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  #411  
Old 05-08-2010, 06:49 PM
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Mary Pat Campbell
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Sorry, I've not been keeping up with my own blog posts. I can't remember the last I linked to so I will link the five past posts from me, in reverse chronological order.

http://powip.com/2010/05/demography-is-destiny/

http://powip.com/2010/05/public-pens...nd-governance/

http://powip.com/2010/05/public-pens...blem-overview/

http://powip.com/2010/05/public-pens...discount-rate/

http://powip.com/2010/04/public-pens...vernors-races/
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  #412  
Old 05-08-2010, 06:52 PM
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That quasi-governmental agency called the USPS:
http://www.govexec.com/dailyfed/0510/050610l1.htm

Quote:
According to USPS Inspector General David Williams, the $75 billion overpayment was the result of a misinterpretation of a 1974 law regulating pension funding. The Office of Personnel Management incorrectly made USPS fund a higher portion of the pensions than it owed, he said, adding the agency could use the $75 billion to pay off its Treasury debt and its obligations to pension and health care accounts.
....
The IG's office also found the Postal Service's obligation to fully prefund its employee pensions and retiree health benefit payments to be excessive. For example, the government prefunds a separate federal retiree account at 41 percent and does not fund health benefits in advance, Williams said. The Postal Service is asking Congress to reconsider its $5.6 billion annual health benefits prefunding requirement.

California

http://www.latimes.com/news/local/la...,6372908.story

Quote:
A decade has passed since lawyer, philanthropist and business executive Richard Riordan held the title of mayor.

Yet just days after he turned 80, the Brentwood resident has transformed himself into the No. 1 doomsayer of city government, telling politicians, business leaders and even the Wall Street Journal that the city he once led is on the verge of bankruptcy.

That message has begun to grate on city leaders, who contend that some budget problems now being faced were created under Riordan's watch.

"We're having to clean up after the lack of reform in our pension system from that administration," said City Administrative Officer Miguel Santana, the top budget analyst working to close a projected $485-million shortfall next year.
....
"As a result of his delays in responding to the city's fiscal emergency, Mr. Villaraigosa has squandered not just his career, but his relevancy," Riordan wrote in a Wall Street Journal commentary co-authored by former city animal services Commissioner Alex Rubalcava, president of an investment advisory firm.

The message has piqued the city's leaders enough to put the B-word — and Riordan's Op-Ed — on Friday's council agenda. Villaraigosa, who has largely ducked the debate, said in a statement that he is "making the tough choices to restore the fiscal stability and long-term financial health of the city."

Santana, on the other hand, issued his own rebuttal memo, pointing out that Villaraigosa's budget, if approved, would reduce the workforce to a size not seen since 1997. In an interview, he also discussed Riordan's hand in expanding the city's employee benefits.

Weeks before he left office in 2001, Riordan campaigned for Charter Amendment A, a ballot measure that allowed police officers and firefighters to retire with up to 90% of their salaries, up from the 70% that had been in place previously.

That beefed-up pension benefit allowed police and firefighters to retire at 50. And it played a key role in expanding the city's retirement costs, said Santana, who has spent the last few months trying to persuade elected officials to roll back the benefits pushed by Riordan.
....
Employee benefits were enhanced in other ways during Riordan's watch. In 1998, the city decided to allow retired public safety employees to receive health subsidies at age 55 – down from 60. And some union leaders still praise the pay package negotiated by his administration during those boom years.
------------
=crap, I lost my Illinois links=
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Michigan

http://www.freep.com/article/2010050...nsion-standoff

Quote:
Gov. Jennifer Granholm is meeting with House and Senate leaders this morning to break a standoff over a bill to allow thousands of public school employees to retire this year with a slight pension increase.

