Waiting Patiently on Public Pensions
Things take time while watching the trends
A screenshot of the old Actuarial Outpost (RIP):
(Sorry, fellow AOians, I only archived things important to me, which were mainly public pensions threads, Social Security, Excel, and the Moody’s Rate history. None of the drama crap.)
New York Times: 2015 July 9 Bad Math and a Coming Public Pension Crisis
When Jim Palermo was serving as a trustee of the village of La Grange, Ill., he noticed something peculiar about the local police officers and firefighters. They were not going to live as long as might be expected, at least according to pension tables.
After Mr. Palermo dug into the numbers, he found that the actuary -- the person who advises pension plan trustees about how much money to set aside -- was using a mortality table from 1971 that showed La Grange's roughly 100 police officers and firefighters were expected to die, on average, before reaching 75, compared with 79 under a more recent table.
On Thursday, a panel of senior actuaries will consider whether to update, or elaborate on, the existing actuarial standards for public pensions. The dueling mortality tables will be among the evidence, and Mr. Palermo is among the parties who have submitted written testimony.
It is only the second time in recent memory that the Actuarial Standards Board has held a public hearing, an indication of the gravity of the nation's pension woes. State and local governments have promised several trillion dollars' worth of benefits to retirees -- the exact amount is in dispute. Now, with large numbers of public workers retiring, the money set aside is turning out to be at least a trillion dollars short.
"Actuaries make a juicy target," said Mary Pat Campbell, an actuary who responded to the board's call for comments.
She expressed concern that elected officials were using actuaries to lend respectability to "questionable behavior" like funding pensions with borrowed money, picking risky investments and "enacting benefit improvements based on lowballed costs."
Actuarial Standards Board Hearing on Public Pension Issues - notice for July 9, 2015
The funding of public pension plans is a matter of considerable public interest. Stakeholders including individuals, organizations, and media outlets are engaged in a vigorous public dialogue on the topic.
As the standards-setting body for actuaries in the United States, the Actuarial Standards Board (ASB) is charged with establishing and improving guidance for credentialed actuaries practicing in the U.S., and in July 2014 the ASB issued a Request for Comments (RFC) on ASOPs and Public Pension Plan Funding and Accounting.
In order to solicit the broadest possible input on proposed standards, the ASB will hold a public hearing on the proposed actuarial standards of practice (ASOPs) applicable to actuarial work regarding public pension plans on July 9, 2015. The ASB urges interested parties to attend the hearing and/or offer comments per the guidelines below.
When public plans get into trouble, it generally does not emerge suddenly, as a run on the bank. Trouble in public pensions develops over years, sometimes decades. Perhaps the slow-moving nature of public pension disasters makes sponsors complacent, but it is probably expected by sponsors that if there were something terribly wrong, the actuaries would have warned them. It does not matter how many disclaimers we actuaries put into our reports. We are the numbers people; we do the projections; we should have been highlighting cases when current assets cannot cover the liability of not only current retirees, much less future retirees.
11 July 2015: Story of a trainrider — not doing that again. At least, not on purpose.
When I was waiting for the late-night train in GCT:
John Bury’s blog: Burypensions
Public pensions category on Actuarial News