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  #11  
Old 01-02-2018, 09:46 AM
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Mary Pat Campbell
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NORTH CAROLINA
CRIMINAL OFFICIALS
http://www.wral.com/treasurer-wants-...nies/17221079/

Quote:
Treasurer wants stronger pension forfeiture law for officials convicted of felonies
Spoiler:
RALEIGH, N.C. — Public officials take an oath to serve and protect the public's trust, but they don't always uphold that standard:

Former Wake County Register of Deeds Laura Riddick and some of her staffers were indicted this month on charges they embezzled more than $1 million.
Former Rockingham County District Attorney Craig Blitzer pleaded guilty in July to failure to discharge the duties of his office in a scheme to get his wife a job. Wallace Bradsher, the former district attorney for Person and Caswell counties, also is charged in the case.
Former state Sen. Fletcher Hartsell is serving a federal prison sentence for using campaign funds for personal expenses.
North Carolina has a law that's been in effect for about a decade that restricts pensions for public officials convicted of a felony related to the job, but State Treasurer Dale Folwell said it needs more teeth.

Folwell was a state lawmaker who helped pass the pension forfeiture law after former House Speaker Jim Black and ex-Agriculture Commissioner Meg Scott Phipps went to prison for taking illegal campaign cash. Neither Black nor Phipps lost their state pensions because there were no rules on the books at the time of their crimes.

"It outrages the citizens of this state," Folwell said Friday of public corruption.

The law doesn't cover crimes unrelated to someone's public position. It also doesn't affect years of service unrelated to a crime, individual pension contributions or earned interest.

Folwell wants current lawmakers to clarify the law to put prosecutors and judges on the same page with his office.

"We're just making sure that, A, we're applying the law because we are keepers of the public purse in the Treasurer's Office, and B, that the prosecutors, the district attorneys and the judges across the state understand that this is very important," he said.

Folwell said the clarification would require anybody who doesn't want to apply the pension forfeiture law in a specific case to "overtly do something to keep the person's pension intact."

He also wants plea deals to be subject to pension forfeitures.

Folwell didn't provide specific examples of cases that may be bypassing the pension forfeiture law, but he said elected officials who misuse their public office and still collect a pension unfairly cost all the other members of the state pension plan.

"It's not emotional, it's not political, it's mathematical," he said.
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  #12  
Old 01-02-2018, 09:46 AM
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OREGON
http://pamplinmedia.com/nbg/142-news...-pension-rates
Quote:
PERS employers, city get a look at future pension rates
Estimates are that Newberg and other government entities will see a steep increase in PERS costs
Spoiler:
Oregon state and local officials are now receiving specific projections of how much more governments must pay for contributions to the Public Employee Retirement System. That includes the city of Newberg. Officials there explained that the report is an annual valuation that establishes advisory rates for the 2019-2021 biennium.

"This is for information only," Matt Zook, the city's finance director, explained. "PERS will release another report in December 2018 that finalizes the rates for the 2019-2021 time period."

Zook added that the city received the state's official report on Dec. 7 and that it indicates the PERS rates will increase, but that he has "not yet analyzed the specific impact using these new rates."

The city of Newberg has about 70 employees included in the 2017-2018 budget that are covered by PERS.

"The city is obligated to pay these rates and absorb the cost into the annual budget," Zook said. "The impact of PERS increases adds additional pressure to the (city's) limited resources."

As an example, Zook said if the city were to apply the just-released 2019-2021 advisory to this year's budget, it would cost an additional $165,000 in PERS cost on top of the $1.3 million already budgeted.

And the challenging fiduciary news doesn't stop there for the city. Zook explained that in 2004 the city joined more than a dozen other Oregon governments that pre-funded some "retirement costs in an effort to provide additional retirement funding at a lower cost, essentially to keep the city of Newberg's rates lowers."

The bond service payment that resulted from the move, he said, was $248,000 in the current budget, an expenditure of "4 to 5 percent on top of the published PERS rates."

And that phenomenon stands for city and county governments across the state: most rates are going up by 4 or 5 percent of employee salaries for the budget cycle that starts in mid-2019 — and higher contributions mean less money for other employee benefits or public services.

The good news: The rates may not be as high when the Public Employees Retirement System board sets final numbers next fall, because rates will be based on the system's investment values as of Dec. 31.

