STUMP » Articles » Let's Ring Out the Year with the 80 Percent Funders! » 31 December 2017, 10:58

Where Stu & MP spout off about everything.

Let's Ring Out the Year with the 80 Percent Funders!  

by

31 December 2017, 10:58

And I’ve got some new heroes, too!

HOORAY FOR THE HEROES!

I’ve got one new one, and one old.

The new hero: William Petroski, Des Moines Register

Iowa lawmakers grill IPERS officials about public pension funding:

IPERS is currently 81.4 percent funded, which some Democratic elected officlals and others have cited as evidence the pension fund is in good shape with about $32 billion in assets. The funded ratio of a pension plan equals the value of the assets in the plan divided by a measure of the pension obligation.

However, Patrice Beckham, a consulting actuary for Cavanaugh Macdonald Consulting LLC, of Bellevue, Nebraska, told lawmakers Monday that there is “no magic funded ratio” and that the funded ratio is just one piece of an equation to evaluate a pension fund’s stability. Cavanaugh Macdonald prepared IPERS’ actuarial report.

The American Academy of Actuaries supports Beckham’s view, describing what it says is the “80 percent pension funding standard myth.”

The academy says an 80 percent funded ratio often has been cited in recent years as a basis for whether a pension plan is financially or “actuarially” sound. But the Pension Practice Council of the American Academy of Actuaries finds says that while the funded ratio may be a useful measure, under­standing a pension plan’s funding progress should not be reduced to a single measure or benchmark at a single point in time. Pension plans should have a strategy in place to attain or maintain a funded status of 100 percent or greater over a reasonable period of time, the academy says.

Solid reporting. THANK YOU WILLIAM PETROSKI!

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(there are some editorial problems in that last paragraph, but I blame the editors for that)

The next one has made the heroes list before: Jack Humphreville at CityWatch LA.

What You Need to Know about the DWP Pension Plan:

While a funded ratio of 88% may be a cause for celebration, especially when compared to the 70% ratio during the recession and the current 80% level for the City’s two pension plans, this level of funding must be considered in light of the bull market where the Dow Jones Industrial Average has more than tripled over the last eight years.

According many pension experts, the funding ratio after a raging bull market should be in the range of 120% so that the pension plan can withstand a recession and/or a down market and still be fully funded. Under the 120% scenario, DWP retirement plans are short an additional $3 billion, increasing the liability to $4.8 billion.

This is even better… and entirely true.

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BOO FOR THE HALL OF SHAMERS

First, the people who should know better (which doesn’t include journalists) -

Elizabeth Kubal, Kankakee comptroller:

A well-funded pension is at 70 percent, noted city comptroller Elizabeth Kubal.

Dear lord — moving it down to 70 percent (and thus missing my news filter – someone had to email me this one).

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Alan Conroy, executive director of the Kansas Public Employees Retirement System and Sen. Laura Kelly, D-Topeka:

“Sen. Laura Kelly, D-Topeka, noted that the system is now nearly 67 percent funded. That means if no more new money were put in, and no new employees were added to the system, the fund would have 67 percent of all the money it needs to pay the obligations it has incurred. That’s a safe zone, between 60 and 80 (percent), Kelly said. ““It’s an improvement over the past, so we’re going in the right direction.”“

Conroy said any level below 60 percent generally is cause for alarm, but anything between 60 and 80 percent is considered acceptable, at least over the short term.”

Okay, 80 percent is mentioned… but they moved the bar even lower to 60!

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Donna Mueller, IPERSCEO:

“…IPERS is still better than 81% fully funded, and that’s considered healthy…”

UGH.

That one, I also needed someone to tell me, because it was in a video in the news and not the text article.

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Okay, and now for the journalists:

Diane Dixon, Lyn Symeta, and Heather Stratman, OC Register:

If the pension fund was liquidated today, CalPERS would only be able to cover 68 percent of its current obligation, far short of the 80 percent level that is considered healthy and sustainable.

Associated Press:

The city hopes to finance the $12.6 million to pay down the debt and move closer to the goal of having pensions funded at 80 percent — a benchmark for judging the health of pension accounts.

Joseph Cranney, Naples Daily News:

The general employee and firefighter pension plans are each 80 percent funded. The police pension plan is 72 percent funded. Typically, at least 80 percent is considered a healthy funding level.

Chriss W. Street, Breitbart columnist:

With the pension plan’s funded ratio — equal to the value of plan assets divided by present pension obligations — having fallen to 68 percent, far below what actuaries call the 80 percent minimum for adequate fund, CalPERS is demanding that cities increase payments.

Bah Humbug to all y’all.

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THOSE IN THE GREY OF LIMBO

The people caught up in my ambiguous pile.

It’s a matter of judgment. Perhaps some of these should be in the Hall of Shame, but in general, it’s just saying 80% is better than where the plans are now, which is hard to object to. However, there’s nothing much relevant about 80%. It’s arbitrary.

So a big ole raspberry to these folks.

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STATS

Here are some graphs:

Cumulative numbers:

  • Hall of Shame: 165 entries since October 2014
  • Never Fully-Funded List of Evil: 2
  • Hall of Heroes: 20
  • Ambiguous: 42

It does seem like these entries are becoming less frequent, but part of it may be because the target is getting lowered to 60% or 70%, and thus I miss the stories. If you come across one of these stories, please email me at marypat.campbell@gmail.com!

STUMP RETROSPECTIVE

I started this blog back in 2014, and here are my prior end-of-year posts:

My new project for this year was: State of the States. I hope to fill out the list even more in 2018.

See ya next year!

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