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

Actuarial Jobs by State

New York  New Jersey  Connecticut  Massachusetts 
California  Florida  Texas  Illinois  Colorado


Reply
 
Thread Tools Search this Thread Display Modes
  #1401  
Old 09-19-2018, 06:33 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: 85,022
Blog Entries: 6
Default

CALIFORNIA
CALPERS
GOVERNANCE

https://www.industryweek.com/compani...pay-harassment
Quote:
Largest US Pension Fund Ups Pressure on Companies Over Executive Pay, Harassment
California Public Employees’ Retirement System voted against pay programs this year at 43% of the 2,145 U.S. public firms it owns stakes in, up from 18% in 2017.
Spoiler:
The largest U.S. public pension fund is taking a tougher line over executive compensation.

The California Public Employees’ Retirement System voted against pay programs this year at 43% of the 2,145 U.S. public firms it owns stakes in, up from 18% in 2017, the system said on Sept.17.


One reason is closer scrutiny, said Simiso Nzima, investment director for corporate governance. In past years some firms may have received a passing grade despite a degree of misalignment between pay and company results, he said.

“Over one, two or three years, performance might look good, but over 10 years, the relationship sometimes just isn’t there,” Nzima said by phone. “We are not against management getting paid” as long as shareholders see long-term returns.

Among the companies receiving “Against” votes were Weight Watchers International Inc., which awarded CEO Mindy Grossman $33.4 million in her first year on the job, and Tesla Inc. after it proposed a stock-option grant to CEO Elon Musk that could yield




him billions if the firm multiplies in size.





Advertising, mouse over for audio


While shareholder votes on compensation plans are merely advisory, poor outcomes can be a blemish for directors concerned with their reputation, and help fuel activist campaigns. Most U.S. firms routinely get more than 90% support.

Calpers, which for years has talked with companies about topics it considers important, also voted against 438 directors at 141 companies where engagements centering on a lack of diversity among board members “did not result in constructive outcomes.”






In June, the system amended its governance principles to emphasize the board’s responsibility to disclose efforts to prevent harassment and any settlements involving executives or directors, and develop policies to claw back compensation if such misconduct occurs.

Calpers, based in Sacramento, has about $350 billion under management and serves 1.9 million public employees, retirees and their families.


https://pensionpulse.blogspot.com/20...nder-fire.html
Quote:
CalPERS CEO Under Fire?
Spoiler:
[skipping over the quoting of pieces I linked earlier in this thread]

The praise does not mean Frost is in the clear. The Sacramento Bee published a story following Webber’s reporting, and many more people learned that Frost did not have a degree when the CalPERS board chose her to lead the nation’s largest public pension fund.

“CalPERS, responsible pension organization, or sad, sad circus?” wrote Lois Henry, a former Bakersfield Californian editor, on Twitter.
....
You can read Dave Low's letter to President Mathur here or here.

You can also read Susan Webber's (aka Yves Smith) comment on the naked capitalism blog here going over how Marcie Frost supposedly misrepresented her education.

I stopped reading Yves' grossly biased and unreasonably critical comments on CalPERS a long time ago. Someone should ask her straight out, who is paying you to attack CalPERS every chance you get? (I'm dead serious)

Anyway, this is another much ado about nothing questionning the credentials of CalPERS' CEO Marcie Frost.

The lady did not lie about not having a college degree, she made it clear to CalPERS' board a few times and yet they hired her because of her commitment to engaging with retirees and public employers, as well as her track record leading Washington state’s public pension fund, the $90 billion Department of Retirement Systems.

As far as I am aware, she did a great job there and that is why she was hired as the CEO of CalPERS.

Don't get me wrong, having a college degree is important but she was honest and has great experience and a proven track record so I don't understand why naked capitalism and others are questionning her or CalPERS' board.

It's ridiculous especially during a time when we need more women as CEOs of major corporations and public pension plans.

It's also worth noting that Mrs. Frost is not the highest paid employee at CalPERS, that honor deservedly goes to the fund's CIO as they have tremendous responsibility overseeing $360 billion in assets.

Still, she gets paid very well and has done a great job at CalPERS as far as I can tell so this really is another naked capitalism hatchet job which should be ignored.

That's all I will say on this latest CalPERS smear job. When you're reporting or blogging on something, make sure you have all the facts or risk looking like a total ass.

Below, CalPERS CEO Marcie Frost discusses agenda item 4 at the March board meeting. Listen to her speak, she might not have a college degree but she sure knows what she's talking about and she's very impressive and composed while delivering her comments.

__________________
It's STUMP

LinkedIn Profile
Reply With Quote
  #1402  
Old 09-19-2018, 06:34 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: 85,022
Blog Entries: 6
Default

https://www.yoursun.com/charlotte/op...191551c93.html

Quote:
Letter: 'Stress testing' public pension plans

Spoiler:
Editor:

Public pension plans have been underfunded for years. Though plan exposures have been identified and public employees have been warned of this condition, everyone ignores it. A new tool will now start to shake public officials out of denial.

The Pew Charitable Trust funded a Harvard study to conduct a “stress test” to see how retirement plans would behave under adverse conditions. This test is similar to what’s done to our financial institutions to be sure they can absorb losses and pay creditors during an economic downturn.

In 2016, state pension plans paid out $214 billion and paid into the plans $130 billion. Officials assume the difference is dependent on pensions’ investment income. If it falls short, plan assets are spent further jeopardizing the plans’ soundness.

Results from public pension plans “stress testing” will tell if plans can meet future obligations without cutting pension benefits under various economic scenarios. Today, the unfunded public pension commitment is $1.6 trillion. Because of constant underfunding and fluctuating investment returns, plus increased benefit costs, public pension plans are more vulnerable or, in worst case insolvent, to even the smallest recession.

