Monday, February 24, 2014

Panel comes to Franklin Square to tell the

public employees of Nassau OTB what Suffolk County Legislator Kevin McCaffrey, AKA President of Teamsters Local 707 , whose pension plan is awaiting takeover by the PBGC, won't tell the members of Teamsters Local 707 whether they work for a public employer or a private employer. At every  general meeting of Teamsters Local 707 members ask when is the PBGC coming and what is the status of the pension plan. Kevin McCaffrey talks like a politician because he is a politician and little more

Come to Franklin Square and talk to public and private employees who are getting taken for a ride and hit by a truck


Panel Seeks Greater Disclosures on Pension Health

Detroit’s pension fund was said to be healthy just before the bankruptcy, but it turned out to be several billion dollars short.Rebecca Cook/Reuters Detroit’s pension fund was said to be healthy just before the bankruptcy, but it turned out to be several billion dollars short.
A panel of risk experts sees a teachable moment in Detroit’s bankruptcy and pension woes.
A blue-ribbon panel of the Society of Actuaries — the entity responsible for education, testing and licensing in the profession — says that more precise, meaningful information about the health of all public pension funds would give citizens the facts they need to make informed decisions.
In a report to be released on Monday, the panel will recommend that pension actuaries provide plan boards of trustees and, ultimately, the public with the fair value of pension obligations and estimates of the annual cash outlays needed to cover them. That means pension officials would disclose something they have long resisted discussing: the total cost, in today’s dollars, of the workers’ pensions, assuming no credit for expected investment gains over the years.
“We think it would be a useful benchmark for plans to have,” said Robert W. Stein, the panel’s chairman, who is both an actuary and a certified public accountant. “We’re optimistic that the information would enable them to better appreciate the future and what it might bring.”
Economists refer to this elusive number as the plan’s total liability, discounted at a risk-free rate. They have called for its disclosure for years, saying it would help pension trustees make better decisions. Economists have calculated rough approximations in recent years for various states and cities, but only the plan actuaries have the data needed for precise calculations.
For all their billions, public pension systems are largely unregulated. Actuarial standards, however obscure, may be the closest thing the sector has to a uniform and enforceable code.
Though the actuaries who work for public pensions have the capacity to spot risks and measure shortfalls with pinpoint accuracy, it is their clients — usually the pension trustees — who call the shots. And plan trustees prefer to be given traditional actuarial estimates, which are smoothed, stretched, averaged, backloaded and otherwise spread across time.
Such numbers generally comply with current actuarial standards, but as Detroit shows, they can also paper over looming disasters. Detroit’s pension fund was said to be healthy just before the bankruptcy, but it turned out to be several billion dollars short.
Bob Stein served as chairman of a blue-ribbon panel for the Society of Actuaries, which is recommending changes in disclosures for public pension funds. Bob Stein served as chairman of a blue-ribbon panel for the Society of Actuaries, which is recommending changes in disclosures for public pension funds.
The new liability measurement called for by the Society of Actuaries panel would not be the only number provided to the public, but it would provide new insight into the market risks for pension plans and the shortfall that might have to be made up by local taxpayers if investment returns did not measure up to expectations.
Disclosing pension liabilities based on risk-free discount rates, however, is viewed with deep suspicion by plan trustees and the unions that represent public workers. Pension officials and union leaders say the risk-free approach, if permitted, will be used to cast public pensions in the worst possible light to whip up fervor against them and justify the termination of the plans.
So far, the only public pension actuary who has publicly provided such numbers is Robert C. North Jr., who tracks the five funds that make up New York City’s vast pension system. He is also one of the 12 members of the blue-ribbon panel. (Other members include New York’s former lieutenant governor, Richard Ravitch; the Pension Benefit Guaranty Corporation’s former executive director, Bradley D. Belt; and the Principal Financial Group’s chief executive, Larry D. Zimpleman.)
For New York City’s biggest fund, known as Nycers, the conventional numbers show assets of about $45 billion and liabilities of $67 billion, or a less-than-stellar funded ratio of 66 percent.
But Mr. North’s fair-value numbers, deep in Nycers’s annual report, show assets of $43 billion and liabilities of $106 billion, or a funded ratio of just 40 percent — a sure sign of trouble ahead as the city’s work force ages and retires.
The difference, $63 billion, is Nycers’s shortfall. That money has to be made up before today’s city workers retire — within 14 years, on average. As a result, New York’s contributions to Nycers are rising every year, squeezing the city budget and making it harder for the city to provide public services.
Mr. North said in 2006 that he tried to give these numbers greater prominence in the annual reports, but was blocked by the plan’s outside auditor, who said that doing so did not comply with generally accepted accounting principles.
Detroit felt an even bigger budget squeeze over the last decade. But, unable to see the hopelessness of its situation, the city borrowed $1.4 billion from the bond markets, put that cash into its pension system and declared victory. The money was invested in assets that subsequently lost value, the workers kept on accruing new benefits, tax revenues continued to falter and finally, last year, that debt was the first thing Detroit defaulted on as it hurtled toward bankruptcy.
The city now says the borrowing transaction was an illegal sham and has asked the bankruptcy court to void it. Bondholders have been told to expect pennies on the dollar for their claims. Pensioners’ losses in the bankruptcy will be softened, but some of them have been warned that their pension checks will be docked to offset improper payouts in the past.
Detroit might have gone bankrupt in any case, but the pain might have been lessened if better decisions had been made early on to address the rising cost of the benefits in the face of the shrinking tax base.
For other places that may have the same problem, the blue-ribbon panel is calling for actuaries to produce other details as well: each pension plan’s projected annual cash payments; the estimated volatility of the fund’s investment performance; and something called a “standardized plan contribution,” which would help all stakeholders assess whether the actual contributions to a pension fund, paid by workers and taxpayers, are reasonable and adequate.
“One would think that alert trustees would want to review this,” Mr. Stein said, “and evaluate how they should respond.”
Mr. Stein said the panel had asked the Actuarial Standards Board to incorporate its recommendations into its professional standards, or perhaps into a new standard solely for public pensions.
A version of this article appears in print on 02/24/2014, on page B

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