As an incentive, all remaining school employees would pay an additional 3% of their wages toward the state retirement system after Oct. 1.
....
Also, the retirement plan is a key to resolving state funding for schools next year. The latest proposal would save school districts $680 million in the 2010-11 fiscal year and $3.2 billion over 10 years, according to the Senate Fiscal Agency. That assumes between 40 and 50% of eligible employees will retire.
....
Under the Senate GOP proposal:


· School employees with at least 30 years of service and at age 55 could retire with a slightly higher pension. They would use a multiplier of 1.6% to calculate their monthly pensions with age and years of service. The current multiplier is 1.5%


· Those with a combined age and years of service of 80 years could retire using a 1.55% multiplier.


· The 3% retirement payments would go into a new trust fund.


· Charter schools would not be required to join the retirement system.


· Private contractors in schools – bus drivers, food service, custodians – would not pay into the retirement system.


· Future retirees would have to reach age 60 for full benefits, with no cost of livingincreases.


House Democrats have insisted on wording along with the trust fund that guarantees retirees health care coverage for life. Senate Republicans oppose that written guarantee.
Now why would that last part be necessary -- wasn't there a big health reform bill recently?
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  #413  
Old 05-10-2010, 09:31 AM
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Campbell,

Granted, this collection of posts of the horrors of public pension plans has been ongoing by you for quite some time. But I have to ask, why do you have a vendetta against public plans? To be honest, it almost seems personal at this point. Did a public plan kill your grandmother?

Seriously though, from what I can tell (correct me if I'm wrong) you are not a pension actuary. So, not only do you have no experience with public plans, but you have no experience with private plans either, correct? Certainly, you don't have to answer my question, but I am just curious as to why you feel the need to attack public plans which actually provide much more societal good than ill. You go so far as to have a blog where you attack. I read your "Public Pension Primer" blog post, which was not a primer on the workings of public plans, but simply an explanation of how to calculate a present value. If this sort of calculation is what makes you think that you are qualified to espouse on the workings of pension plans, then I submit that you may want to reconsider. Don't use misleading titles, at the very least.
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  #414  
Old 05-10-2010, 10:45 AM
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limabeanactuary limabeanactuary is offline
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1. You have to go back probably about 3-4 years to see what originated these threads.

But it has changed over time.

Do you really want to know where my links are coming from? Google news alerts. Google emails me once a day with about 20-25 links [I had to limit it] -- I am not doing much active other than organizing the links, pulling out some quotes, and sometimes reacting to it. But you'll notice that lately, I mainly just pull out the lede and don't comment at all. It's not like it requires a lot of diligent searching.


2. There is necessarily going to be simplification if one is presenting stuff to a general audience. I do not have to dumb down any discussion here at the AO.

The "Public Pension Primer" does not mean that only public pensions are involved with a particular topic. It's just that certain jargon gets thrown around, such as discount rate, double-dipping, spiking, unfunded liability, and I'm trying to explain what these things are.

There are lots of detail I do not know or understand, and when I see that, I come here and ask about it.

3. I have not worked in DB pensions, but I have worked on income annuities. The promises are a bit different before income is taken, I agree, and there are many details I do not know [such as adjustments for joint benefits, which I asked about in another thread here recently].

I may not be an expert of the ins and outs of the details of different types of pension plans, but I do know the effect of various assumptions on annuity factors. I do know Mr. Micawber's advice, too.

One doesn't need to work directly in life settlements, for example, to see what the possible issues can be and how that would affect life insurance.

But more than that, it should not be beyond the ken of an informed citizen to understand the finances of their own government. "Shut up! You don't know what you're talking about!" does not inspire much trust from those footing the bill.

4. For the record, I have no problem with DB pensions if they are looked at realistically in terms of employee motivations, costs, demographic changes, etc.

