STUMP » Articles » Pension Quick Takes: Nice Work if You Can Get It » 20 March 2015, 05:13

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Pension Quick Takes: Nice Work if You Can Get It  

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20 March 2015, 05:13

First, thanks to this week’s top referrers:

And let’s jump into the story that gives this post its subtitle, from:

ILLINOIS

Guy trying to get a $36K boost to his pension due to one day’s work:

A union lobbyist who qualified for a teacher pension windfall by subbing at a school for one day is now suing a state retirement board because his benefits were scaled back once his sweet deal was exposed. Retired Illinois Federation of Teachers lobbyist David Piccioli, 65, is arguing that lawmakers violated the state constitutional provision that says a pension cannot be “diminished or impaired” once it is set.

Piccioli is already collecting $31,485 from the Teachers Retirement System. If he wins his case, his teacher pension could increase by more than $36,000, the Tribune estimated — more than doubling what he gets now.

Because Illinois and because union lobbyist.

If Illinois needed an argument against the absurdity of the constitutional provision in their court case, this would be a great example.

UPDATE: Seems it has come to the attention of other people as well.
If you want a little light listening, here’s the audio for the Illinois Supreme Court hearings on the pension reform. It’s less than an hour.

SAN DIEGO, CALIFORNIA

Here’s one guy who’s losing the job: San Diego County pension fund CEO gets the boot:

Brian White, the chief executive of the $10 billion-plus county pension fund whose use of a leverage-heavy investment strategy alarmed retirees and gained negative press on a national scale, is stepping away from the system.

The board of the San Diego County Employees Retirement Association, which plans and saves for county employee pensions, announced the mutual separation after a closed-door meeting that went for less than an hour on Thursday.

The vote to approve the deal was 8-1, with sheriff’s Commander David Myers — White’s staunchest supporter — voting no. Myers declined to comment on his vote after the meeting.

San Diego has appeared on STUMP before, once in which I pointed out the risky asset mix, a followup on the pension fund managers, and something preceding those two by months noting how well the San Diego county city managers were being paid.

I imagine that situation is only going to get uglier. I wonder if/how they will get out of their risky investments. I highly recommend them doing it before the Fed possibly raises rates (which of course they may not do for years.)

I hope the ex-CEO can live on his severance package of $250K while he finds his next job. Upside: not many people want to be in charge of a pension that’s not doing so well. Should be easy to find another public pension fund needing an executive.

SAN BERNADINO, CALIFORNIA

San Bernadino has defaulted on $10 million in bond payments:

(Reuters) – The southern California city of San Bernardino has defaulted on nearly $10 million in payments on its privately placed pension bond debt since it declared bankruptcy in 2012, according to documents seen by Reuters.

In addition, the city has not negotiated with its bondholders since September, according to a person familiar with the stalled negotiations.

…..
The city continues to pay its monthly dues to Calpers in full, but has paid nothing to its bondholders for nearly three years, according to the interest payment schedule on roughly $50 million of pension obligation bonds issued by San Bernardino in 2005.

Oh, did they default on pension obligation bonds? But are paying their required pension contributions to Calpers? (“dues”? wtf? I assume it’s not “dues” but “required contributions”.)

But back to the article:

In an unprecedented legal argument for a Chapter 9 municipal bankruptcy, EEPK, the Luxembourg-based bank and holder of the pension bonds, and Ambac Assurance Corp, which insures a portion of the bonds, assert in a January lawsuit against San Bernardino that those bonds are part of a single pension obligation, so that any payment to Calpers by San Bernardino requires equivalent payment to the bondholders.

If you call them pension obligation bonds, you are setting up an expectation they are an obligation equal to the pensions, eh? Funny how that works.

The bankruptcy judge may not be happy with such obvious inequities in treating obligations.

In his written opinion, U.S. Bankruptcy Court Judge Christopher M. Klein blasted CalPERS as “a bully” for weighing in on the proceeding to insist — wrongly — that the city had no choice but to pay workers their promised pensions.

…..

San Bernardino could be the first city in California to consider cutting worker pensions in a bankruptcy.

Before Klein’s ruling, San Bernardino officials repeatedly said they planned to keep paying CalPERS for worker pensions. They said they feared that employees would leave for other government jobs if they moved them to a less expensive retirement option.

The city manager confirmed these plans to the Los Angeles Times in February.