Taxpayers should demand a “stress test” be done on all public pension plans to prepare for the next downturn. It would provide a tool to understand and respond to the short term and long term economic volatility. Taxpayers are the debtors and failure to meet these legal obligations could be creating a lien on their homes.

Frank Mazur

Punta Gorda


__________________
It's STUMP

LinkedIn Profile
Reply With Quote
  #1403  
Old 09-19-2018, 06:43 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: 85,022
Blog Entries: 6
Default

CHICAGO, ILLINOIS
PENSION OBLIGATION BONDS

https://ward32.org/wp-content/upload...-CFO-Brown.pdf
Quote:
Letter from Ward 32 Alderman Scott Waguespack to CFO Carole Brown
Spoiler:
Carole Brown
Chief Financial Officer
City of Chicago
Carole.Brown@cityofchicago.org
September 6, 2018
Dear CFO Brown:
Thank you for taking the time to hold the briefing regarding the pension obligation bonds/Fund
Stabilization Bonds. I appreciate that the due diligence and analysis required for a project such
as this is involved and time consuming. As such, below is a list of outstanding questions and
concerns regarding the project as your analysis moves forward that we would like answered
before considering a vote on the pension obligation bonds package proposed by the Mayor:
● Will this potential structure consolidate debt into a single, tax exempt package? Will you
have the authority to convert some portion of the issuance to taxable debt? What are the
expected payment structure and amortization schedules?
● For years, we have argued that new, progressive revenue sources are needed, and this
proposal will not negate that need, as pointed out by the CITI research report. What is
the Mayor’s plan to create new revenue sources to cover the new debt service this alone
will generate?
● How will the administration sell this deal--how much of it will be competitive and/or
negotiated?
● How many series will there be, and how far apart?
● What is the target annual interest rate?
● What refinancing provisions will the administration seek? Are they callable at any time
during their term or must they reach maturity?
● If the market goes into a recession within the first years of the deal, what is the plan to
fund the City's debt?
● Will the administration allocate the full amount of the pension obligation bonds to the
pension funds, or will a portion be used to offset the prescribed ramp up in contributions
from the annual general fund?
● It appears that these are GO bonds without a dedicated revenue source beyond the
yearly budget, is there a plan to cut the current budget/raise revenue/or change the
structure of the debt payments to afford in the immediate term the new debt service?
● This is the largest bond deal on the municipal level in recent memory and will double the
city's debt service, what do you expect the market appetite will be for something this
large?
● Will the Council will have the ability to review and either approve or deny the potential
securitization of the issuance?
Thank you for your time and attention to this matter.We look forward to your responses.
Sincerely,
Scott Waguespack
32nd Ward Alderman
INTERCEPT

https://www.illinoispolicy.org/crowd...e-grant-money/
Quote:
CROWDING OUT: CHICAGO PENSION FUND DEMANDS INTERCEPT OF STATE GRANT MONEY
The Chicago firefighters pension fund has filed claims with the Illinois comptroller for $3.3 million in shorted pension contributions, an action that could worsen city finances and service delivery.


Spoiler:
Chicago could be the latest municipality to face diversion of state money as a result of a pension intercept law that took full effect in 2018. Under that law, municipalities that fail to make full contributions to their police or fire pension funds can see state money meant for the local government diverted directly to the pension funds instead.

According to The Bond Buyer, the Firemen’s Annuity and Benefit Fund of Chicago filed two claims with the Illinois comptroller for a combined $3.3 million shortage, alleging the city shorted it by $1.8 million in 2016 and by $1.5 million in 2017. While these are relatively small amounts for such large pension funds, there is no ignoring the city’s enormous pension problem and its crowding-out effects on core services for residents.

Bond Buyer reported that the city will likely contest the fund’s claims. The amount of the full, or “actuarially required,” contributions to municipal pension funds each year is determined by either the Illinois Department of Insurance or an independent actuary employed by the pension fund or municipality.

Under the pension intercept law, the Illinois comptroller must withhold state funds owed to a local government once a pension fund makes a claim for pension payments owed. For most municipalities, the comptroller can intercept all money owed to local entities from the state – including sales and income tax collections on behalf of municipalities – but for the city of Chicago, the comptroller can only withhold grant money from the state.

Hearken back to Harvey

As a result of the more limited pool of money that is subject to withholding, and the fact that Chicago shorted a smaller portion of its total pension contribution, the Windy City is unlikely to face immediate consequences as severe as those in Harvey, Illinois. In spring 2018, Harvey became the first municipality to have state funds withheld under the pension intercept law. The city laid off nearly half of its police and fire forces as a result.

That said, Chicago cannot avoid the consequences of pension crowd-out for long. Chicago- related pension systems are nearly $42 billion in debt.

Chicago and sister governments shouldering more than $40 billion in pension debt

Led by outgoing Mayor Rahm Emanuel, the city has already pursued near-sighted solutions to its pension crisis. Emanuel pushed through massive multiyear tax hikes, including a property tax increase of $543 million, new taxes on ridesharing and e-cigarettes, tax increases on water and sewer services and 911 calls, and hikes in fees ranging from garbage collection to building permits.

The mayor also lobbied for the Illinois General Assembly to allow Chicago to make reduced pension contributions over the course of five years – set forth in public acts 99-0506 and 100-0023. Contributions are set to spike by hundreds of millions of dollars over the next five years, ending in an annual contribution that is $1 billion higher than this year.

Chicago pension contributions set to spike twice over the next decade

Unfortunately, Chicago and Harvey are not alone in facing pension-induced financial crises that threaten to crowd out core government services. Peoria, Illinois, recently issued layoff notices to more than two dozen employees as a result of ballooning pension costs, even without having faced an intercept claim by one of its pension funds. Nearly 60 percent of Illinois’ downstate police and fire pension funds did not receive full payments in 2016, according to research by Wirepoints, meaning hundreds of municipalities are vulnerable to the state’s intercept law.