I thought the recent article in Contingencies on ways to change ERISA to make DB plans work better in the current day is very good at providing this sort of analysis:
http://www.contingenciesonline.com/c.../20100506#pg24

For all my doom-saying, I think there's lots of good proposals in that article. It might be interesting to see if any of those ever actually come to light.
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  #415  
Old 05-10-2010, 11:44 AM
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Quote:
Originally Posted by EA4ME View Post
Campbell,

Granted, this collection of posts of the horrors of public pension plans has been ongoing by you for quite some time. But I have to ask, why do you have a vendetta against public plans? To be honest, it almost seems personal at this point. Did a public plan kill your grandmother?
How can a taxpayer [who is not benefiting from public pension plans] NOT have a vendetta against public pension plans? It seems as if the "rules" are far too lax, they are too easy to game, and are easily politicized. There is no reason for taxpayers to subsidize the enormous costs of these pensions plans, (costs including corruption, using wrong assumptions). The private job market has pretty much decided it's too expensive, so why are government jobs still providing this benefit? I would much rather see government employees simply receive the present value of their benefit as a cash payment every year.
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  #416  
Old 05-10-2010, 11:56 AM
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It is not so much “Shut up! You don’t know what you’re talking about!” that I would want the public to hear, but more like “Trust that the people who do know what they are talking about are doing their jobs correctly.”

Much of what I see you are posting and linking to are opinion and editorial articles. These aren’t really based in fact, and mostly amount to the author trying to capitalize on public sentiment regarding tax increases. So the article with the title “Public Plans want your tax dollars to give rich benefits to lazy government workers” will sell much better than “Public Plans are surprisingly well funded and doing their job in a cost-efficient manner”. It’s clearly the nature of our society. What I have trouble with is a fellow actuary and clearly intelligent person who buys into it, and worse more, is adding fuel to the fire. Members of the AO have gone into this before, but there are differences between private and public plans. This is the reason why FASB and GASB exist separately to provide guidelines. It doesn’t look as if GASB will be altering its definition of discount rate to align itself with what FASB does, and for legitimate reasons.

The recent article that you link to in Contingencies is a good one, I agree. I think that, in particular, the points about retirement age and participation age could be very helpful in providing incentives to companies to maintain private plans. But for the most part, this article is written from a standpoint of helping private, not public plans. The suggestions would not affect most public plans; indeed, public plans are not subject to the PBGC.

Do I think there are legitimate issues with public plans? Yes, of course. Unfortunately, the problems arise for the most part due to the political climate in which they must function. It’s true; when times are good there are examples of political pressure (mostly from unions) to increase benefits, but too often in difficult economic times (like the one we’re in now) the unions would fight tooth and nail against any benefit reductions or increased contributions. But all this “public plan bashing” is leading to a climate in which the pension is seen as too expensive and the only option is to switch to a 401(k) style of benefit. This is the wrong answer, as it is common knowledge that the 401(k) does not provide the type of retirement security that is beneficial to society as a whole (what do you think happens to all the retirees who outlive their balances? Alas, I think in the coming years we will see many examples of this.)

Basically, I think we’d be better served if the focus was on some small changes that could be made to further enhance pensions (public and private) rather than tearing them down completely. Retirement security closely follows the decline in the number of db pensions. And that will be costly for all of us, much more so than anything we are facing now.
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  #417  
Old 05-10-2010, 12:11 PM
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limabeanactuary limabeanactuary is offline
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Well, there's a good reason not to believe the numbers coming out of plan valuations, due to treating an expected return on very risky assets as a sure thing, and not taking into consideration the value of the "taxpayer put" when the assets don't perform up to expected [in addition to the risk that the taxpayers won't actually be there to put the liability on].

I did start out the threads as a reply to various arguments made about current pension valuations, but it morphed in just surveying what's out there in the news.

It's a good idea to keep track of what public sentiment is, as it will impact actuaries in specific ways. Yes, there are a lot of opinion pieces here, but I also try to pull pro-pensions pieces as well [yes, I make skeptical comments on some of these, but I also make comments about some claims against public pensions]. I'm just taking what google gives me every day. It's getting extremely political because, guess what?, it's a pretty important election year for many gubernatorial races.

