Month: January 2022

Sagging Stocks Aren’t the Only Threat to Pension Plans

Mary Pat Campbell

Link:https://www.governing.com/finance/sagging-stocks-arent-the-only-threat-to-pension-plans

Excerpt:

You need money to make money, and the programs long in trouble didn’t have enough assets on hand to take full advantage of a banner year. Say your plan started 2021 with a funding level of 80 percent (meaning you had enough assets to cover 80 percent of your anticipated liabilities). With a 30 percent return, your plan would then be 104 percent funded. But if you only started with a 30 percent funding level, the same percentage gain would bump you up only to 39 percent funded.

“The problem of a deeply underfunded plan is that they don’t have a lot of assets, so big returns aren’t as helpful to them,” says Donald Boyd, co-director of the Project on State and Local Government Finance at the University at Albany. “They’ve still got a huge way to go.”

….

Maintaining discipline has been hard. When pension plans have a good year, as in 2021, there’s a temptation for legislators to skip contributions. This would be akin to an individual seeing her retirement account gain $10,000 and figuring she can skip that year’s $5,000 contribution.

The problem is that you have to maximize your gains in good years, not fritter them away, because inevitably you’re going to have to make up for bad years at some point. “When politicians have a lot of money around, they tend not to put it in the fund,” says the Urban Institute’s Johnson. “When things are bad, they kick the burden down the road and let future taxpayers worry about it.”

Author(s): Alan Greenblatt

Publication Date: 25 Jan 2022

Publication Site: Governing

Three States, D.C. Sue Google Claiming Location Tracking Violates Users’ Privacy

Mary Pat Campbell

Link:https://www.insurancejournal.com/news/national/2022/01/25/650651.htm

Excerpt:

Texas, Indiana, Washington State and the District of Columbia sued Alphabet Inc.’s Google on Monday over what they called deceptive location-tracking practices that invade users’ privacy.

“Google falsely led consumers to believe that changing their account and device settings would allow customers to protect their privacy and control what personal data the company could access,” Washington, D.C., Attorney General Karl Racine’s office said in a statement.

Yet Google “continues to systematically surveil customers and profit from customer data,” the statement said, calling the practice “a clear violation of consumers’ privacy.”

Author(s): David Shepardson and Doina Chiacu

Publication Date: 25 Jan 2022

Publication Site: Insurance Journal

Federal prosecutors have been investigating D.C.’s pension board, responsible for $10 billion retirement fund

Mary Pat Campbell

Link: https://www.washingtonpost.com/dc-md-va/2022/01/23/dc-pension-fund-investigation/

Excerpt:

Federal prosecutors have been investigating the financial transactions of the D.C. Retirement Board, which manages the city’s $10 billion pension fund for retired teachers, police officers and firefighters.

The fully funded municipal employee pension plan has long been the jewel in D.C.’s financial crown, the envy of other cities and a signal of the trustworthiness of the District’s finances to the credit rating agencies that issue municipal bond ratings.

….

The existence of the investigation was disclosed in a whistleblower lawsuit filed in December against the D.C. Retirement Board by Erie Sampson, the agency’s general counsel since 2008.

Sampson alleges that she was placed on administrative leave in October in retaliation for alerting officials at the retirement board and in D.C. government, including the city’s chief financial officer and members of the D.C. Council, about problems in the retirement board’s accounting and governance — as well as for cooperating with the federal investigation.

A spokesperson for the retirement board declined to comment, citing the ongoing litigation.

Author(s): Julie Zauzmer Weil

Publication Date: 23 Jan 2022

Publication Site: Washington Post

What does risk really mean?

Mary Pat Campbell

Link: https://allisonschrager.substack.com/p/known-unknowns-c60

Excerpt:

In Bloomberg last week, I argued that the price of safety is mis-priced. Real yields have been negative for the better part of the last 10 years, and have been very negative since the pandemic. And the Fed has no plans to bring it above zero. I can understand a market negative real yield from time to time for convenience reasons. But all of the time? For decades? How can you explain that? Well, I blame the Fed and regulatory policy, as well as other countries buying lots of safe assets to manage their currencies. Lately, it’s been a lot of the Fed.