Addressing pension pain points

The cause of the local pension crisis in Illinois is that promised benefits – or accrued pension liabilities – are growing far faster than taxpayers’ ability to pay for them.

Harvey-02 (1)

The only way out for Chicago and other struggling municipalities is meaningful pension reform that starts with a constitutional amendment to allow changes in future, not-yet-earned benefit accruals for current workers and ends with moving all new hires into 401(k)-style personal retirement accounts.

Real, lasting pension reform is the only way to protect taxpayers from further tax hikes, protect government worker retirement security from fund insolvency, and ensure state and local governments can continue to provide core services such as education and public safety.


__________________
It's STUMP

LinkedIn Profile
Reply With Quote
  #1404  
Old 09-19-2018, 06:45 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: 85,022
Blog Entries: 6
Default

ILLINOIS

https://foxillinois.com/news/local/1...it-in-jeopardy

Quote:
$1.1 million grant to add Danville firefighters, pension debt puts it in jeopardy

Spoiler:
DANVILLE, Ill. (WCCU) — $1.1 million in grant money is on the table in Danville.

Some city leaders said it's not going to help, but the firefighters said they need it now more than ever.

The federal grant, called Staffing for Adequate Fire and Emergency Response (SAFER), would hire six more firefighters for at least three years.

The local union said they are understaffed and working too many hours, which is exceeding the city's overtime budget.

“I want to make sure that, while we are looking at the safety of our community and looking at the safety of our firefighters, we want to make sure we can afford to do this and afford to continue to do this," said Alderman Lloyd Randle of the 7th Ward.

The federal grant would help pay 75 percent of the cost for the first two years and then 35 percent for the third year. After that, the funds are gone in hopes the city can support it on its own.

The firefighters’ local union said they need the grant, taking it upon themselves to apply for it months ago.

“This shows a way to help the city save money,” said President of the Union Brian Hogg. “[It would] save the taxpayers money, help reduce the overtime and let us spend more time at home with our families."

Something he said is hard to do when working extra shifts, which can take a toll on them physically and mentally.

“This is a job where you have to be on you’re A-game the whole time," Hogg said.

Randle said he's thinking more long-term about the grant.

Right now, he said the city is close to reaching half of a million dollars in overtime penalties for police and fire.

“We want to make sure that we can in fact reduce the overtime and that there are no long-term implications to the pension fund," Randle said.

The pension debt could increase if the city looks to keep the new firefighters on board after three years, ultimately falling on taxpayers.

But Hogg said for the time being, the grant would help the fire department better serve the community—something they do no matter what.

“We will still serve to the best of our ability,” Hobb said.

The city has until Oct. 7 to either accept or reject this grant.

Council members are still waiting to get all the details and promises of the grant before deciding.
https://www.ilnews.org/news/schools/...375fedd53.html
Quote:
Report: Every adult in the state owes $4,000 for teacher health care costs; pensions not included

Spoiler:
Every adult in Illinois is on the hook for $4,000 in retired teacher health care costs, according to a new study showing the state has no money saved to pay for the growing cost of its promises.

The report released Tuesday by Bellwether Education Partners estimates that Illinois owes $54 billion in future health care costs that have been promised to teachers after retirement. That’s the sixth-most of any state when divvied up by each state’s adult population. This is not included in the estimated $130 billion in unfunded teacher pension liabilities.

Thirty-five states offer post-employment health coverage to teachers, of which Illinois is one, according to the report.

“For too long, employers were able to promote the benefits without recognizing their long-term costs,” the report said. “That reckoning is coming, and there are better and worse ways to tackle it.”

Chad Aldeman, principal at Bellwether, said the growing bills from health care could edge out dollars intended for the classroom.

“Less money is going to current services like schools or teachers that are in the classroom right now,” he said, adding that the costs are bound to grow as retirees live longer and health care costs increase.

The growing cost will have to be paid for by either cuts to retiree benefits, tax hikes, or a combination of both, Aldeman said.

Health care benefits, like pension payments, are a promise made by the state and local school districts but, unlike pensions, the benefits aren’t protected from diminishment by Illinois’ constitution.

States should put qualified retirees into health care exchanges, the report said, and rescind coverage of retirees making more than a certain amount.

“The state is providing retiree benefits even to a retired superintendent who’s making $150,000 or $200,000 a year in a pension and they get free healthcare on top of that,” Aldeman said. “That may not be a good use of public dollars.”


__________________
It's STUMP

LinkedIn Profile
Reply With Quote
  #1405  
Old 09-19-2018, 06:46 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: 85,022
Blog Entries: 6
Default

KENTUCKY
http://kentuckytoday.com/stories/goo...expected,15248
Quote:
Retirement gains good news for KY's teachers

Spoiler:
FRANKFORT, Ky. (KT) – Some good news for one of the state’s public pension plans as Kentucky teachers see investments go up.

The Kentucky Teachers Retirement System said Monday pension investments posted a 10.81 percent gain (gross) for the fiscal year that ended on June 30. That exceeds the plan’s assumed 7.5 percent rate of return and is among the top two percent of large pension plans across the country.

The net return was 10.5 percent.

Along with the top two percent performance for the most recent year, TRS’s investments were in the top two percent for the 10-year period, while returns were in the top eight percent for both the three and five-year periods.

All rankings are according to Aon Hewitt Investment Consulting’s analysis of large domestic pension plans with more than $1 billion in assets.

During the fiscal year, TRS benefitted from the second year of additional funding approved by the General Assembly and Gov. Matt Bevin for the 2016-18 biennium, which was the first such appropriations since 2008.

“The additional funding arrived as the economy continued to grow, helping returns on the investments that will provide teachers their pensions in retirement,” said TRS Executive Secretary Gary Harbin. “This year’s results again show TRS’s long-term investment strategy is working, and, with the benefit of the first full funding of the pension in years for the 2018-20 biennium, we look forward to adding to that performance.”

