All about risk
Link: https://patch.com/california/lakeelsinore-wildomar/rivcos-unfunded-pension-gap-closes-report
Excerpt:
It noted the county’s retirement apparatus is now 76.4 percent funded, compared to 71 percent a year ago. The key metric that reflects a sound pension system is considered 80 percent funded status.
The county’s unfunded pension gap is $2.24 billion, compared to $2.49 billion estimated in the prior year, according to PARC.
Publication Date: 1 Mar 2022
Publication Site: Patch.com
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
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
Excerpt:
The 80 percent mark long has been considered the minimum threshold for a pension fund. However, that’s actually still too low. An Issue Brief by the American Academy of Actuaries called it, “The 80% Pension Funding Standard Myth” (pdf).
It said, “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. Left unchallenged, this misinformation can gain undue credibility with the observer, who may accept and in turn rely on it as fact, thereby establishing a mythic standard. … 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.”
Author(s): John Seiler
Publication Date: 19 Sept 2021
Publication Site: The Epoch Times