Investments of Oregon's public-pension fund rose in value from $69.2 billion in November 2016 to $76.4 billion in October, the board learned Dec. 1, when preliminary 2019-2021 rates were released. The final 2017 valuation will be unveiled Feb. 2.

The growing value of the PERS fund also may shave the system's unfunded long-term liability, pegged at $25.3 billion at the end of 2016, by a billion or two by the end of this year. That liability is spread out over a few decades.

Still, PERS Board Chairman John Thomas said, given that large number, "This problem is not going to go away."

Board member Stephen Buckley added: "We need to look at ways to address the funding issues other than simply continuing to increase employer contributions."

A D V E R T I S I N G | Continue reading below

About $7 of every $10 paid out in pension benefits comes from investment earnings. Most of the rest comes from government employers.

Rates dribbling out

More than 900 government employers that are members of PERS will get detailed reports through mid-December. The reports were prepared by Milliman, a firm that does the actuarial work for PERS.

The rates are based on several factors, including the mix of workers hired before and after August 2003, when lawmakers overhauled benefits; the share of police and fire employees who qualify for greater pensions than other workers; and whether government employers have set aside money, known as "side accounts," to offset some of their pension liabilities.

The PERS board is scheduled to set final 2019-2021 rates at its Oct. 5 meeting next year.

The projected rates are "collared," so that much of the increase is spread over the following four years.

A D V E R T I S I N G | Continue reading below


PERS Executive Director Steve Rodeman said the agency consulted with an employer advisory group about the possibility of letting the rates jump over a single budget cycle instead of spreading out the increase.

Without collaring, "The big jump we would see in 2019-2021 would be even bigger," he said, and the idea was dropped.

Biggest beneficiaries mostly retired now

At the end of 2016, far more public employees (107,262) were covered by the post-August 2003 pension program, which is less generous than those in Tire 1 hired before 1996 (26,964) and those in Tier 2 hired from 1996-2003 (38,257).

However, the vast majority of PERS retirees (124,171) qualify for the more generous Tier 1 benefits.

The PERS board did vote to transfer $186.9 million not needed for contingencies into the fund that pays out benefits to retirees. Combined with a similar action April 3, the board has added a total of $532.7 million to the fund.

A D V E R T I S I N G | Continue reading below

That's about 10 percent of a $5 billion target set by Gov. Kate Brown to reduce the system's unfunded liability.

That number was chosen because it is the estimated amount of loss that resulted from a 2015 decision by the Oregon Supreme Court, which ruled that reduced cost-of-living adjustments approved by the Legislature in 2013 cannot be made retroactive to benefits earned before 2013.

Reducing liability

A task force named by Brown submitted proposals to raise money to reduce that liability in a Nov. 1 report. It did not recommend any specifics, which will be up to Brown and the Legislature to consider.

"We are not a legislative body. But we do understand the math," Thomas said. "We are going to do what we have to do to maintain sustainability."

The PERS board oversees the pension system, and the Oregon Investment Council oversees its investments. But Thomas said neither can tackle the bigger questions about long-term liabilities.

A D V E R T I S I N G | Continue reading below
"This is not something that can be unilaterally fixed," he said. "It's going to be something that various constituent groups need to get together on, do some brainstorming and look at the long-term issues. This is not going to go away. It needs to be addressed."

Among the seven task force members was Lawrence Furnstahl, chief financial officer of Oregon Health & Sciences University and a PERS board member.

Although news of increased investment earnings is welcome, Furnstahl said PERS also must prepare for worst-case scenarios outlined in Milliman's latest report.

Although the PERS fund has made substantial gains in the past year, it lost 28 percent of its value during the recession.

PERS Board member Steve Demarest agreed with Furnstahl that it is prudent to be prepared: "But let's keep our fingers crossed and hope for the best."

Projected PERS employer rates

A D V E R T I S I N G | Continue reading below

Numbers below show actual 2017-2019 PERS rates, as a percent of employee salaries, followed by projected 2019-2021 rates. The numbers are broken down to reflect those hired before and after a 2003 reform that cut benefits; and for public safety workers, who qualify for greater pension benefits.

-- State of Oregon: Pre-2003, 18.67 to 23.83 percent; post-2003, 10.78 to 16.25 percent; public safety, 15.55 to 20.98 percent.

-- Multnomah County: Pre-2003, 19.55 to 24.86 percent; post-2003, 11.29 to 16.81 percent; public safety, 16.06 to 21.54 percent.