The risk-free rate is always being tinkered with by policymakers. Maybe it never actually equals the market price, but sometimes it’s more distorted than others, and it seems like it’s really off right now. And if that’s true, what does that say about the price of any risky asset? Perhaps that explains why crypto currencies are worth so much despite not offering much inherent value and having such a high Beta. When celebrities are hawking an esoteric risky asset, you know something is wrong.

Risk-free assets are the most systematically important asset in markets. They touch absolutely everything. And when it goes wrong, things get real. When market prices are not market prices for years at a time, risk gets distorted, and people subsequently take on more risk than they realize. I’m not predicting a financial crisis, but I do reckon that this could be why markets are just so weird right now.

Author(s): Allison Schrager

Publication Date: 24 Jan 2022

Publication Site: Known Unknowns

Tokyo’s ‘oldest man’ had been dead for 30 years

Mary Pat Campbell

Link:https://www.bbc.com/news/world-asia-pacific-10809128

Excerpt:

He was thought to be the oldest man in Tokyo – but when officials went to congratulate Sogen Kato on his 111th birthday, they uncovered mummified skeletal remains lying in his bed.

Mr Kato may have been dead for 30 years according to Japanese authorities.

They grew suspicious when they went to honour Mr Kato at his address in Adachi ward, but his granddaughter told them he “doesn’t want to see anybody”.

Police are now investigating the family on possible fraud charges.

…..

But the family had received 9.5 million yen ($109,000: £70,000) in widower’s pension payments via Mr Kato’s bank account since his wife died six years ago, and some of the money had recently been withdrawn.

Publication Date: 29 July 2010

Publication Site: BBC

Texas teacher pension system makes investment in risky special purpose acquisition company

Mary Pat Campbell

Link:https://reason.org/commentary/texas-teacher-pension-system-makes-investment-in-risky-special-purpose-acquisition-company/

Excerpt:

The Texas Teacher Retirement System recently announced that it would make its first investment in a special purpose acquisition company (SPAC) totaling $200 million. Pension funds across the nations have spent the last decade seeking out higher investment yields from alternative investments like private equity in response to stagnating returns from more traditional investments. Recently a few funds have started to experiment with even more non-traditional vehicles such as cryptocurrencies and NFTs to improve investment results. Texas’ SPAC investment signals pension funds’ continued interest in these alternative assets.

….

SPACs are a perfect example of a high-risk, high-reward investment. Risk and transparency issues associated with this type of investment have even motivated the creation of SPAC insurance. Companies like HubInternational sell this insurance to investors for each stage of the SPAC process, ensuring they come out whole. Public pension funds like Texas TRS could theoretically buy this type of insurance on their SPAC investments, thus reducing the risk of the investment. The problem is the cost of SPAC insurance is rising fast, and the return adjusted for these costs is dwindling.

The risks associated with SPACs should make public pension funds very weary. Rather than continuing to take on riskier strategies to achieve lofty investment return goals, policymakers and those managing the retirement investments of public workers should lower assumed rates of investment returns and make other funding reforms that secure the long-term stability of retirement systems.

Author(s): Swaroop Bhagavatula

Publication Date: 21 Jan 2022

Publication Site: Reason

Gardaí investigating after man’s body used in apparent attempt to claim pension

Mary Pat Campbell

Link:https://www.irishtimes.com/news/ireland/irish-news/garda%C3%AD-investigating-after-man-s-body-used-in-apparent-attempt-to-claim-pension-1.4782598

Graphic:

Excerpt:

Gardaí are investigating the death of a man in Carlow town, whose body was brought into a post office by two others in what appeared to be an attempt to claim the deceased’s pension.

The bizarre series of events began when a man entered the post office at Hosey’s shop on Staplestown Road at about 11.30 am on Friday.

The man wanted to collect a pension payment on behalf of an older man but was informed by a staff member that the pensioner would have to be present if a payment was to be made.

The man left the post office and returned a short time later with two other men, one of whom was in his 60s. The two younger men are understood to have sought a pension payment for the third man, who it appeared was being propped up.

….

The deceased man, named locally as Peadar Doyle, is believed to have been in his late 60s and a resident of Pollerton Road, close to the post office.