But in an interview, San Bernardino City Atty. Gary Saenz said Klein’s opinion was significant.

The city is now drafting a plan for paying its creditors, he said. Although city officials put “a high value” on continuing to pay CalPERS, Saenz said, the issue “is still up in the air.”

Detroit cutting pensions to current retirees while it was going through bankruptcy was a big step, but if Calpers loses one of these cases outright (and it is going to one of these days, just due to reality), the floodgates will open in California.

Be careful you don’t get wet.

FEDERAL

Speaking of nice jobs, how about a nice little pension for life for five years’ ‘work’?

Rep. Aaron Schock, who announced his resignation today under suspicion of misusing public money, will be eligible for more of it in retirement.

Schock, a Republican from Illinois, could eventually collect hundreds of thousands of dollars in taxpayer-funded retirement benefits, depending on how long he lives.

Starting at age 62, he will be eligible for just under $18,500 annually, according to estimates by the National Taxpayers Union, a conservative nonprofit organization.
……
Schock was first elected in 2008. His resignation will abruptly end ongoing congressional ethics investigations into his activities, although federal prosecutors could conceivably pursue the matter. Schock has not been charged with any crime.

About that last…. well. Let Ace explain.

Anyway, Aaron Shock recently took a wealthy software businessman’s private plane to a Cub’s game. The law says that this is a gift, and that he cannot accept it; he can take the plane ride, but he must pay the pro rata cost of the flight.

The pro rata cost was $13,000 plus. The first $3000 and change of that cost Shock had his PAC pay, by listing the cost as “for software.”

Cute. It wasn’t for software, it was for a flight on a very nice corporate jet belonging to a software magnate. But I guess “for software” sounds better than that.

He’s also the guy who had taxpayers pay for a $40,000 redesign of his Congressional office, in the style of Downton Abbey, because, I guess, he felt the gay left wasn’t spreading enough rumors that he was An Gay.

I don’t think people cared whether he was promiscuous in the usually interesting way, but more that he was promiscuous with their own money. If he had done the redesign on his own dime… well, I guess he wouldn’t have been a Congressman.

More on the federal situation, there are some pension reforms being proposed:

Congressman Bruce Westerman (R-AR) has introduced legislation (H.R. 1230) that would change the pension benefit formula for federal employees to use the highest five years of earnings to calculate civil service pension benefits.

“This bill would simply change the formula for determining pension benefits for civilian federal employees from the best-earning three years to the best-earning five years of service,” said Westerman. “The bill ensures that the program employees of the federal government have paid into for their careers is available in retirement and sustainable for future generations.”

It is easier to spike one’s pension (where someone gets a boost at the end of their career for a short period, so as to increase the ultimate pension) the fewer years that go into the benefit calculation. The worst situation is where the pension is based on one’s ending salary level (so one could get a ginormous raise a day before retirement, and that would be used for pension calculation), but highest year of earnings is a close second.

Highest three years of earnings is not so bad, but highest five years would bring down the average a bit. Not a bad idea.

It wouldn’t affect congressional pensions so much as they don’t really get big boosts in pay that often.

Finally, asking for a little sunlight on federal pensions:

It’s national Sunshine Week across America. During this week, good-government groups advocate for open government and transparency. One area that remains hidden is federal pensions.

Imagine if you could review your congressman’s pension, including amount contributed, years to break even and total payout to life expectancy. Or what if taxpayers could view the pensions of former Internal Revenue Service chief Lois Lerner or former Secret Service boss Julia Pierson? But we don’t know because we can’t see them. The data is not merely opaque, but literally housed and hidden in a Cold War-era underground complex in Pennsylvania.

Recently, our organization, American Transparency, filed a Freedom of Information Act request to reveal individual federal pensions. The Office of Personnel Management rejected it as “a clear unwarranted invasion of personal privacy.” Still, our request for the active salaries of the 2.5 million federal employees was fulfilled, with seven-year histories. We post these salaries on our website, OpenTheBooks.com.

But if active salaries (by name) can be transparent, why would posting federal retiree pension amounts, service credits and contributions be an invasion of privacy? The same privacy law underlies both records. The Obama administration’s legal argument against revealing pension data is arbitrary.

Guys, the Obama admin is not known for its transparency. Of course the legal argument is arbitrary. They wouldn’t let any of the data out if they could help it.


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