STUMP » Articles » End-of-Summer 80% Pension Funding Extravaganza! » 31 August 2016, 06:13

Where Stu & MP spout off about everything.

End-of-Summer 80% Pension Funding Extravaganza!  

by

31 August 2016, 06:13

Labor Day is around the corner, and we all know what that means:

That is a seriously weird gif. Let me try again:

Let’s just agree that all the animated gifs I could find tagged SALES are just…odd.

Anyway, it’s time to see which pensions are 20% off! And even more!

NEW HERO!

But before I get to the Hall of Shame, let me introduce our new hero: Robert Fellner, Director of Transparency Research at the Nevada Policy Research Institute

For example, because CalPERS is only 68 percent funded, as opposed to the 100 percent minimum the American Academy of Actuaries recommends, the system needs to outperform its 7.5 percent target to prevent the existing debt from growing faster than its investment gains can offset.

YAAAAAAAAY!

Let’s be seeing more of that!

That said, the Academy isn’t saying 100% is the minimum, but the target. Some amount of deviation from 100% is not necessarily bad. Targeting something less than full-fundedness is bad.

SAME AS IT EVER WAS

Now back to the usual.

Dan Walters, Sacramento Bee in his second appearance:

It also means the fund is scarcely 70 percent of fully covering liabilities, even at 7.5 percent, and therefore under the 80 percent deemed to be minimally sufficient,

Lewis Solomon, guest columnist for Sarasota Herald-Tribune:

A defined benefit plan is critically unfunded if it fails to meet a 70 percent assets to liabilities ratio, a threshold which Sarasota’s plan barely exceeds. A plan is in a healthy position if 80 percent funded; 90 percent is even better. Because a municipality is different from a private company, the 80 percent ratio is sufficient for a public plan. Sarasota will not go out of business and retains the power to tax to meet its obligations.

Tristan Hallman, Dallas Morning News:

The fund has $3.27 billion in unfunded liabilities and less than $2.7 billion in assets — a funding ratio of 45 percent. Pensions are generally thought to be in danger if their funding ratio is less than 80 percent.

Michael Taylor, @BankerAnonymous:

First: Are liabilities (future payouts) at least 80 percent covered by money already in the pension plan? This is called the “Funded Ratio.” If you’re at 80 percent, then you’re pretty good. It doesn’t have to be 100 percent. Less than 60 percent and you’ve got a potential problem.

Joseph Cranney, Naples Daily News:

The police pension is 67 percent fully funded, and the firefighters’ and general employees’ pensions are each 77 percent fully funded, and all are below the target of 80 percent funded, which is considered a healthy level to cover future obligations.

Arek Sarkissian, Naples News:

The state’s pension plan is 87 percent funded, which is higher than the 80 percent funded level considered healthy for public pension funds.

Jim Rosica, Saint Peters Blog:

As the Tampa Tribune once explained [WHICH IS JIM ROSICA]: “Financial experts generally call pension plans healthy if they’re at least 80 percent funded. That’s because employees retire at different times, meaning a run on the bank is unlikely.”

I need to explain the [WHICH IS JIM ROSICA] — he wrote the post, and he linked to a Tampa Tribune article that he wrote a few years ago.

Petoskey News, editorial:

Like a majority of Michigan’s 700-plus local units that use nonprofit MERS for their pension administration, all of the area governments fall short of the 80-percent-funded-and-up range which experts often refer to as healthy.

You may remember Petoskey News for its thee-fer not long ago.

STATS UPDATE

The 80% Funding Hall of Shame, started in October 2014, has the following stats:

112 shame entries
10 Heroes
7 Ambiguous

Of the 129 entries, 69 refer to the pensions being “healthy”

AMBIGUITY EXPLODES

Since I announced the new category, I’ve been amassing lots of entries.

Cole Epley, Omaha World Herald:

The Nebraska Legislature considers a funding ratio of 80 percent as the minimum benchmark for a healthy plan.

It’s not really Cole’s fault, maybe. I’m just too lazy to see if the Nebraska legislature did that. If they did, then the Nebraska legislature gets on the list.

Hazel Bradford, Pensions & Investments:

“For the multiemployer plans, also experiencing underfunding problems, the PPA gave trustees a new color-coded zone system and funding requirements based on plan funding levels, with green for healthy plans funded at 80% or better, yellow for endangered plans funded between 65% and 79%, and red for critical plans funded less than 65%.”

This is kind of true, but there are issues. Again, not necessarily Hazel’s fault.

Michael Taylor, San Antonio Express-News:

Ten years ago, the fund reported an 89 percent “funded ratio” — which is a short-hand number for how much of its future payouts are covered by invested assets. Healthy pension plans generally don’t have to have all future payments covered, but an 80 percent to 90 percent funded ratio range feels comfortable. Dallas’ now is about half that amount.

HMMM. Maybe I should have just dropped this in the Hall of Shame.

I reserve the right to move this at a later date.

Tristan Hallman, Dallas Morning News:

The fund has $3.27 billion in unfunded liabilities and less than $2.7 billion in assets — a funding ratio of 45 percent. Pensions are generally thought to be in danger if their funding ratio is less than 80 percent.

….Getting closer.

Being below 80% is not necessarily bad or good.

It’s not the target, can we agree on that, at least?

Michael Taylor, San Antonio Express-News:

Remember, 100 percent means fully funded, but many funds do just fine running in perpetuity in the 80 percent to 90 percent region.

Yes he is above. I’m not sure if I want to go with “just fine” here. Also, the perpetuity thing.

Most of these pension funds have been around less than 100 years. I wouldn’t call any of that perpetual.


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