Author(s): Jack Power, Ronan McGreevy

Publication Date: 21 Jan 2022

Publication Site: The Irish Times

Two men take corpse into Irish post office to claim dead man’s pension

Mary Pat Campbell

Link:https://www.theguardian.com/world/2022/jan/22/two-men-take-corpse-into-irish-post-office-to-claim-dead-mans-pension

Excerpt:

Gardaí have launched an investigation after two men carried a dead body into an Irish post office in an apparent attempt to claim his pension.

The deceased pensioner was described in reports as being “propped up” by the men as they walked into the building in County Carlow on Friday morning.

The outlandish series of events began when one of the men entered the post office at about 11.30am on Friday, asking to collect a pension payment for an older man, the Irish Times reported. He was refused, with staff informing him that the pensioner would have to be present in order for the money to be handed over.

Author(s): Clea Skopeliti

Publication Date: 22 Jan 2022

Publication Site: The Guardian

Pennsylvania lawmakers mull pension reforms as PSERS remains under scrutiny

Mary Pat Campbell

Link: https://www.timesleader.com/wire/state-wire/1535867/pennsylvania-lawmakers-mull-pension-reforms-as-psers-remains-under-scrutiny

Excerpt:

State lawmakers met with officials of Pennsylvania’s public pension funds Thursday to vet reform measures that have been introduced to increase transparency and oversight of the pension system.

The measures are working their way through the legislative process and could be considered for passage this year. Thursday’s hearing offered participants a chance to voice concerns or probe for costs and conflicts that could derail the measures.

….

Among the proposals reviewed by pension officials and legislators was a bill that would force the funds to more closely track more than $1 billion of annual investment manager fees, and profit-sharing and other money-management costs. The measure would also require video copies of hours-long board meetings to be made publicly available — online for three years, and then by request.

Author(s): Joseph N. DiStefano

Publication Date: 21 Jan 2022

Publication Site: Times Leader

Top Causes of Death by Age Group, 2020: Death Rates

Mary Pat Campbell

Link: https://marypatcampbell.substack.com/p/top-causes-of-death-by-age-group-0bf?justPublished=true

Graphic:

Excerpt:

I present the rates in percentages, as opposed to the more traditional number (which is per 100,000 people per year), because I do not want people to get this confused with the raw counts of people who died. Yes, that does mean there are a lot of small numbers. For children, I even had to extend some out to 4 decimal places to get a significant figure.

In adulthood, natural causes of death tend to increase in rate with increasing age. More below.

External causes (accidents, homicides, and suicide) will have the similar rates over broad ages but drop dramatically in ranking with increasing age — as the natural causes become more likely to occur.

COVID has a similar pattern in mortality as heart disease — indeed, the heart disease death rate is approximately twice that of the COVID death rate for the entire age range from 15 to 85+ on the table.

Author(s): Mary Pat Campbell

Publication Date: 22 Jan 2022

Publication Site: STUMP at substack

Board members of Pa.’s largest pension fund asked to sign secrecy oaths

Mary Pat Campbell

Link: https://www.witf.org/2022/01/21/board-members-of-pa-s-largest-pension-fund-asked-to-sign-secrecy-oaths/

Excerpt:

Leaders of Pennsylvania’s beleaguered teachers’ pension fund are requesting that board members sign oaths of secrecy before receiving a critical update on the botched investment calculation scandal that has led to multiple federal investigations.

On Thursday morning, the chairman of the Pennsylvania Public School Employees’ Retirement System board told members in an email that they must sign a yet-to-be-drafted non-disclosure agreement to participate in a closed-door meeting later this month.

The meeting, scheduled for Jan. 31, is pivotal: Board members are poised to be presented with the findings of a taxpayer-funded inquiry into an investment calculation mistake in late 2020 that wrongly spared teachers a potential hike in their pension payments, leaving taxpayers to make up the difference over time. The calculation was later fixed, and teacher payments increased.

The inquiry was conducted by Womble Bond Dickinson, a law firm hired by the board last year to conduct an internal investigation into the error as PSERS coped with the federal probes. The system has agreed to pay Womble up to $367,600 in fees for its work, with partners collecting up to $695 an hour.

Author(s): Angela Couloumbis of Spotlight PA and Joseph N. DiStefano of The Inquirer

Publication Date: 21 Jan 2022

Publication Site: WITF