STUMP » Articles » Pensions Watch: Non-Complete Disaster Edition » 14 April 2016, 21:07

Where Stu & MP spout off about everything.

Pensions Watch: Non-Complete Disaster Edition  

by

14 April 2016, 21:07

Why should Puerto Rico, Chicago, and Central States get all the love?

Let’s check out other pension stories!

MR BURY GOES TO WASHINGTON

I mean that literally.

The Enrolled Actuaries annual meeting was in Washington, DC this week. I knew this because I was in DC last weekend working on actuarial stuff (exams, specifically) and a pension actuary popped his head in to say howdy and also mentioned the EA meeting was going to be up.

Also, John Bury was there. Before I headed out to DC, I saw he had said that in an unusual move, there would be no recordings of the meeting.

HMMMM

Anyway, Bury made 4 posts (so far) about the meeting:

A different pension actuary I knew remarked on the IRS backing down on a proposed rule. It’s here, if you’re interested, but it’s not something of wide interest.

Even I can’t pretend to be interested in it.

Thus ends the actuarial content. Today.

NEW YORK CITY IS SO DONE WITH HEDGE FUNDS

Before the official decision:

NYC Public Employee Pension Fund May Pull Hedge-Fund Investments
Fund plans to vote Thursday on whether to begin divesting from hedge funds

New York City’s biggest public employee pension fund is poised to vote Thursday to begin pulling its investments from hedge funds, the latest move by a large pension plan to scrap an investment path that once promised big returns.

The move by the New York City Employees’ Retirement System, which says it is the nation’s largest pension fund for municipal employees, is expected to be approved in a majority vote by its trustees, according to people familiar with the internal discussions.

“Hedge funds are charging exorbitant fees for high-risk and opaque investments,” said Letitia James, the city’s public advocate, and one of the trustees of the pension fund. “As financial stewards of public employees’ money, we must invest in responsible and secure assets,” she said in a statement.

And the vote was taken today….

Unsurprising result:

New York City Employees axes $1.5 billion hedge fund program

New York City Employees’ Retirement System’s board voted Thursday to eliminate its $1.5 billion hedge fund program.

I happen to agree that government plans have no business investing in opaque assets, especially when basic stuff like fees are “required” to be hidden.

GOLDMAN SACHS IS MADE TO PAY FOR SOMETHING

Okay, Illinois is popping in for a moment. But it’s not really about Illinois.

Illinois, California pension funds to receive millions from Goldman Sachs settlement
:

Illinois and California’s pension funds are among the recipients of a $5.06 billion settlement with Goldman Sachs Group (GS) over allegations of misrepresented mortgage-backed securities.

Illinois’ pension funds will receive $25 million — roughly $23.8 million to the $42.3 billion Illinois Teachers’ Retirement System, Springfield; $737,500 to the $14.6 billion Illinois State Board of Investment, Chicago, which oversees the State Employees’ Retirement System, General Assembly Retirement System and Judges’ Retirement System; and $472,500 to the $15.9 billion Illinois State Universities Retirement System, Champaign; Illinois Attorney General Lisa Madigan announced in a news release Monday.

Illinois will also receive $16 million in consumer relief.

Additionally, the $290.7 billion California Public Employees’ Retirement System, Sacramento, and $178.7 billion California State Teachers’ Retirement System, West Sacramento, will receive funds, confirmed a spokeswoman for California Attorney General Kamala D. Harris in an e-mail.

CalPERS is anticipated to receive $8 million. CalSTRS’ amount could not immediately be learned. The state will also receive funds for consumer relief.

But wait, there’s more!

CA Sues Morgan Stanley Over Public Pension Funds:

The State of California has sued investment bank Morgan Stanley, filing a complaint in San Francisco Superior Court, seeking redress for what officials said was massive harm to its public-sector workers.

“Public employees in California, including peace officers, firefighters, teachers, and other public servants, suffered major losses as a result of Morgan Stanley’s residential mortgage-backed securities, in which high-risk home loans were purchased from subprime lenders, bundled together and sold for billions of dollars to investors,” the complaint alleges, according to CBS San Francisco.

