Tag: 80% funding myth

Funding Public Pension Plans–Theory and Practice

Mary Pat Campbell

Link:https://www.actuary.org/node/14815

Excerpt:

The Pension Practice Council’s Jan. 25 webinar, “Funding Public Pension Plans—Theory and Practice,” highlighted the Academy’s issue brief The 80% Pension Funding Myth; explored prudent funding practices; and examined considerations being made in the management of “surplus” for state and local public employee pension plans.

Presenters were Academy Pension Vice President Sherry Chan; Paul Angelo, a member of the Public Plans Committee; and Academy member David Lamoureux. Public Plans Committee Chairperson Todd Tauzer moderated.

Using the issue brief as a starting point, Tauzer laid the groundwork of the discussion in going over the basics of pension funding and a funded ratio. Funded ratios move in economic cycles and can be affected by assumption changes, and are also subject to varying asset valuations and liability measurements, he said.

Plan projections go beyond a point in time measurement and can illustrate plan trajectory, which is a more robust indicator of plan health over time. Nevertheless, funded ratios continue to be used ubiquitously. Tauzer highlighted additional considerations to bring context, like financial health and investment strategy of plan sponsor, history of benefit changes, and adherence to funding policy.

Publication Date: 25 Jan 2022

Publication Site: American Academy of Actuaries

The 80% Pension Funding Myth

Mary Pat Campbell

Link:https://www.actuary.org/node/14645

Excerpt:

Using an 80% funded ratio as a benchmark for whether pension plans are healthy is inappropriate.

No single level of funding defines a line between a “healthy” and an “unhealthy” pension plan.

Pension plans are generally better evaluated on the strategy in place to attain a funded ratio of 100% within a reasonable period of time.

The financial health of a pension plan depends on many factors in addition to funded status— including the size of any shortfall compared with the resources of the plan sponsor.

Projections under a range of scenarios can be particularly useful in evaluating the plan’s expected funding trajectory and assessing plan health.

Author(s): Pension Practice Council

Publication Date: October 2021

Publication Site: American Academy of Actuaries

Pension crisis has local impact

Mary Pat Campbell

Link: http://www.keweenawreport.com/featured/pension-crisis-has-local-impact/

Excerpt:

Keweenaw Report reached out to City of Houghton manager Eric Waara to see if there was a similar arrangement for DPW staff there. He said everyone’s plan was converted to MERS over a decade ago. Waara says Houghton’s fund is well over 80 percent covered, which is considered excellent. That means current assets can cover nearly all expected future liabilities related to retirement.

Publication Date: 6 May 2021

Publication Site: Keweenaw Report

Opponents vow to intensify campaign against proposed Florida pension revamp

Mary Pat Campbell

Link: https://www.thecentersquare.com/florida/opponents-vow-to-intensify-campaign-against-proposed-florida-pension-revamp/article_a37e3158-93d8-11eb-a8d7-7771f4ad8a68.html

Excerpt:

SB 84’s legislative analysis estimates the proposed change would save the state $8.3 million in the first year, increasing to $109.7 million annually after 30 years.

As of June 30, FRS held $164.3 billion in assets against $200.3 billion in liabilities, leaving $36 billion in unfunded liabilities, which means the FRS could cover 82 percent of its obligations if every member retired today.

Templin said an 80-percent threshold is the “gold standard” in pension viability and the FRS is “in very good shape.”

Which makes it attractive for manipulation, said AFSCME Florida Retiree Executive Board member Maxie Hicks.

Author(s): John Haughey

Publication Date: 2 April 2021

Publication Site: The Center Square

Report: Riverside County’s pension liabilities high, but gap gradually closing

Mary Pat Campbell

Link: https://www.desertsun.com/story/news/politics/2021/02/09/report-riverside-countys-pension-liabilities-high-but-gap-gradually-closing/4457794001/

Excerpt:

According to the report, the county’s retirement apparatus is now 71% funded, compared to 70% in January 2020.

Although the unfunded pension gap increased from $3.5 billion to $3.6 billion in that time, the total market value of the county’s assets also grew, from $8.1 billion to $8.8 billion, according to PARC.

….

If investment growth remains positive, and the county’s financial condition does not suffer from additional financial shocks like the one stemming from coronavirus, PARC estimated that the 80% funded status could be attained by 2027.

Author(s): City News Service

Publication Date: 9 February 2021

Publication Site: Desert Sun