tag:blogger.com,1999:blog-2009324187193157520.post6250449443423124084..comments2024-01-29T09:53:58.059-05:00Comments on Benefits and Compensation with John Lowell: Pension MiseducationJohn Lowellhttp://www.blogger.com/profile/00264893397248519558noreply@blogger.comBlogger11125tag:blogger.com,1999:blog-2009324187193157520.post-58128145710399934522013-09-13T13:30:49.925-04:002013-09-13T13:30:49.925-04:00Very interesting, thank you.Very interesting, thank you.John Lowellhttps://www.blogger.com/profile/00264893397248519558noreply@blogger.comtag:blogger.com,1999:blog-2009324187193157520.post-37257884065986637162013-09-13T13:18:07.187-04:002013-09-13T13:18:07.187-04:00Take a look at page 34 from this link to the CalPE...Take a look at page 34 from this link to the CalPERS study...it shows that public safety life expectancy is slightly longer than the other public employees<br /><br />http://www.calpers.ca.gov/eip-docs/employer/retiree-ben-trust/experience-study.pdfAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-2009324187193157520.post-50949078449481329922013-09-13T11:48:31.688-04:002013-09-13T11:48:31.688-04:00Yet another "Anonymous", thanks for read...Yet another "Anonymous", thanks for reading and commenting. I was not aware of the CalPers study that you cite, but I am sure that what you state is true. I didn't comment on the other actuarial assumptions in my post because the article that I was commenting on didn't mention them.<br /><br />However, as you seem to know (perhaps you are an actuary as well), especially in the public plan world, the plan sponsor and actuary have lots of leeway with their choices of actuarial assumptions. And, yes, changing from an unrealistic to a realistic mortality table can significantly influence reported costs.<br /><br />I don't know that I have ever written about it here, but for years, I have espoused that most pay-related pension plans should be valued for funding purposes using actuarial assumptions that are best estimates (be conservative in choosing them) and the Entry Age Normal actuarial cost method thereby essentially locking in (without regard to plan changes) the cost of the plan as a percentage of pay. Neither Congress nor the accounting profession agrees with me, but neither of them has much actuarial training either. <br /><br />And, finally, to the extent that a government is going to increase benefit levels because their plan appears to be well-funded, in my opinion, they should be held to a similar standard with regard to decreasing benefits when the plan appears to be not well-funded.John Lowellhttps://www.blogger.com/profile/00264893397248519558noreply@blogger.comtag:blogger.com,1999:blog-2009324187193157520.post-7837793585111394132013-09-13T10:58:56.620-04:002013-09-13T10:58:56.620-04:00John, what about the dated mortality assumptions u...John, what about the dated mortality assumptions used by some police and fire plans? SOme tables date back to the 1970s. Cops & FFs say they live shorter lives but this belief was debunked by a 2010 CalPERs experience study. <br /><br />It seems that labor and the government sponsors are good with the bogus assumptions--the state or city gets to make a smaller contribution using bogus mortality estimates and because smaller plan contributions are made, there is more money left for cops and FFs salary increases. Your thoughts?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2009324187193157520.post-58567943657691158122013-09-13T07:08:47.926-04:002013-09-13T07:08:47.926-04:00Thanks to all for reading and commenting. I've...Thanks to all for reading and commenting. I've obviously struck a chord with this post. As difficult as it is oftentimes, I try to stay apolitical in my posts keeping them to just the facts with my opinion (clearly shown as my opinion) mixed in.John Lowellhttps://www.blogger.com/profile/00264893397248519558noreply@blogger.comtag:blogger.com,1999:blog-2009324187193157520.post-13502146624679318472013-09-12T20:26:17.451-04:002013-09-12T20:26:17.451-04:00CA CHING, CA CHING, CA CHING! YEAH, IT MUST BE THA...CA CHING, CA CHING, CA CHING! YEAH, IT MUST BE THAT TIME OF YEAR AGAIN! My Union Boss down at the Town Hall emailed me yesterday and.<br />Told me that this article was hitting the Papers today, and He told Me.<br />to make it Look like I was Working till this Blows Over in a week. I<br />know the routine! In a week, I'll be back to my usual activity of.<br />Collecting A Paycheck for Doing Nothing! Hey, Private Sector.