TRS assets for all its funds, which also include medical insurance and life insurance funds, exceeded $20 billion for the first time, due to the market performance for the year.

The results come just days before the Kentucky Supreme Court takes up the constitutionality of public pension reforms enacted by Senate Bill 151.

Attorney General Andy Beshear filed suit against Gov. Matt Bevin after SB 151, which was originally a sewage measure, but was amended to contain provisions of the original pension bill, SB 1, and was approved by a House committee and both houses of the General Assembly in the space of just a few hours.

The suit by Beshear, together with the Kentucky Educational Association and the Kentucky Fraternal Order of Police, was filed against Bevin shortly after the governor signed the measure into law in early April.

In his June ruling declaring SB 151 unconstitutional, Franklin Circuit Judge Phillip Shepherd took issue with the process used to change SB 151 from legislation dealing with sewage to become the public pension reform bill, saying the changed bill did not receive the required three readings on three separate days in each chamber, and that it was appropriations bill, meaning it required 51 votes to pass. The bill only cleared the chamber, 49-46. It easily received the number of votes needed in the Senate.

Bevin appealed the ruling. The Kentucky Supreme Court will hear oral arguments Thursday at 10 a.m., EDT.


__________________
It's STUMP

LinkedIn Profile
Reply With Quote
  #1406  
Old 09-19-2018, 06:53 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: 85,022
Blog Entries: 6
Default

https://illinoislawreview.org/print/...-maximization/

Quote:
Public Wealth Maximization
A New Framework for Fiduciary Duties in Public Funds

Spoiler:
This Article challenges the standard doctrine that public pension funds should be managed solely for the benefit of plan participants and their beneficiaries. Instead, economic logic suggests that public pension fund trustees owe their duties to the public collectively. This analysis is driven by the fact that, in practice, individual pension fund claimants function more like senior creditors than the residual claimants that are the typical recipients of fiduciary duties, and that the public—and current and future taxpayers specifically—are the true residual risk bearers for public pension funds.

This reframing of fiduciary duties in public funds has dramatic consequences for the investment policies of the funds. Most importantly, a shift in the locus of fiduciary duties to public wealth maximization will require fund managers to more fully consider the externalities accompanying their investments, which should serve to help them fully and accurately price their investments. Private investors might ignore certain negative effects, such as uncompensated harms from pollution or depleted natural resources, because the government absorbs the costs of such externalities. Indeed, a strict fiduciary duty to act in the interests of the fund would obligate a private investor to ignore such externalities, so long as they do not negatively affect the returns of the fund’s investments. The government—and by extension, the public who funds the government—that absorbs the cost of these externalities, however, should view investments differently. They should view it with an eye to minimizing negative externalities, particularly those that are significantly more expensive to remediate than to prevent. Similarly, a strict reading of fiduciary duty would suggest that funds should ignore positive externalities from investments that benefit society but not the plan participants. A focus on public wealth maximization would suggest that positive externalities should also be taken into account in investment decisions, which might, as a consequence, result in more investment in sustainable enterprises and long-term projects.


I. Introduction

Imagine a group of public pension fund trustees—some political appointees, some investment experts, and some union representatives or employees—gathered in a conference room for a quarterly meeting on investment policy. At issue is whether the pension fund, a multi-billion-dollar fund managing assets to fund the pensions of generations of state workers, should divest from companies that engage in coal mining and coal-based energy production. The trustees are fiduciaries, managing on behalf of others. But what does their fiduciary obligation require? Should they focus solely on maximizing the wealth of plan participants and their beneficiaries? Should more general societal interests, such as addressing climate change, play a role in how they make their decisions? What about the workers who may be affected by large-scale divestment from mining activities?

Public trustees have long been held to a strict duty of loyalty that, by design, limits their ability to direct the fund in ways that would not serve the interests of the pension plan participants and their beneficiaries. Trustees, in turn, narrowly focus fund managers on short-term wealth maximization1—or, as I will call it in this Article, “participant wealth maximization”—which limits the ability of a fund to invest in certain sustainable or socially responsible investment (“SRI”) initiatives, and may also decrease the ability of a fund to invest in longer-term projects to the extent that the risks and returns of such projects are difficult to evaluate. For our pension fund trustees, a strict reading of their duty would require them to disregard worker and societal interests and focus solely on maximizing the value of the fund.

A limiting focus on participant value maximization has considerable virtues: it provides a simple, clear objective for fund managers and reduces managerial agency costs by dissuading managers from pursuing investments that are not in the interests of the fund beneficiaries. Furthermore, as Jensen argues, “200 years’ worth of work in economics and finance indicate that social welfare is maximized when all firms in an economy attempt to maximize their own total firm value.”2 This argument applies equally well to public funds, so that not only are fund beneficiaries better off by focusing on maximizing total value, but society as a whole is better off as well.

The requirement of participant wealth maximization, however, suffers from several weaknesses. The standard economic analysis, on which participant wealth maximization depends, assumes well-functioning, liquid markets that accurately price assets and investment risk. After the financial crisis, however, many scholars are less confident in the financial markets’ ability to effectively price assets.3 Asset pricing may also be more difficult because of challenges in calculating risk. Risk is, arguably, often mispriced because markets fail to account for negative externalities4 created when economic actors do not bear the full cost of their choices.5 For example, a firm may pollute the water or air or deplete resources “without having to purchase the right to do so from the parties giving up the clean air or water.”6 Also, a market may not accurately price a risk—such as tail risk—because such a risk seems too remote. 7 Related to this, the market may fail to adequately price certain risks and externalities because of a shaky assumption—or more properly, a moral hazard—that the government will cover all or part of the cost of a crisis event. Pricing these risks is extremely difficult, especially in longer time frames. Similarly, protecting a portfolio against such risks, such as through the purchase of put options, is difficult because the options are very costly. 8

