I am not feeling well, and up-to-my-rump in Trumpery, so time for a whip around the pension web!
But first, interested in an actuarial horror story? Check out my short story The Nested Horror, which is a part of the 12th Actuarial Speculative Fiction contest. Plenty of interesting stories there, including the Choose-Your-Own-Adventure A Macro to Die By
Thanks to my linkers:
There was one link that came up a lot recently, but it’s not really a site linker, per se….
HOWDY ACTUARIAL OUTPOST!
Hey my peeps! I noticed you came from that Actuary Sues Academy for Confidentiality Breach thread!
My non-actuarial peeps may also be interested in that thread. It digs up all sorts of interesting stuff, and I bet there will be more coming.
For others who would like to know some context before you hop over there, check out my post from September 2014, How Important is the Mortality Assumption? And Other Assumptions? as well as Mark Glennon’s post Illinois Fire and Police Pension Actuary Facing Actuarial Discipline – WP Exclusive from February 2016.
Separately, my actuarial peeps may have some recommendations for me for my Mortality Mondays. PM me!
ON MULTIEMPLOYER PENSIONS
The GAO put out a report on high-risk programs, and one they pointed out was the PBGC, the entity “guaranteeing” private pensions.
John Bury has a couple posts on this:
GAO on PBGC — where Bury comments: “Here is a government agency that the GAO believes is very soon headed for insolvency for a variety of reasons that the GAO also believes should be dispensing non-financial assistance on how to avoid insolvency.”
MPRA Update — where he looks at the multiemployer plans trying to request benefit cuts in order to remain solvent. Bury remarks: “In the war to strip union employees of their benefit the MPRA seems to be MIA.”
LEO KOLIVAKIS ON ASSET SIDE ISSUES
Leo Kolivakis of Pension Pulse generally keeps an eye on the asset side, his expertise being asset management and he particularly keeps an eye on Canadian pension issues.
In recent posts, Leo looks at:
CalPERS’s Private Equity Disaster? — does a deep dive into Calpers asset management strategy/policy, and really gets into the nitty-gritty of what it takes to do this right.
CPPIB Fixing China’s Pension Future? — Canada and China are sharing expertise around pensions, and Kolivakis notes governance issues (in more ways than one) that prevents China getting their pension situation together.
Much Ado About CPPIB’s Quarterly Results? – I agree with Kolivakis; volatility in one quarter does not mean much for a pension fund.
Canada’s Mighty PE Investors? — Canadian pension funds’ involvement in private equity.
I see Kolivakis also has a post up about Disimproving Canadian mortality leading to overestimation of Canadian liabilities, and I plan on looking at these issues later. As Kolivakis notes in that post, it’s the near-zero interest rate situation that affects liability value far more than longevity.
Thought I’d mention this, as George Will doesn’t often pop up in my pensions sphere.
Some American disasters come as bolts from the blue — the stock-market crash of October 1929, Pearl Harbor, the designated hitter, 9/11. Others are predictable because they arise from arithmetic that is neither hidden nor arcane. Now comes the tsunami of pension problems that will wash over many cities and states.
Yup. None of this should be a surprise.
The Manhattan Institute’s Josh B. McGee reports that teachers’ pension plans, which cover more people than all other state and local plans combined, have at least a $500 billion problem. This is the gap between promised benefits and money set aside to fund them.
A clear and present consequence is, McGee says, “pension cost crowd-out.” Because pensions are consuming a larger share of education spending, 29 states spent less per pupil on instructional supplies in 2013 than in 2000, and during that period, instructional salaries per pupil were essentially flat.
This is just another instance of public policies that transfer wealth from the young to the elderly who, after a lifetime of accumulation, are society’s most affluent cohort.
Of course, this is assuming that the pension promises will continue to be kept. I don’t assume so.
The problems of state and local pensions are cumulatively huge. The problems of Social Security and Medicare are each huge, but in 2016 neither candidate addressed them, and today’s White House chief of staff vows that the administration will not “meddle” with either program. Demography, however, is destiny for entitlements, so arithmetic will do the meddling.
That sounds to me like George Will thinks so, as well.
Kentucky Pension Liabilities: Trends in ERS, County, and Teachers Plans
A Week of Bad Pension Ideas: Just Make the Full Payments!
South Carolina Pensions: Liability Trends