-- City of Portland: Pre-2003, 17.62 to 22.76 percent; post-2003, 10.69 to 16.25 percent; public safety, 15.46 to 20.98 percent.

-- Portland Public Schools: Pre-2003, 6.66 to 13.07 percent; post-2003, 1.33 to 7.45 percent; public safety, 6.10 to 12.18 percent.
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  #13  
Old 01-02-2018, 09:46 AM
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TEXAS
DALLAS
https://www.dallasnews.com/news/dall...city-hall-2018
Quote:
Bikes, bonds and big plans: 6 things to watch at Dallas City Hall in 2018
Spoiler:
Dallas City Hall spent 2017 staring down the ghosts of years and decades past: Confederate monuments, the police and fire pension mess, the Trinity toll road, four of six back-pay lawsuits and billions in deferred maintenance.
Save for the sudden arrival of Amazon or another twist, 2018 shouldn't be as dramatic as last year. But consequences are still ahead at Dallas City Hall in the coming year.
Here are six things to watch in the new year.
1. Pension reform plows forward

Executive Director Kelly Gottschalk (right) talks with Chairman Sam Friar during the Board of Trustees meeting at Dallas Police and Fire Pension System in Dallas on Dec. 8, 2016.
(Jae S. Lee/Staff Photographer)
After a year in crisis mode and a spring of tense negotiations in Austin, will 2018 be a quieter year for the beleaguered Dallas Police and Fire Pension System?
"I hope so," said Executive Director Kelly Gottschalk, who was at the center of the struggle.
But the legislation to save the pension was not a cure-all, and now pension leaders have to chip their way back to solvency. The next year will be the first in a long journey ahead. Dozens more pension-related retirements could be coming in January for police and firefighters because of the changes to the pension.
The system will continue to deal with litigation. And pension officials will try to get out of some of the overvalued investments of the past — including thousands of undeveloped acres in Idaho and Colorado — that helped create an unprecedented crisis.
But new governance is changing the system's direction. The board — the majority was appointed by Mayor Mike Rawlings — has already taken a harder line on some policies for benefits, over the objection of the police-and-fire board representatives.

HOUSTON
PENSION OBLIGATION BONDS
https://www.iris.xyz/fixed-income/pe...ligation-bombs
Quote:
Pension Obligation Bonds or Pension Obligation Bombs?
Spoiler:
Last week the City of Houston came to market with a $1.0 billion voter-approved pension obligation bond or POB. As a refresher, POBs are issued in the taxable market by local and state governments for the purpose of paying unfunded pension liabilities. Key to the success of POBs is the ability to arbitrage the cost of debt versus the returns for the pension assets and reasonably managing future pension costs. If the issuer cannot earn enough relative to the cost of the debt, as well as manage the pension plans in a manner that reduces the pension liability, then the outcome will likely be credit underperformance and potential rating downgrades.
Enter the City of Houston and its notable pension reforms and POB bonds. Houston pension reforms are notable because of the implementation of “cost corridors” on pension benefits for current and retired fire, police and municipal employees. In Houston’s case, market risk was transferred from the City of Houston to the retirees and employees. There was also a reduction of the assumed rate of return on pension assets to 7.0% from 8.0% or 8.5%, the implementation of a fixed 30 year amortization period and, finally, the City’s request of its voters (through a ballot referendum) for a $1.0 billion bond to stabilize the pension plans. The level of compromise between voter, employee, retiree and the city can only be described as impressive.
Two key provisions of Houston’s pension reforms are guided by the “cost corridor” concept, which means if pension assets grow slower than pension liabilities, current employees and retirees could receive benefit reductions because the city’s cost would be fixed. This represents a transfer of market risk to the pension plans from the city. These reforms could be used as a national model for pension reform because they ask all stakeholders to give and take.
Even with all of the compromises and the potential stabilization of the City of Houston’s finances, S&P Global Ratings warns in its December 6, 2017 report titled “Pension Obligation Bonds’ Credit Impact On U.S. Local Government Issuers,” POBs are a negative credit factor if issued in an environment of fiscal distress or as a mechanism of short-term budget relief. Generally, local governments do not need to issue POBs if their pension systems are well funded, return assumptions are conservative and if the city or county is fully funding its annual required contribution. Clearly, if a local government is issuing a POB something has gone wrong. Houston’s problems started with poor funding and the miscalculation of its pension liability. The result was a quick deterioration in funding ratios and significant fiscal stress.
Related: Tax Reform: Making the World Safer for Corporate Bondholders
S&P is correct that POBs alone do not fix pension issues. There are many cases where aggressive return assumptions or poor timing lead to unfortunate outcomes. S&P cites the New Orleans, LA 2000 POB and Stockton, CA 2008 POB as examples of POB risk. Nevertheless, we do not view Houston in the same light as New Orleans or Stockton because of the major and far-reaching pension reforms the city enacted, its diverse and thriving economy (anchored but not dependent oil and natural gas activity) and its significant taxing authority. These credit factors help defuse potential Houston pension obligation bombs.