Rather than contributing directly to arguments against private wealth maximization, however, this Article addresses the direction of fiduciary duty and specifically the standard doctrine that public fund trustees’ duties are rightly owed to plan participants and their beneficiaries. Justice Frankfurter’s famous question 9—who should receive the benefit of fiduciary duties and what obligations are owed—is particularly relevant in the face of billions of dollars in unfunded liabilities for public and private pension funds.10 Participant wealth maximization is justified in part by the notion that plan participants and their beneficiaries are the true residual claimants of the fund, as would be the case for most trust beneficiaries. Under this logic, plan participants are owed fiduciary duties because they are the primary beneficiaries when the fund is managed well and the primary victims when it is managed poorly.11

This is not the case for public funds, however, as other parties—namely, the government and taxpayers—bear almost all of the risk should a public fund fail. In practice, individual participant claimants function more like senior creditors with fixed claims that have little real risk that they will not be received. And, in the case of a surplus in the fund, the government and taxpayers funding the plan are the primary beneficiaries, whereas the pension plan participants and beneficiaries only have a claim to a fixed sum. As a consequence, fiduciary duties should flow to the true risk-takers: the public—the current and future citizens and residents—who will ultimately benefit or suffer from the investment choices of the public fund trustees.

This reframing of fiduciary duties, from participant wealth maximization to public wealth maximization, has dramatic consequences for the management of trillions of dollars in public fund assets.12 To return again to our public fund trustees huddled around a conference table, how might this shift affect a decision to divest from certain mining activities? Rather than merely focusing on the returns that such investments might bring in the short term, the trustees now wrestle with the larger question of the effect of these investments on the public generally (and the state’s taxpayers, more specifically), of which the returns of the pension fund are an important, but no longer unique, consideration. Additional concerns may include, among other things, the communities in which the mining companies may operate (particularly if they are located in the state which sponsors the pension fund), the environmental effects of mining that the state may need to later remediate, and the potential for long-term investments in other forms of energy.

A shift to the proper recipient of fiduciary duties—current and future generations of citizens—requires fund managers to more fully consider the externalities accompanying their investments, which should serve to help them fully and accurately price their investments. Private investors might ignore certain effects, such as uncompensated harms from pollution, depleted natural resources, or widespread health problems, because the government absorbs the costs of such externalities. A strict fiduciary duty to act in the interests of the fund would obligate a private investor to ignore such externalities, so long as they do not negatively affect the returns of the fund’s investments. The government that absorbs the cost of these externalities, however, should view investments differently, with a view to minimizing negative externalities, particularly those that are significantly more expensive to remediate than to prevent. As a result of this analysis, it follows that public funds should benefit from less constrained fiduciary standards that would encourage more investment in sustainable enterprises and long-term projects.

This Article proceeds as follows. In Part II, the Article describes the existing fiduciary standards for private funds under the Employee Retirement Income Security Act of 1974 (“ERISA”) and how U.S. public funds are influenced by ERISA’s standards—or apply other, equally stringent standards, developed from a common source—even though they are not directly subject to ERISA. In Part III, the Article challenges the application of a narrow, trust law-derived conception of fiduciary duties, such as those promulgated through ERISA, to public funds. Trust law, with a clear residual claimant, differs considerably from the realities of public fund funding and liabilities. Furthermore, private pension funds differ considerably from public pension funds in terms of claimants and liabilities and yet, in the case of trusts, private funds, and public funds, the operative fiduciary duties remain the same. In Part IV, the Article considers the implications from these differences and explores how shifting fiduciary duties to the true risk bearers in pension funds would lead to important changes in how pension funds invest. In particular, public funds should have the ability to consider a much broader range of investments and increasingly focus on sustainable, long-term projects. This Part, however, also identifies the increased risk of a broader fiduciary standard for pension funds and suggests governance changes that should help to mitigate the increased risk of higher agency costs resulting from a broader fiduciary standard.

II. The Development of Fiduciary Duties for Public Fund Officials

The fiduciary duties of pension fund officials are based in long-standing trust doctrines, tracing back to the 1830 case Harvard College v. Armory. Harvard College provides the core standard of care for trustees by requiring them “to observe how men of prudence, discretion and intelligence manage their own affairs.”13 This standard of prudence has evolved gradually over time, with the Restatement (Third) of Trusts requiring trustees to “administer the trust as a prudent person would, in light of the purposes, terms, and other circumstances of the trust,”14 with “reasonable care, skill, and caution.”15 If the trustee possesses special facilities or skills, the trustee also has a duty to use such skills.16

Along with the requirement to behave prudently and with due care, trustees are also bound by a strict duty of loyalty that requires them to “administer the trust solely in the interest of the beneficiaries,”17 prohibits them from engaging in self-dealing transactions, 18 and obligates them to deal fairly with, and provide full disclosure of, “all material facts the trustee knows or should know” to the beneficiaries.19 Trustees must also administer the trust impartially with respect to the various beneficiaries of the trust.20

These common-law standards are widely used by trusts in every imaginable context, from a grandparent’s $10,000 trust for her grandchildren to a $10 billion pension fund for public employees. It is a testament to the power and flexibility of the core principles of prudence, loyalty, and impartiality that the law is able to function relatively effectively—with important caveats described below—to protect the interests of a variety of beneficiaries across such a wide range of trusts and funds. There are subtle, but important, differences, however, in how these principles are defined and applied in various contexts. Most importantly, there are differences in the law as applied to corporate pension funds as opposed to public pension funds.
..... [go to link to read the middle]
.....
V. Conclusion

To whom should fund duties be owed? Economic logic suggests that public pension fund trustees owe their duties to the public collectively. In practice, individual pension fund claimants function more like senior creditors than the residual claimants that are the typical recipients of fiduciary duties. The public in general, and current and future taxpayers specifically, are the true residual risk-bearers for public pension funds.

