STUMP » Articles » 80 Percent Funding Hall of Shame: I Write Letters » 13 January 2015, 07:06

Nothing notable to add to the 80% Hall of Shame today – but I do want to note what I do when I get these links. I try to give the authors of the piece some notification about the error.

A little while back, I came across this editorial about Connecticut pensions, which included the line:

The problem is in the funding. States that set aside around 80 percent enjoy adequate to healthy pension funds but Connecticut’s has been in the 45 percent region, down there with Illinois.

And I wrote them a response. If you check out my spreadsheet About tab, you will see I have a couple of form responses I edit to make it relevant to the item at hand.

My preference is to comment directly on the piece, if possible, and then my next preference is to contact the authors in some way. In this case, I sent an official letter to the editor.

Which got published:

Mary Pat Campbell Croton Falls, N.Y.
Publication: The Day

This is in regards to your editorial, “State cannot ignore pension problems,” (Dec. 26). There was a comment that 80 percent funding was healthy for a public pension plan. This is not the case.

This is from the American Academy of Actuaries: http://www.actuary.org/files/Pension%20Funding.pdf

The beginning: “The health of defined-benefit pension plans is a key issue to the tens of millions of Americans who are receiving or expecting to collect pension benefits. Some have said that the level of funding – specifically an 80 percent funded level – should be used as a general benchmark to determine whether pension plans are financially healthy. In reality, however, no single level of funding distinguishes a healthy plan from an unhealthy plan. In fact, plans should have as their objective accumulating assets equal to 100 percent of relevant pension obligations.”

Of course, the Connecticut pension situation is even worse. But 80 percent is far from healthy.

So there’s that.

In addition, another piece for the Hall of Shame:

Preliminary estimates show that the plan would be healthy, or 80 percent funded, by 2018 at the latest, and that the “unfunded liability” could be cut in nearly half to about $400 million by that year.

I emailed the authors, but never heard from them. Maybe they won’t make the mistake again.

The whole point of this particular exercise is to quash the “they say” parroting, and also to call into question the expertise of the supposed experts who think 80% funding is okay.

It’s not okay. Especially at the end of a bull market.

But more on that in a future post.