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  #14  
Old 01-02-2018, 01:53 PM
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http://crr.bc.edu/briefs/the-funded-...ser-to-states/

Quote:
The Funded Status of Local Pensions Inches Closer to States
Spoiler:
The brief’s key findings are:

Since 2001, the aggregate funded status of local pension plans has lagged behind that of state plans, but the gap has been closing recently for two reasons.

First, local plans continue to receive more of their required contributions than state plans and are a bit more likely to use stringent funding methods.

Second, in recent years, local plans have earned stronger investment returns than state plans, perhaps partly due to a lower allocation to alternative investments.

Despite this progress, many local plans – like their state counterparts – still face significant funding challenges.
http://crr.bc.edu/wp-content/uploads/2017/12/slp58.pdf
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Old 01-02-2018, 01:54 PM
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http://crr.bc.edu/briefs/the-funded-...ser-to-states/

Quote:
The Funded Status of Local Pensions Inches Closer to States
Spoiler:
The brief’s key findings are:

Since 2001, the aggregate funded status of local pension plans has lagged behind that of state plans, but the gap has been closing recently for two reasons.

First, local plans continue to receive more of their required contributions than state plans and are a bit more likely to use stringent funding methods.

Second, in recent years, local plans have earned stronger investment returns than state plans, perhaps partly due to a lower allocation to alternative investments.

Despite this progress, many local plans – like their state counterparts – still face significant funding challenges.
http://crr.bc.edu/wp-content/uploads/2017/12/slp58.pdf
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Old 01-02-2018, 05:40 PM
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https://www.wsj.com/articles/pension...eap-1514808000

Quote:
Pension Funds’ Dilemma: What To Buy When Nothing Is Cheap?

How much risk to tolerate in 2018 is a question all investors are asking at a time when some say everything is overvalued
Spoiler:
The largest U.S. public pension fund debated in December whether to sell more than $50 billion in stocks as global markets raced higher. But in the end, the board of the California Public Employees’ Retirement System decided it was fine to hold more.

Retirement systems that manage money for firefighters, police officers, teachers and other public workers aren’t pulling back on costly bets at a time when markets are rising around the world.

Some public pension funds are adding to traditional allocations of stocks and bonds while both are expensive. Others are loading up on more private-equity or real-estate holdings that are less liquid and sometimes carry high fees.

How much risk to take is a question facing all investors as they enter 2018. “Everything is overvalued,” said Wilshire Consulting President Andrew Junkin, who advises public pension funds. “There’s no magic option out there.”

In the public pension world, the willingness to chase expensive assets is the product of the core challenge most funds face—how to fulfill their mounting obligations to workers and retirees.

Decades of low government contributions, overly optimistic assumptions, overpromises on benefits and two recessions have left them with deep funding holes at a time when retirees are accelerating cash outflows. Estimates of their current combined funding shortfall vary from $1.6 trillion to $4 trillion.

The goal of most pension funds is to pay for future benefits by earning 7% to 8% a year. After the 2008 financial crisis, many funds tried to hit those marks by lowering their holdings of bonds as interest rates dropped, and by turning to real estate, commodities, hedge funds and private-equity holdings.

These so-called alternative investments rose to 26% of holdings at about 150 of the biggest U.S. funds in 2016, according to the Public Plans database, compared with 7% more than a decade earlier.

That strategy has its own risks. Venturing deeper into alternative investments diversifies holdings but can also add fees, complexity and the challenge of selling illiquid assets quickly if the fund needs cash. Returns from these investments can be volatile. Only private equity outperformed stocks between 2010 and 2016, according to a study by the Center for Retirement Research at Boston College, while hedge-funds returns barely exceeded 1% and commodities lost money.