This reframing of fiduciary duties in public funds has dramatic consequences for the investment policies of the funds. Most importantly, a shift in the locus of fiduciary duties to public wealth maximization will require fund managers to more fully consider the externalities accompanying their investments, which should serve to help them fully and accurately price their investments. Private investors might ignore certain negative effects, such as uncompensated harms from pollution or depleted natural resources, because the government absorbs the costs of such externalities. Indeed, a strict fiduciary duty to act in the interests of the fund would obligate a private investor to ignore such externalities, so long as they do not negatively affect the returns of the fund’s investments. The government—and by extension, the public who funds the government—that absorbs the cost of these externalities, however, should view investments differently, with a view to minimizing negative externalities, particularly those that are significantly more expensive to remediate than to prevent. Similarly, a strict reading of fiduciary duty suggests that funds should ignore positive externalities from investments that benefit society but not the plan participants. A focus on public wealth maximization would suggest that positive externalities should also be taken into account in investment decisions, which might, as a consequence, result in more investment in sustainable enterprises and long-term projects.

Fiduciary duties, however, are not a substitute for other kinds of governance structures. This is particularly the case with public pension funds as there is very little that the nominal beneficiaries can do to enforce the fiduciary duties. To take advantage of a shift to public wealth maximization—indeed, before any statutes could be rewritten—state and local governments need to ensure that their governance structures are robust enough to manage the potential agency costs that arise with increased socially-responsible investing.

* Professor of Law, Ohio State University Moritz College of Law. The author thanks Cinnamon Carlarne and Christopher Walker for helpful comments on an earlier draft.

__________________
It's STUMP

LinkedIn Profile
Reply With Quote
  #1407  
Old 09-19-2018, 06:58 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: 85,022
Blog Entries: 6
Default

CHICAGO, ILLINOIS

https://www.illinoispolicy.org/high-...d-managers-9m/

Quote:
HIGH-RISK REAL ESTATE INVESTMENTS COST CHICAGO PENSION FUNDS $54M, WIN FUND MANAGERS $9M
A real estate investment deal arranged by a firm that employed former Mayor Richard M. Daley’s nephew has dealt a blow to Chicago’s cash-strapped pension funds, underscoring the need for a 401(k)-style alternative.


Spoiler:
A 12-year-old real estate investment deal struck between all five of Chicago’s pension funds and a politically connected investment management firm has resulted in a collective loss of more than $54 million, according to an investigation by the Chicago Sun-Times.

The deal was assembled by DV Urban Realty Partners, an investment management firm formed by Robert M. Vanecko, nephew of former Chicago Mayor Richard M. Daley, and Allison S. Davis, a developer who headed the law firm that first employed former President Barack Obama.

DV Urban lost most of its $3.4 million investment as well, but more than made up for it with the $9 million the firm collected from the pension funds in service fees.

According to the Chicago Sun-Times, the deal had been advertised by the firm as “high-risk,” cautioning in the prospectus that the pension funds may “lose their entire investments.” Despite the excessive risk and the already-insecure condition of the pension funds, however, each of Chicago’s five pension fund boards invested tens of millions of dollars with the firm.

Daley had still been serving as mayor at the time the deal was finalized and had top aides serving on three of the city’s pension fund boards, raising the question of whether conflicting political interests may have played a role in reaching the deal.

In May 2009, a federal grand jury opened an investigation into the investment package. Vanecko left the firm shortly thereafter, according to the Sun-Times, purportedly at the behest of Daley. The firm ousted Davis in 2012. Federal authorities did not bring charges against any employees of DV Urban following the investigation.

The five pension funds bruised by the investment deal cover retirement plans for Chicago employees including “teachers, police officers, municipal workers, garbage collectors and bus drivers,” the Sun-Times notes.

Whether these particular losses can be attributed to unsound judgement or interested political entanglements, what cannot be overlooked is that defined-benefit pension systems trap thousands of public-sector workers with these kinds of risks, with no way out.

With a 401(k)-style retirement plan, government employees unhappy with a politically connected deal gone wrong would have had the ability to move their retirement funds elsewhere.

State lawmakers should allow Chicago and all other local governments to enroll all new workers into a 401(k)-style system that puts public employees themselves – rather than Chicago political whims – in control of their retirements. More than 20,000 state university employees in Illinois have already opted for such a plan.

Defined-benefit pensions jeopardize government workers’ retirement security and tether taxpayers to massive, unpredictable costs. While the transition into 401(k) plans is in urgent order statewide, Chicago officials would be wise to take the first step forward.


__________________
It's STUMP

LinkedIn Profile
Reply With Quote
  #1408  
Old 09-23-2018, 05:32 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: 85,022
Blog Entries: 6
Default

FIDUCIARY DUTY

https://www.truthinaccounting.org/ne...s-or-taxpayers

Quote:
Should public pension plan assets be managed for pensioners, or taxpayers?
Spoiler:
Paul Rose is a law professor at The Ohio State University. Over the weekend, he had an article published in the Illinois Law Review titled “Public Wealth Maximization.” Rose makes a groundbreaking case for the fundamental reshaping of fiduciary duties of managers of public pension funds. Historically, they have been directed to pursue the best interests of plan beneficiaries. Rose argues that they should first and foremost be managed for the benefit of the general public – citizens and taxpayers.

As part of his argument, Rose notes that the legal position of pension plan participants behaves more like a senior claim on government, rather than the residual claim for shareholders in corporations, where managers owe a fiduciary duty to the residual claim. While it may seem that pension plan participants fare well when plan assets are invested well, and they fare poorly if plan assets are invested poorly, that just isn’t the case, especially in places like Illinois where defined pension benefits are guaranteed under state law.

So Rose argues that fiduciary duties should flow to the real risk takers – the public.