<br />Workers; You really gotta Pony Up more Taxes! I need at least a 10 %.<br />raise! My Cabin Cruiser at the Dock behind my Vacation House in.<br />Florida needs a New Engine. My wife has been after me for a new car.<br />She wants a BMW X6 G-Power Typhoon S! I told her I can't afford that.<br />car. So then she says she will accept a Mercedes-Benz CL-Class and.<br />Nothing else! I also got Private School Tuition of $ 40,000.00 due.<br />in September. I got Credit Card Expenses coming out my AXX! That<br />new 3000 sq ft extension on my house raised my property taxes $ 15,000.<br />The maid and the housekeeper want raises. The gardener also wants a.<br />raise. You see Bunky; It ain't easy in the Public Sector! So come<br />on Private Sector Worker; Pony Up and Pay More Taxes so I can afford to.<br />live here! You See; Life Is Not Fair, and the DemoRats will take.<br />care of Everything! HAPPY DAYS ARE HERE AGAIN!Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2009324187193157520.post-20989727489029582013-09-12T18:32:29.815-04:002013-09-12T18:32:29.815-04:00Quoting ..."Then over the next 20 years they ...Quoting ..."Then over the next 20 years they didn't reduce the formula...."<br /><br />That's because our paid-off elected officials have rigged this system in favor of the Public Sector unions by passing State Constitutional amendments or statutes which make it VERY VERY difficult (if not impossible) to reduce the rate of pension accrual even for FUTURE service of CURRENT workers. <br /><br />In some States/Cities they go so far as to lock in the formula (from any reductions ... with increases, of course being OK) with even ONE day of employment.<br /><br />Simply another example of the Public Sector Union/worker's "mugging" of the Taxpayers .... of course with the help of our elected official bought-off with Public Sector Union campaign contributions and election support.<br /><br />It's WAY past time for Taxpayers to renege on ALL of these grossly excessive pension & benefit "promises". Hopefully the stage to do so will be set from the outcome of Detroit's bankruptcy.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2009324187193157520.post-43982872533563202282013-09-12T17:38:24.661-04:002013-09-12T17:38:24.661-04:00Good article John ! I'd also say that the bi...Good article John ! I'd also say that the biggest decision is right at the time of 'creating', or increasing by amendment, the pension benefit formula. Many govt plans increased their formulas over the past 20 years and they estimated the affordable cost based on inv return assumption that was too large. Then over the next 20 years they didn't reduce the formula.....thus causing contribution nightmares. Also, 'spiking' wasn't predictable in setting the formulas.....leading to MORE nightmares. Private sector doesn't have that problem.....contributions getting too large? Time to freeze. Problem solved ! Steve B, EA, MSPAAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-2009324187193157520.post-76918811683616925102013-09-12T10:59:07.488-04:002013-09-12T10:59:07.488-04:00They will in short order find out that "reali...They will in short order find out that "reality" and the "math" ALWAYS governs.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2009324187193157520.post-55492760721717199102013-09-12T10:30:34.103-04:002013-09-12T10:30:34.103-04:00Anonymous, thanks for reading and commenting. Ther...Anonymous, thanks for reading and commenting. There is and has been a steady debate over the correct methods and assumptions to use when performing funding calculations for public pensions. Many of us in the profession can argue either side, up to a point. But, when governments choose to ignore calculations done by their actuaries because they don't like the answers, we run into insurmountable problems.John Lowellhttps://www.blogger.com/profile/00264893397248519558noreply@blogger.comtag:blogger.com,1999:blog-2009324187193157520.post-21573529032015854832013-09-12T09:48:17.488-04:002013-09-12T09:48:17.488-04:00This is obviously the biggest problem for PUBLIC S...This is obviously the biggest problem for PUBLIC Sector pensions where common practice has been to discount Plan "liabilities" at the rate assumed for investment returns. That's why almost all Public Sector Plans are in the financial toilet, with many to fail with great distress to both taxpayers and the workers who (right or wrong) assumed they would get the absurdly generous pensions they were "promised".Anonymousnoreply@blogger.com