STUMP » Articles » 80 Percent Funding Hall of Shame: April 2015 roundup » 30 April 2015, 01:47

Time to hit my Hall of Shame database

This is more to collate everything I’ve seen go by in the past month… and hoping that these become less frequent over time. I thought I saw a few good trends bubbling up, having a fallow period for a few weeks.

And then, no, it came roaring back.

I’m going to be a little less GIF-happy than last time.

Michael G. Riley, vice chair at Rhode Island Center for Freedom and Prosperity

This is a visual one:

It’s just the column header in the rightmost column, and really, the rest of the piece is just fine. Here’s the end:

Even under reform and after a massive bull market the funded ratio [for Rhode Island pensions] has not improved. That means costs have been calculated incorrectly and discounted incorrectly. Using GASB 68, the State and Magaziner will be forced to report a collapse in the funded ratio and a huge increase in liability. Under current law, the state does not have to fund reality but they do need to show a 5 year plan and clearly spell out the current financial condition of the state. That should be interesting.

It sure will.

Washington Post editorial

Still, the state has only two-thirds of the funds necessary to meet its long-term obligations, well short of the widely accepted benchmark of 80 percent.

I kept trying to jump through their hoops to comment, but found a “fellow actuary stepped out in front of me. From Evan Inglis:

The April 5 editorial “Short-term thinking” perpetuated a misunderstanding that 80 percent is a benchmark or standard for pension funding. Only in unusual situations is anything other than 100 percent funding the target for a pension plan that is prefunded with assets.

Yay, Evan — I added you to my Heroes List! I used to think I’d exclude actuaries doing what they should be doing, but as I’ve seen precious few doing it, I’m adding them, too.

So far, I’ve got two people on my list. Come on, it’s lonely out here.

For this NOLA article, I’m not quite sure if it’s the reporter or a speaker who made the error:

This would abolish cost of living increases and so-called “13th checks,” until the fund is healthy, as defined by 80 percent funding level.

The NOLA situation is ugly. More on that another time.

Frank Kim, Orange County CFO:

In five years the system is expected to be 80-percent funded – a level Kim said finance officials like to see.

I would hope they like to see 100% fundedness.

But I guess they put the bar low, as they might actually clear it.

Bob Adelman, the New American:

Most private pension plans are required to hold 100 percent of future liabilities in investments, while plans such as Chicago’s are allowed some leeway, so the story goes, because shortages can always be made up by increasing taxes on citizens. The minimum benchmark for such plans is 80 percent. Chicago’s is 36 percent, and declining into what some are calling a death spiral: Benefit payouts are accelerating due to demographics — more and more city employees, dependent solely on their pension payouts during retirement — and low earnings, thanks to the Federal Reserve’s determined policy of forcing interest rates down.

This one was a little iffy. But the minimum benchmark should be 100%, not 80%.

Karen Pierog, Reuters:

The city’s biggest liability is its pensions. It ended fiscal 2013 with an unfunded liability of $19.2 billion in its four retirement funds, leaving them only funded 37 percent, well below the 80 percent level considered healthy.

Great, another Reuters person whom I cannot correct because there is no official contact channel.

I wonder if Karen picked this up from Hilary Russ.

After that last one, I had a silence of about 3 weeks. I thought perhaps the well had run dry.

But nope!

Samantha Marcus, NJ.com:

Experts generally say a pension fund with an 80 percent funding ratio is considered healthy.

Puke.

Oh well.

I guess this feature is likely to be around for a while. Especially since so many plans are so far away from 100% that 80% seems “reasonable”.

Even after a years-long bull run.