Consider a market crash. Do pensioners care? Not if their benefits are defined and guaranteed. Citizens and taxpayers are the ones on the hook. They’ve effectively been placed in the stock market, even if they don’t want to be there – just on the downside.

In discussing the implications of his argument, Rose focuses on what they can mean for investment choices, particularly in light of externalities and issues relating to socially-responsible investing. But his argument also has important – and likely good – implications for risk-shifting to taxpayers, and could result in ‘socially responsible’ investment decisions of a different sort, including less risky investment portfolios for public pension plans.

In a world where pension benefits are defined and guaranteed, and plan managers under a duty to care first and foremost about plan participants, there can be incentives to invest in riskier-than-socially-responsible portfolios when citizens and taxpayers bear any downside of risky investments.

In turn, the idea that pension plan assets should be managed with a view to the public as the residual claim supports an argument I am developing that GASB recognized pension liabilities on balance sheets incorrectly. After decades of leaving them off the balance sheet, GASB finally required the net pension liability – the total liability less plan assets – to be included in the debts of governments. One can make a case, and I am developing it, that GASB should have forced the recognition of the total liability as a debt, along with recognizing plan assets among the assets of the sponsoring government.


__________________
It's STUMP

LinkedIn Profile
Reply With Quote
  #1409  
Old 09-24-2018, 10:01 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: 85,022
Blog Entries: 6
Default

CHICAGO, ILLINOIS

http://digitaledition.chicagotribune...7-5fdf960374b2
Quote:
The cost of Jon Burge’s police torture legacy

Spoiler:
There are many ways to measure the legacy of disgraced Chicago police Cmdr. Jon Burge. There’s the alleged torture suspects suffered — a means of forcing confessions — at the hands of officers under his supervision. And the years those who were wrongly convicted spent behind bars. Taxpayers have paid a hefty price, too, as the city county and state settled lawsuit after lawsuit.

We learned in recent days that Burge died, at the age of 70, in Florida. A Vietnam War veteran, Burge started working for the Chicago police in 1970 and moved up the ranks to commander. Stories of the violence committed under Burge — including beatings, electric shock, suffocation with typewriter covers and games of Russian roulette — began to surface and by 1993 he was fired. Years later, he was convicted of lying to federal authorities about his conduct and was sent to prison.

His death is a reminder of the price paid by so many in the wake of the torture revelations. Here are four examples:

26 years

Alton Logan spent 26 years in prison for murder before the lawyers of another man, Andrew Wilson, came forward to point the finger at their client. Wilson, who had just died, confessed to the killing, the legal team said. They said they couldn’t say anything before that because they were bound to attorney-client privilege while he was still alive. In the wake of that revelation, Logan was initially released on bond and eventually the Illinois attorney general’s office dismissed the charges against him.

$132 million

The Chicago-based People’s Law Office, which handled torture-related lawsuits, calculates that the torture cases involving Burge and officers he oversaw have cost the city, Cook County and state of Illinois $132 million. That figure includes settlements and legal fees that were paid to individuals who said they were tortured.

The city of Chicago has paid $83 million alone in settlements related to torture cases under Burge, according to figures compiled by the People’s Law Office. The city reached one of the largest settlements — totaling $10.2 million — with Alton Logan in 2013. Logan had been convicted and sentenced to life in the 1982 fatal shooting of Lloyd Wickliffee, who had been working security at a South Side McDonald’s. Logan had taken Burge to court, arguing that evidence that could have proved he was innocent was hidden. The state of Illinois paid Logan $200,000 after he was exonerated, according to the People’s Law Office.

The city also paid out $10.2 million to Eric Caine, who had been convicted of the 1986 murders of an elderly couple. He spent about 25 years in prison until a Cook County judge tossed the conviction in 2011. He had alleged that detectives working under Burge tortured him until he provided a false confession.

Reparations package

In 2015, the Chicago City Council approved a $5.5 million reparations package for people who were tortured during Burge’s time with the Chicago police. The package include settlements up to $100,000 for 57 victims, said Flint Taylor, an attorney with the People’s Law Office. Victims who had already gotten settlements from the city for more than $100,000 were not eligible. Victims and their families were also eligible to receive tuition for classes at City College and could receive job training services.

The reparations package also led to the opening of the Chicago Torture Justice Center in Englewood to provide a variety of services to Burge’s victims and the community impacted by police brutality. The package also called for public school students in eighth grade and 10th grade to learn about the Burge torture era, according to a news release from the city at the time.

Burge’s police pension: $4,000 monthly

Burge continued to collect a his taxpayer-funded monthly pension of more than $4,000, according to the People’s Law Office. Illinois Attorney General Lisa Madigan had previously tried to challenge the pension payments, but it was tossed out by the Illinois Supreme Court. The state’s high court ruled that the Retirement Board of the Policemen’s Annuity and Benefit Fund of Chicago has the jurisdiction to decide if the monthly pension should be terminated.

“This opinion should not be read, in any way, as diminishing the seriousness of Burge’s actions while a supervisor at Area Two, or the seriousness of police misconduct in general. As noted, the question in this appeal is limited solely to who decides whether a police officer’s pension benefits should be terminated when he commits a felony,” the court’s ruling stated.


http://www.chicagobusiness.com/opini...nsion-problems

Quote:
City Hall is looking at the wrong side of the balance sheet to solve pension problems
Rather than taking on billions in new debt to rescue swamped public-employee pensions, the city should consider an asset transfer—depositing income-producing public assets like, say, Midway Airport, into a pension fund. It's worked elsewhere.
MICHAEL D. BELSKY
University of Chicago

Spoiler:
The city of Chicago is considering issuing $10 billion in bonds with the idea of increasing funding levels in its public-employee pensions to 53 percent from the current 26.5 percent. The city’s liability is pegged at $28 billion and requires payments of close to $1.0 billion. These payments are expected to rise to $2.1 billion in 2023. Numbers of this magnitude serve to crowd out dollars for essential services such as police, fire and infrastructure.