Despite the recent embrace of alternative investments, most public pensions are still heavily linked to the ebbs and flows of global markets. Public pension funds had a median 56.69% of their holdings in equities as of September 30, according to Wilshire Trust Universe Comparison Service, as compared with 54.37% a year earlier. They also had 23.3% in bonds, down from 25% a year earlier.

The stance paid off during 2017’s market rally, as public pensions had one of their best years of the past decade. They earned 12.4% in the 2017 fiscal year ended June 30, according to Wilshire Trust Universe Comparison Service. It was their best annual result since 2014.

But some in the pension world are predicting it won’t last. Over the next decade Wilshire Consulting is predicting a 6.25% compound return for U.S. equities and 3.5% return for core bonds. International equities have a projected compounded return of 6.45%. Most pensions’ return targets remain at 7% to 8%.

Some pensions are trying to confront the challenge by changing the make-up of their investments more frequently. The board of the New York City Employees’ Retirement System has asked investment staff to re-examine the fund’s asset allocation less than two years after the previous lineup was approved, said Mike Haddad, deputy chief investment officer for public markets.

The effects of high stock valuations, a U.S. tax overhaul, the Federal Reserve’s move away from quantitative easing and a rising rate environment are all new points of discussion. “It’s a unique set of market conditions that’s very challenging for a long-term pension,” Mr. Haddad said.

The California State Teachers Retirement System in 2017 shifted $10 billion into a mix of bonds and alternatives it said was designed to hedge risk. That money was divided into 39% long-dated Treasurys and 61% hedge fund-type investments. The second-largest public pension in the U.S. by assets, it rolled back its fixed-income target to 13% from 15% and shaved its equities target to 54% from 55% effective Jan. 1.

“The truth will be told in the next bear market on which strategy provides better diversification,” said Calstrs Chief Investment Officer Christopher Ailman.

One major Canadian pension fund is planning a bigger bet on illiquid assets. The $202 billion Canadian pension fund Caisse de dépôt et placement du Québec plans to move money into investments such as real estate, private equity, infrastructure and corporate credit, said President and Chief Executive Officer Michael Sabia, of CDPQ.

“Today, liquid assets—traditional government bonds and public equities—account for the majority of our investments,” Mr. Sabia said in a statement. “A few years down the road, this will no longer be the case.”

The biggest public pension in the U.S., known by its abbreviation Calpers, has been backing away from alternative investments as a way of reducing complexity and fees. In December, directors considered a 34% allocation to equities, which would have involved selling more than $50 billion in stocks based on its holdings at end of October. They also considered a higher allocation that would have meant buying about $30 billion. With their bond holdings, they thought about doubling them as well as holding steady.

In the end, the fund opted to raise its equities target to 50% from 46% as of July 1 and its fixed income target to 28% from 20%. It had 49.8% of its $341.5 billion portfolio in equities as of Oct. 31, according to the fund’s website.

No matter which move Calpers made, it faced challenges. Scaling back Calpers’ equity investment would have reduced the fund’s projected 7% return at a time when the fund has just 68% of the assets needed to pay for future benefits. That would have meant higher contribution costs for local governments across California.

But increasing its allocation to stocks is also risky. “This may not be the most opportune time to take on additional equity risk,” investment manager Dianne Sandoval said at a December board meeting.


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Old 01-04-2018, 09:31 AM
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BALTIMORE, MARYLAND

http://www.baltimoresun.com/news/mar...103-story.html

Quote:
Baltimore judge rules city violated contracts by cutting police and fire pension benefits
Spoiler:
A Baltimore circuit judge has ruled that city officials broke their contract with many police officers, firefighters and retirees in 2010 by cutting a key pension provision that has cost retirees millions in pension benefits.

Judge Julie R. Rubin ruled Tuesday that former Mayor Stephanie Rawlings-Blake’s overhaul of pension benefits “unlawfully withdrew” a variable pension benefit that paid out more money to retirees when the stock market improved.

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“The city breached its contract,” she wrote in an opinion that handed several victories to the unions and others to the city.

The partial ruling in favor of the police and fire unions — who have battled the city in court for years — was hailed by retirees.

“The city is going to owe a lot of money,” predicted Lt. Victor Gearhart, the former first vice president of the Baltimore police union. “Justice will be done for the retirees since [Rawlings-Blake] illegally cut our benefits. A contract is still a contract and the city will learn to respect that.”

