NJ OPEB Update – 2020

Link: https://burypensions.wordpress.com/2022/04/26/nj-opeb-update-2020/

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There are three separate reports for statelocal government, and local education which throw a lot of distracting numbers at you but, when added up, show that after an amazing 1/3rd reduction in the total OPEB Liability (from $110 billion as of 6/30/16 to under $74 billion as of 6/30/19) the state actuaries sharply reversed course.

Author(s): John Bury

Publication Date: 26 Apr 2022

Publication Site: Burypensions

Actuarial Assumptions and Valuations of the State-Funded Retirement Systems

Link:http://www.auditor.illinois.gov/Audit-Reports/Performance-Special-Multi/State-Actuary-Reports/2021-State-Actuary-Rpt-Full.pdf

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The combined total of the required Fiscal Year 2023 State contribution
for the six retirement systems was $10.97 billion, an increase of $0.14
billion over the previous year. Cheiron verified the arithmetic calculations
made by the systems’ actuaries to develop the required State contribution
and reviewed the assumptions on which it was based.

The Illinois Pension Code (for TRS, SURS, SERS, JRS, and GARS)
establishes a method that does not adequately fund the systems, back
loading contributions and targeting the accumulation of assets equal to 90%
of the actuarial liability in the year 2045. This contribution level does not
conform to generally accepted actuarial principles and practices. Generally
accepted actuarial funding methods target the accumulation of assets equal to
100% of the actuarial liability, not 90%.

According to the systems’ 2021 actuarial valuation reports, the funded
ratio of the retirement systems ranged from 47.5% (CTPF) to 19.3%
(GARS), based on the actuarial value of assets as a ratio to the actuarial
liability. If there is a significant market downturn, the unfunded actuarial
liability and the required State contribution rate could both increase
significantly, putting the sustainability of the systems further into question.

Author(s): Frank J. Mautino

Publication Date: 22 Dec 2021

Publication Site: Office of the Auditor General, State of Illinois

Pension Plan Actuarial Assumption Litigation: The End is Not Yet in Sight

Link:https://www.jdsupra.com/legalnews/pension-plan-actuarial-assumption-5162449/

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One recent line of ERISA litigation involves the actuarial equivalence factors used by defined benefit pension plans.  The lawsuits apply both to active defined benefit pension plans and pension plans that have been “frozen” as to future benefit accruals.

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Basically, the lawsuits allege that the plan, through the use of out-of-date and “unreasonable” actuarial assumptions and conversion factors, has “overcharged” participants when converting from the Life Annuity Benefit to payment in an alternate payment form. 

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In many of the cases, the challenge focuses on allegedly outdated mortality tables that do not take improved life expectancy into account.  In some situations, the actuarial factors (including mortality table assumption) were established decades ago and have never been updated.  In essence, the lawsuits allege that the plan (by not using updated factors and tables) is not paying out the full value of the participant’s benefit when the participant has elected payment in an alternate payment form.

Author(s): Gregg Dooge

Publication Date: 20 Jan 2022

Publication Site: JD Supra