Lack of disclosure

The complaint depicts Morgan Stanley as doling out bad deals out of “fear that transparency would be ‘a relationship killer,’ hampering a lucrative business with the companies taking on the risky debt,” Bloomberg noted. “Harris accuses the bank of bundling high-risk loans from subprime lenders — some directly funded by Morgan Stanley — and selling them to investors without disclosing its own concerns about the poor quality of the debt.”

In a statement, the office of California Attorney General Kamala Harris singled out the state’s large twin public pension funds as suffering particularly large losses. “The California Public Employees Retirement System (CalPERS) and the California State Teachers Retirement System (CalSTRS) — two of the nation’s largest institutional investors — lost hundred of millions of dollars on these Morgan Stanley investments,” the statement read. “CalPERS provides retirement security and health plans to more than 1.6 million California firefighters, peace officers, and other public employees. CalSTRS provides retirement, disability, and survivor benefits for over 850,000 of California’s pre-kindergarten through community college educators and their families.”

I don’t think hedge funds or private equity is particularly nefarious per se. That said, it’s best for government entities to stick to public investments.

Individuals directing their own investments obviously have an alignment of interest, but even private institutions like insurers have some oversight.

There’s precious little oversight of governmental pension funds. Let’s remove the opacity.

CRIMINAL PENSIONS

While I’ve watched civil lawsuits go by with respect to public pensions, it’s not as often I see criminal cases come into play.

Here are a couple.

Jury: Firefighter Fraudulently Collected Disability Pension:

A former firefighter accused of collecting a state disability pension while working as a martial arts instructor and participating in competitive mixed martial arts has been convicted of theft by deception.

Camden resident Shane Streater, who’s 41, faces up to 10 years in prison when he’s sentenced next month. The verdict was rendered Tuesday by a Camden County jury following a weeklong trial.

Streater, who had pleaded not guilty, applied for an accidental disability pension in 2009, saying he was disabled due to two on-duty accidents. In each incident he claimed to have injured his back and/or neck.

Based largely on statements from Streater regarding his inability to engage in physical activity, an independent doctor found he had a total and permanent disability. The doctor, though, concluded that his disability was from a preexisting condition and not work related.

The New Jersey Police and Firemen’s Retirement System Board awarded Streater an ordinary disability pension in 2010. Streater appealed that ruling, insisting his disability was work-related and he was entitled to an accidental disability pension, which is untaxed and pays about 67 percent of the beneficiary’s salary. An ordinary disability pension pays 40 percent of salary and is taxed.

State officials said they later learned Streater was teaching jiu-jitsu two or more times a week at a mixed martial arts academy. They said they also found an online video of him participating in a highly competitive tournament.

I just want to note that I’m 41, just like this guy.

And that I have nerve damage (not caused by my job… I think). Part of it is probably do to my fucked-up neck.

I was laid up in bed yesterday, on a giant mattress heating pad, trying a new medication that did nothing for me. Whee.

To be sure, I just need to be able to read and type. Copy/paste is a huge bit. Today, I’ve had wavy lines across my field of vision. I’ve had to do things to keep from passing out. I have trouble remembering words and I forget everybody’s names when the pain spikes….

Where was I?

Oh yes. My job isn’t firefighting. I can do a lot of aspects of my job even while I can’t see very well, my ability to talk is impaired, and I lose verbal abilities.

But I didn’t fake a work-related injury when I was 34 or 35, I have no defined benefit pension coming to me, and I’m not going to jail for fraud.

All in all, I think I have it pretty good.

CLAWING BACK ILL-GOTTEN GAINS

Enough self-indulgence. Here’s a theory on being able to get money from the pension of a criminal politician:

Prosecutors: Dean Skelos’ $95k pension should draw big fine

ALBANY – Federal prosecutors want a judge to impose a hefty fine on former Senate Majority Leader Dean Skelos since the convicted ex-lawmaker will still get his $95,000-a-year pension.

In a court filing late Monday, U.S. Attorney Preet Bharara’s office asked District Judge Kimba Wood to sentence Skelos to 12 ½ to 15 2/3 years in prison, arguing Skelos’ bribery and extortion convictions rank among “the most serious public corruption crimes committed in New York State in recent memory.”