In her ruling, Rubin did not state what damages — if any — the city would have to pay. But council members said they are bracing for a potential impact of being forced to pay out tens of millions of dollars in pension benefits dating back to the law’s passage.

An actuary has estimated the city could be liable for as much as $57 million in payments should the unions ultimately prevail in court.

The next court date in the matter has not been set.

Baltimore brings in new lawyers to restart police contract talks
City Councilman Eric T. Costello, chairman of the council’s budget committee, said city officials have set aside $24.3 million to pay out in case they lose the lawsuit.

“This has been ongoing for seven years,” Costello said of the legal battle. “I’d like to see it resolved as quickly as a humanly possible. This is something that’s outstanding that public safety officers are upset about and rightfully so. We want to get it resolved as quickly as possible.”

Rawlings-Blake overhauled the city’s police and fire pension system to prevent an imminent fiscal crisis, she said. The city’s pension fund for firefighters and police officers is funded at about 70 percent of the long-term costs of providing benefits. Its unfunded long-term liability is more than $1 billion.

City officials say the mayor’s legislation — which was passed by the City Council — ultimately cut about $400 million in long-term pension costs by reducing benefits, raising the retirement age and requiring higher contributions from workers.

The unions, in response, launched a campaign against Rawlings-Blake and her City Council supporters, picketing City Hall, posting billboards accusing elected leaders of turning their backs on public safety workers, and filing suit.

Since the law’s enactment, the city and public safety unions have traded court victories in the case.

In 2014, the 4th U.S. Circuit Court of Appeals in Richmond, Va., overturned a lower court's ruling in 2012 that a key provision of the 2010 law limiting cost-of-living increases for younger retirees was unconstitutional and not reasonable. But the appeals court concluded the police officers and firefighters could continue to contest the law in state court for "breach of contract."

Judge Barbara Milano Keenan of the 4th Circuit wrote at the time that the unions could try again to challenge the law using a different argument, specifically that the city has taken "private property for public use, without just compensation."

Under the mayor's overhaul, firefighters and police have been required to increase contributions to the pension fund — now 10 percent of their salaries. Officers were told that they would no longer be able to retire after 20 years, but would have to stay on the force for 25 years to receive their pensions.

Retired workers also lost what was called the "variable benefit," an annual increase tied to the stock market. Instead, the youngest retirees receive no annual increase through the variable benefit, and older retirees receive a 1 percent or 2 percent annual increase.

In 2012, U.S. District Judge Marvin J. Garbis took issue with that aspect of the law, ruling that the cost-of-living adjustments were unconstitutional in that they harmed younger retirees too severely.

The plan "had the pernicious effect of eliminating and/or reducing annual increases from retirees under 65 at the time of enactment and, consequently, significantly reducing their pensions when they became 65," he wrote.

The law was "not reasonable," Garbis wrote at the time.

City Solicitor Andre Davis said Wednesday he looked forward resolving the matter in court. Several aspects of the union’s suit still must go to trial according to Rubin’s ruling.

“Under the judge’s decision there’s going to be a trial,” he said. “We look forward to meeting with the judge.”

Lester Davis, a spokesman for City Council President Bernard C. “Jack” Young, said his office is studying the matter.

“We have to sit down with the solicitor and get a clear understanding of the city’s plan going forward,” he said. “When folks dedicate themselves to public service, they deserve to be compensated in retirement. We also have to make sure we’re not bankrupting the city so we can continue to take care of folks who put their lives on the line for the city.”


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Old 01-04-2018, 10:25 AM
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CONNECTICUT
TEACHERS

https://www.ai-cio.com/news/connecti...n-restructure/

Quote:
Connecticut Gov. Calls for Pension Contribution Restructure
Malloy says state can’t afford annual payments into teachers’ retirement system.
Spoiler:
Connecticut Gov. Dannel Malloy said the general assembly should restructure the contributions into its $17 billion teachers’ pension fund, saying the current contribution rates made by the state are too high.

“Connecticut simply cannot afford annual payments of $4 [billion] to $6 billion into this fund,” said Malloy in a statement. “We must make smart reforms now to fix the system, and we can do it without curtailing benefits for teachers. If we don’t act, there will be no way to meet these obligations without hollowing out major state programs such as Medicaid and municipal aid.”

Malloy’s comments were in response to reports about a memo from Connecticut Treasurer Denise Nappier citing the additional costs associated with recent changes to the Teachers’ Retirement System.