I do not fault the mayor for looking for solutions. Unlike most elected officials across the country he has been willing to start tackling the issue of legacy costs with recent increases in the property tax, a water and sewer surcharge and an increase in 911 fees, all aimed at increasing required payments to shore up the pension funds.

That said, a $10 billion dollar pension bond is not a panacea and has many attendant risks. The idea currently being floated is that the proceeds of the bond issue will be deposited into the funds, thereby reducing the liability. This deposit, in turn, results in a lower payment. The annual pension expense covers payments to retirees, the funding of recently accrued benefits by active employees and paying down of the unfunded liability. Underlying all this is the assumption that the cost of borrowing $10 billion will be about 5.25% and the earnings on pension assets will be a blended 7% for the four public-employee funds. However, there's no guarantee of a 7% return on investment, as demonstrated by the fact that funds across the country have seen their pension burden increase as a result of investment returns on assets coming in well under the assumed rate of return. If that happens in Chicago, taxpayers will be on the hook. In the worst case this may create a moral hazard in which fund managers reach for returns through riskier investments.

Rather than using property taxes to securitize the bonds, the city is contemplating using sources of revenue transferred from the state, such as the local distribution share of the sales tax, the personal property replacement tax and the motor fuel tax (the last is problematic in light of the lock box amendment which constitutionally requires this source to be used exclusively for transportation purposes). The problem with this is that these sources of revenue are deposited into the corporate fund to support basic services. In effect this becomes another source of crowding out.


As an alternative the city should consider an asset transfer, a common practice in the private sector. This entails depositing an income-producing asset owned by the government into a pension fund. An asset transfer does not require going into debt; rather, the city would be using an existing publicly owned asset that was previously was valued at cost. The transfer enables the asset to be accounted using its higher market value to boost funding ratios. (Admittedly, valuing public assets is not easy in that there is not a ready market for public assets. That said there have been numerous privatizations of public assets and public-private partnerships across the country to arrive at a reasonable value—not withstanding parking meters.) An additional benefit is that the asset remains in the public domain, which is not always the case with privatizations. Another positive is that public assets are often essential purpose monopolies such as water and electric systems. This provides a stable asset values and predictable income streams for pensions as opposed to the vagaries of the market.

Any excess cash flow can be used to offset the annual pension expense after the asset is operated, maintained, and pays its debts. According to a Stanford University white paper published in 2017, an asset transfer was successfully done in Queensland, Australia with the Queensland Motorway. In this case the pension fund received the motorway asset at a value of $3.1 billion. Driven—no pun intended—by its fiduciary duty to maximize the value of assets, the fund made improvements through more efficient operations, adding lanes and new roads. The fund sold the asset three years later for $7.1 billion.

Recently the State of New Jersey had its lottery system independently valued at $13.5 billion. The system was contributed to its state pension funds bringing the funding ratio from 44.7% to 58.7%. With cash flows from the lottery, pension payments were increased from $1.86 billion to $2.51 billion. While this increased payment will help pay down the liability, the state was able to reduce payments from its general fund by $1.5 billion, helping to mitigate the crowding-out effect.

I suggest that rather than going into further debt to shore up pensions, the city should explore inventorying its income-producing assets and consider contributing these to the pension funds. For example, the water and sewer system or Midway Airport, to name a few. In fact, non-income-producing assets such as undeveloped land can be contributed and then monetized in the future through leasing or sale for development. I realize that there will be many hurdles such as protecting any existing bondholders, and complying with federal regulations. But those hurdles are worth exploring if we want the city to get out from under these large legacy liabilities and be able to have a fiscally sustainable government. At a minimum if the pension bonds were proffered as a way to “start the conversation,” as stated by mayoral advisor Michael Sacks, then I would add asset transfers to that conversation.

Michael D. Belsky is senior fellow and executive director at the Center for Municipal Finance at the University of Chicago's Harris School of Public Policy. He was also mayor of Highland Park from 2003 to 2011.

__________________
It's STUMP

LinkedIn Profile
Reply With Quote
  #1410  
Old 09-24-2018, 02:24 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: 85,022
Blog Entries: 6
Default

MICHIGAN

Quote:
Almost 250 Michigan Communities Face Underfunded Pension, Health Care Systems

Spoiler:
More than a quarter of all Michigan communities had pension or health care systems that were under-funded in 2017, according to the Michigan Department of Treasury. The department says 247 communities had systems that were under-funded, totaling about $19 billion.

Local governments are considered under-funded by the state if they have pension systems that are funded less than 60 percent and if they have other post-employment benefits (OPEB) systems – which largely consist of retiree health care benefits — that are funded less than 40 percent.

Rod Taylor is division administrator for the Community Engagement and Finance Division of the Michigan Department of Treasury. He says it’s a problem that could have big implications for those communities and the state.

“That potentially could have a negative impact on those local communities or the state of Michigan as a whole in terms of our credit rating or the overall economic vitality of the state,” said Taylor.

“It’s important for those communities and it’s important for those employees in those communities. So, it’s trying to bring light to that larger issue.”

He says many local governments are making progress toward addressing those problems.

“The vast majority of them have understood the potential risk that’s out there and have started to make some significant positive changes to address their underfunded status.”

The state created more aggressive methods for monitoring the health of communities’ pension and health care systems last year. Taylor says that new law, Public Act 202 of 2017, has helped most local governments with under-funded systems make positive changes in the last year.

“The vast majority of them have understood the potential risk that’s out there and have started to make some significant positive changes to address their underfunded status,” said Taylor.

Taylor said 883 total communities have reported the status of their funds to Treasury for the 2017 year. 28 percent of those communities are in under-funded status.


__________________
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 06:56 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 0.39538 seconds with 12 queries