...and finding that doesn't work...until ultimately, they default on their promises.

So this goes back to the earliest key point that I have disagreed with various people on, and that's the statement: "the government doesn't go out of business".

Yes, if you are completely ignorant of history, then I suppose you can believe that.
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  #103  
Old 02-16-2012, 12:53 PM
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Default Jerry Brown gets no love from CalPERS

From the comment section of the Sacramento Bee today:
"After my read of the CalPERS response, it is clear that public plans and private plans play by different rules.
In private plans, the IRS assumes that DC plans will earn 7.5% to 8.5%, and that DB plans will earn about 6% over the long term.
CalPERS needs to protect their turf, and it is in their best interest to say that DC plans will earn 6.75% while DB plans earn 7.75%. The don't read from the same economic text that everyone else uses.

So CalPERS makes the DC plan look more expensive to achieve the desired results. How very political of them...."
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  #104  
Old 02-16-2012, 02:42 PM
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Default Does the DB plan keep public employees chained in?

http://papers.ssrn.com/sol3/papers.c...act_id=2004778

This paper suggests that changed retirement plans from DB to DC will result in more employee turnover and less efficiency. Is the DB promise a method of keeping people on the job longer, and improving effectiveness?

Maybe, but the effect they describe is trivially small, and good management practices would solve that problem quickly.
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  #105  
Old 02-16-2012, 03:49 PM
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It's amazing how much more effective public employees are compared to those in the private sector.

Keep those DB plans going, y'all!
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  #106  
Old 02-16-2012, 08:05 PM
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Originally Posted by Duffer View Post
From the comment section of the Sacramento Bee today:
"After my read of the CalPERS response, it is clear that public plans and private plans play by different rules.
In private plans, the IRS assumes that DC plans will earn 7.5% to 8.5%, and that DB plans will earn about 6% over the long term.
CalPERS needs to protect their turf, and it is in their best interest to say that DC plans will earn 6.75% while DB plans earn 7.75%. The don't read from the same economic text that everyone else uses.

So CalPERS makes the DC plan look more expensive to achieve the desired results. How very political of them...."
DC plans do earn 1% less than DB plans. Public sector DB plans discount using expected return on plan assets, private sector DB plans do not. That accounts for the difference in the discount rate. Why does everyone think they are coming up with two different answers to the same question?
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  #107  
Old 02-17-2012, 02:03 PM
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DC plans do earn 1% less than DB plans. Public sector DB plans discount using expected return on plan assets, private sector DB plans do not. That accounts for the difference in the discount rate. Why does everyone think they are coming up with two different answers to the same question?
Look at the evidence. IRS says 7.5-8.5 is the rate for DC plans. We private plan actuaries deal with that fact every day.

Meanwhile, look at the NIRS report of August 2008, before we all went to he!!

What is the updated average return on assets in both types of plans since the prior recession of 2001?
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Last edited by Duffer; 02-17-2012 at 02:11 PM..
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  #108  
Old 02-17-2012, 04:01 PM
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Public sector DB plans discount using expected return on plan assets,
But they're using their expected return on plan assets, right? Or is there some uniform and accepted method of determining what the expected return on assets is that everyone should use?

I honestly don't know, but the second option doesn't make much sense to me; I have this gut feeling there are confidence intervals that either aren't being calculated, aren't being communicated or aren't being applied.

Or are they? Tell me how.
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  #109  
Old 02-17-2012, 05:50 PM
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But they're using their expected return on plan assets, right? Or is there some uniform and accepted method of determining what the expected return on assets is that everyone should use?

I honestly don't know, but the second option doesn't make much sense to me; I have this gut feeling there are confidence intervals that either aren't being calculated, aren't being communicated or aren't being applied.

Or are they? Tell me how.
ASOP 27 addresses the selection of economic assumptions for measuring pension obligations. The actuary's recommendation varies from plan to plan due mainly to differences in asset allocation. Whether or not the Board adopts the actuary's recommendation is another matter of which stakeholders should be aware.
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  #110  
Old 02-17-2012, 10:22 PM
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Look at the evidence. IRS says 7.5-8.5 is the rate for DC plans. We private plan actuaries deal with that fact every day.
Citation please. (What does the IRS have to do with a rate of return/discount/projection on a DC plan anyway?)
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What is the updated average return on assets in both types of plans since the prior recession of 2001?
Isn't this the whole problem anyway? and, what does the (current?) rate of return have to do with long-term expectations? (except how it might affect long-term historical averages that those expectations might be based on?)

It seems to me that a lot of these discussions bounce back and forth between returns and expectations without explaining the transition or basis for using a particular number in a certain calculation. Of course historical returns are used in estimating future expectations; of course different asset allocations result in different expectations; of course different expectations are used to discount liabilities used to answer different questions. I think that it is just plain stupid to expect that there is one single answer to the question of "what is the value of a plan's liabilities?" The question is not that simple and too dependent on the context. Unfortunately, the accountants and the regulators (as well as the taxpayers, the financiers, and the media) appear to demand a single numerical answer rather than being willing to work with the "confidence interval" response (for lack of a better term) or a context specific response (termination/long-term/generationally neutral/or whatever) that actuaries could feel more comfortable with.

[/rant]...you may now begin slinging mud, rocks, innuendo, and vitriol at will...
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