“We need to take action to make our teachers’ retirement system more sustainable and more cost-effective for taxpayers,” said Malloy, “both now and well into the future.”

At a special conference call meeting of the Teachers’ Retirement Board in November, Nappier voted against the approval of a revised actuarial valuation that increases retirement contributions from teachers to 7% of their pay from 6%, and reduces the state’s contribution by $59.5 million.

“This latest action by the legislature tugs at the threads of our efforts,” said Napier in a statement at the time. “And I strongly advise that there be careful scrutiny of any steps that would undermine the framework necessary to reach our goal.”

Malloy said that changes he proposed last session would have made the state’s retirement system more stable, and more able to absorb market changes.

“I will continue to advocate for these commonsense reforms in 2018 and look forward to working with the Treasurer and leaders in the General Assembly to lower all of Connecticut’s unfunded liabilities,” Malloy said.

The proposed amortization and refinancing changes to the Teachers’ Retirement System in Malloy’s fiscal year 2018-2019 budget proposal include extending the amortization period. Malloy said the proposal would help the state avoid actuarially determined employer contribution payments without affecting benefits, and while also still paying off the full amount of the unfunded liability. He said that without any action by the state’s general assembly, “these payments are scheduled to double in the coming years, with the potential of quadrupling or quintupling” within 20 years.


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Old 01-04-2018, 10:42 AM
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Originally Posted by campbell View Post
http://www.benefitspro.com/2018/01/0...urn=1515080233

Quote:
10 states with the best pension funding: a tale of two discount rates
‘Best’ is a relative term under the most conservative discount rate

Spoiler:
How trustees of state-sponsored pension plans value the cost of future liabilities, and in turn determine funded ratios, is a touchy subject among retirement policy experts and lawmakers.

Pew Charitable Trusts’ annual report on state pensions, released last April, showed $1.1 trillion in unfunded liabilities in 2015. The aggregate funding level for plans across the country was 72 percent.


Pew ranked state pensions based on the assumed rates of investment returns — or discount rates — that state trustees apply to pensions. The average assumed rate of return was 7.6 percent.

Pew found eight states have funded ratios above 90 percent; 21 states were funded below 70 percent; and four were funded under 50 percent.


How much pensions expect to earn from assets has tremendous implications for the annual contributions made by taxpayers to pensions. Higher expected rates of return, of course, lower the cost of future liabilities, and lower annual contributions required to maintain solvency.

Some in the policy and actuary world claim states are applying generous return expectations. Count the American Legislative Exchange Council (ALEC) among that group. The non-profit advocacy’s membership is comprised of mostly conservative state lawmakers and corporations.

“The public sector’s current assumed rates of return significantly distort how much money is needed to fund the plans today to guarantee and eventually pay out future benefits,” ALEC said in its recently published pension report. “Ultimately, this will result in broken promises to state employees and financial hardship for taxpayers.”

ALEC applies a risk-free discount rate of 2.14 percent to pensions, drawn from a blend of recent yields on 10 and 20-year Treasury bonds.

Under the risk-free assumption, ALEC found that more than 280 state-sponsored pensions have an average funded ratio of 33.7 percent, amounting to $6 trillion in total unfunded liabilities.

If ALEC had its way, only one state—Wisconsin—could claim a funded ratio above 50 percent.

But is a pure risk-free discount rate a reasonable measurement to apply to public pension plans?

In the private sector, sponsors of single employer pension plans apply a discount rate set by Congress, based off the 25-year average return on high quality corporate bonds. That sliding scale puts corporate discount rates generally between 4 percent and 6 percent.

An inquiry to ALEC as to the practicality of applying a risk-free rate of return was not returned before press time.

In 2014, the Society of Actuaries released a report recommending that assumed rates of returns should be “more heavily based on current risk-free rates.” But the report also said assumed returns shouldn’t be “aggressively conservative.”

While some states are taking measures to recalculate their investment assumptions, most are relying on the status quo.