It's interesting to see the various themes develop. You get particular players who show up a lot in these stories, and some of these are one-offs. For a time pay-for-play scandals were hot [they still bubble up here and there].

Right now, retirement ages and underfunding of plans is a huge theme, especially with what's going on in Greece [which has retirement ages that are just ridiculous-- 50 for hairdressers, b/c they work with toxic chemicals, for example. Is there really heightened mortality for hairdressers due to all the hair-dying and perms?]
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  #418  
Old 05-10-2010, 12:18 PM
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Quote:
Originally Posted by EA4ME View Post
It is not so much “Shut up! You don’t know what you’re talking about!” that I would want the public to hear, but more like “Trust that the people who do know what they are talking about are doing their jobs correctly.”
Given recent experience, I don't think I'm willing to do so (trust that people are doing their jobs correctly). Politicians do one thing correctly: get reelected.

Quote:
So the article with the title “Public Plans want your tax dollars to give rich benefits to lazy government workers” will sell much better than “Public Plans are surprisingly well funded and doing their job in a cost-efficient manner”.
Except... they aren't surprisingly well funded. < 60% funded is NOT well funded.

Quote:
But all this “public plan bashing” is leading to a climate in which the pension is seen as too expensive and the only option is to switch to a 401(k) style of benefit. This is the wrong answer, as it is common knowledge that the 401(k) does not provide the type of retirement security that is beneficial to society as a whole (what do you think happens to all the retirees who outlive their balances? Alas, I think in the coming years we will see many examples of this.)
And? I agree that DB > 401(k), if properly funded. But if not funded, DB = 401(k) = $0. Good luck selling taxpayers on the need for public employees to get better benefits than said taxpayers, however.
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  #419  
Old 05-10-2010, 02:08 PM
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Originally Posted by limabeanactuary View Post
Well, there's a good reason not to believe the numbers coming out of plan valuations, due to treating an expected return on very risky assets as a sure thing, and not taking into consideration the value of the "taxpayer put" when the assets don't perform up to expected [in addition to the risk that the taxpayers won't actually be there to put the liability on].
This is your opinion. It is not true that there is “good reason” not to believe the numbers. An “expected” return is just that. It means that sometimes the return on assets in my plan will exceed that return and sometimes it won’t. In an effort to keep taxpayer contributions steady, an expected return, or discount rate, is set in a reasonable manner given asset allocations (not “very risky assets”). The discount rate is set in accordance with the standards of GASB as well as the ASOPs. In many cases, the 25+ year historical rate of return for the plan exceeds the discount rate assumption.

Yes, you can find plans that aren’t well funded. Yes, you can find plans that are not functioning properly (not making required contributions). Correct, < 60% is NOT well funded. But, > 80% is. And there are many, many plans that are well funded. Like Campbell mentions, there are repeat offenders; many of the poorly run plans keep showing up in the news articles. You have to realize that there are many plans out there that you just don’t hear about, and the reason you don’t hear about them is exactly what I mentioned in my previous post. Well run, well funded plans aren’t grabbing any headlines – they are just doing their job.
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  #420  
Old 05-10-2010, 02:36 PM
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Originally Posted by EA4ME View Post
Yes, you can find plans that aren’t well funded. Yes, you can find plans that are not functioning properly (not making required contributions). Correct, < 60% is NOT well funded. But, > 80% is. And there are many, many plans that are well funded. Like Campbell mentions, there are repeat offenders; many of the poorly run plans keep showing up in the news articles. You have to realize that there are many plans out there that you just don’t hear about, and the reason you don’t hear about them is exactly what I mentioned in my previous post. Well run, well funded plans aren’t grabbing any headlines – they are just doing their job.
But, you see, the plans that aren't well funded can potentially BANKRUPT STATES!!!!

And guess who's on the hook for the liabilities? Millions of taxpayers!!!!!

I can tell you what, if New Jersey decided to come after the taxpayers for the missing $$$, this person will find himself living somewhere not called New Jersey.
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