The prosecution also wants Skelos to pay a major fine – well above $350,000 — in part because he will keep his lucrative state retirement benefits despite being tossed from office following the guilty verdict.

The New York State Constitution protects lawmakers and state employees from having to forfeit their pensions, even if convicted of a corruption crime.

….
State taxpayers are on the hook for more than $775,000 a year in pension payments to former state lawmakers convicted of a felony, a Gannett Albany Bureau review of data from the state Comptroller’s Office showed.

To be sure, $775K is a drop in the bucket compared to the total pension benefits paid out in New York.

I wish the feds well, but it’s tough to claw money out of a pension of any sort.
Prior post on legislative wrangling to yank the pensions of felons.

LAWSUIT FOR BIGGER PENSION

In Connecticut, an ex-medical examiner is suing over the amount he’s getting in pension:

Most people would be more than pleased to receive an annual lifetime pension of more than $135,000 a year, plus lifetime retirement health benefits for themselves and their spouse.

But the recipient of those benefits — former chief state medical examiner H. Wayne Carver II, 64, one of the highest-profile public officials, whose top salary was more than $300,000 — is suing the state. Carver claims he was shortchanged and should be getting tens of thousands of dollars more a year under the state’s long-established retirement formula.

State retirement officials imposed an IRS-inspired cap on his benefits when he retired in 2013 after more than three decades of state service, Carver, of Old Saybrook, said in a phone interview Thursday.

That cap wasn’t applied to even-higher-paid officials, who had retired in past years when state officials were unaware of recently established IRS requirements and limits. Those retirees continue to receive pensions in annual amounts more than twice what Carver received.

“They promised me one thing for 31 years, and then they take part of it back,” Carver told Government Watch. He was referring to periodic updates he received from the retirement division of Office of the State Comptroller as he approached retirement age, telling him what he would be entitled to as a pension after he left.

Retirement officials changed the rules because they belatedly woke in 2010 to IRS limitations they hadn’t noticed even though they’d been on the books for more than a decade. The IRS grants tax benefits to state pension plans (such as allowing employees to make annual contributions toward their pensions without paying income tax on them), but in return the federal tax agency insists that the pension plan abide by limits to the size of pension payments.

In recent years the State Employees Retirement Commission — which oversees the comptroller’s office’s administration state pensions and other benefits — has tried to come to some resolution with the IRS and state employee unions that negotiated pension rights.

But so far there has been no resolution, and a small number of elite retirees still receive pensions above the IRS limits — while Carver and more recent retirees have fallen under the IRS limits.

If it’s legit to limit Carver’s pension, seems to me that they should also be able to cut back on the pensions of those other people.

It seems pretty damn arbitrary to whack him but not the others.

More on the issue:

Reports like these are what make taxpayers angry about lavish public employee benefits: A retired state official earning a pension of $135,000 is suing to get a better deal, The Courant’s Jon Lender wrote this week. The retiree, unfortunately, is justified.

Those in the private sector who have seen their pensions give way to 401(k)s might feel little sympathy for retired Chief State Medical Examiner H. Wayne Carver II, 64. But he’s right. He is suing the state for a higher pension that he says was guaranteed under the state’s retirement formula.

He’s not alone. Retired Connecticut State University System chancellor David G. Carter gets a $160,000 yearly pension, though the state for years assured him it would be $367,000. He’s also pursuing the higher pension.

…..
Change The Law

Other governments, including North Carolina’s and the city of San Diego, have solved the problem by paying well-compensated retirees the amount above the IRS cap out of non-pension funds. The IRS allows this as long as the money doesn’t come from a traditional pension fund.

Connecticut may have to do the same, even though it’s facing huge state budget deficits in coming years — and has to find $1.5 billion to put into the pension fund every year to make up for years of inadequate payments.

So here’s the deal. If they’re worried about paying a penalty for this guy, that means they’re definitely paying a penalty for the other guys who have too-high pensions…. right?

I bet the IRS would love to talk with y’all.

Compilation of Connecticut posts


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