Here is a look at the states with the best-funded ratios under the risk-free rate recommended by ALEC, and a comparison to Pew’s numbers on funded ratios and assumed rates of return:



10. Nebraska


Funded ratio using risk-free model: 39.7 percent

Reported funding ratio in 2015: 91 percent

Assumed rate of return in 2015, according to Pew Survey: 8 percent

9. Maine


Funded ratio using risk-free model: 41.4 percent

Reported funding ratio in 2015: 83 percent

Assumed rate of return in 2015, according to Pew Survey: 7.1 percent

8. Utah


Funded ratio using risk-free model: 41.5 percent

Reported funding ratio in 2015: 86 percent

Assumed rate of return in 2015, according to Pew Survey: 7.5 percent

7. Delaware


Funded ratio using risk-free model: 42.4 percent

Reported funding ratio in 2015: 89 percent

Assumed rate of return in 2015, according to Pew Survey: 5.8 percent

6. Idaho


Funded ratio using risk-free model: 43.2 percent

Reported funding ratio in 2015: 92 percent

Assumed rate of return in 2015, according to Pew Survey: 7.1 percent

5. North Carolina


Funded ratio using risk-free model: 45 percent

Reported funding ratio in 2015: 95 percent

Assumed rate of return in 2015, according to Pew Survey: 7.3 percent

4. Tennessee


Funded ratio using risk-free model: 45.9 percent

Reported funding ratio in 2015: 95 percent

Assumed rate of return in 2015, according to Pew Survey: 7.5 percent

3. New York


Funded ratio using risk-free model: 46.3 percent

Reported funding ratio in 2015: 98 percent

Assumed rate of return in 2015, according to Pew Survey: 7.5 percent

2. South Dakota


Funded ratio using risk-free model: 48.1 percent

Reported funding ratio in 2015: 104 percent

Assumed rate of return in 2015, according to Pew Survey: 7.3 percent

1. Wisconsin


Funded ratio using risk-free model: 61.5 percent

Reported funding ratio in 2015: 98 percent

Assumed rate of return in 2015, according to Pew Survey: 7.2 percent
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Old 01-04-2018, 11:10 AM
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RHODE ISLAND

http://www.golocalprov.com/politics/...re-to-pensions

Quote:
Riley: Rhode Island to Contribute More to Pensions, Providence Still in Fantasy Land
Spoiler:
Recent public reporting citing the Rhode Island Treasurer’s Office announcement of an actuarial valuation report of the state pension system shows significant deterioration in the state-funded ratio to approximately 54%. Rhode Island now has only 54% of the funds necessary to fund pension benefit payment to state retirees and their families.
As a result, the State intends to add to the current fiscal year 2019 budget allocation of $442 million increasing to $465 million for the Fiscal Year 2020.

This change is a result of a Gabriel Roder-suggested lowering of the Rhode Island expected rate of return or “discount rate” to 7%. Without increasing contributions, it would be even more unlikely that the state pension fund could achieve and 80% funded ratio necessary to return some colas taken away in 2011.

It appears that State pension investment returns have significantly underperformed expectations relative to the growth in liabilities. It also appears the State continued its long-standing strategy of purposely underfunding the pension system in order to produce “balanced” budgets. Very few states actually have balanced budgets despite constitutional requirements. Rhode Island does not have a balanced budget and is ranked “D” by Truth in Accounting.

Providence? Even Worse

Providence's expected investment rate of return is an unheard of 8% and Elorza continues to purposely underfund pensions using delayed payment schemes, inflated assets, and elevated return assumptions.

In the corporate world, these are violations and in the municipal world, it is considered fraud to mislead municipal bond investors. Elorza has openly laughed at bankruptcy worries in order to assure investors and keep borrowing money. Truth in Accounting shows that Providence citizens, as a result of poor financial management, are among the most tax-burdened citizens in America. Providence received an “F” in a recent report.

If Providence matched the State actuary suggestion of 7% returns, instead of the Elorza chosen rate of 8%, then Providence unfunded liabilities would increase by over $200 million and the reported funded ratio would be under 20%. Elorza has not and will not accept reality. On the other hand, despite reversing campaign his promises of raising the State's discount rate, Treasurer Magaziner has behaved responsibly by using more realistic assumptions, knowing this causes an increase in budgeted pension contributions.

Providence needs to contribute more to pensions and needs to contribute them on time. Jorge Elorza has improved on the extremely poor records of those before him but continues to mislead taxpayers and retirees.



Michael G. Riley is vice chair at Rhode Island Center for Freedom and Prosperity and is managing member and founder of Coastal Management Group, LLC. Riley has 35 years of experience in the financial industry, having managed divisions of PaineWebber, LETCO, and TD Securities (TD Bank). He has been quoted in Barron’s, Wall Street Transcript, NY Post, and various other print media and also appeared on NBC News, Yahoo TV, and CNBC.

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