Tag: Forbes

No Hope In Sight For Chicago’s Worst-In-The-Nation Pension Plans

Mary Pat Campbell

Link:https://www.forbes.com/sites/ebauer/2023/08/01/no-hope-in-sight-for-chicagos-worst-in-the-nation-pension-plans/?sh=4fd6218f24c2

Excerpt:

Back on July 18, the Equable Institute released the 2023 version of its annual State of Pensions report, which means that, yes, it’s time for another check-in on these infamously-poorly-funded pension plans. Among the wealth of tables is a list of the best and worst-funded of the 58 local pension plans studied, and, yes, you guessed it, the bottom five spots are Chicago plans, with the bottom three at levels far below all others:

  • Municipal employees, 21% funded,
  • Chicago police, 21.8% funded, and
  • Chicago fire, 18.8% funded.

Combined with the Chicago Laborers’ pension fund, with a 41% funded status, the pensions for which the city bears a direct responsibility have a total pension debt on a market value of assets basis of $35 billion. (This data is from the actual reports*, released in May, which doesn’t match the Equable report precisely.) Spot fifth-worst is taken up by the Chicago Teachers, at 42.4% funded, and the first non-Chicago system in their list, Dallas Police & Fire at 45.2%, is twice as well funded, percentage-point-wise, as the Terrible Trio.

…..

What’s more, Ralph Martire and his Center for Tax and Budget Accountability continue to promote what he calls “reamortization” as a solution to the problem, both through an April Chicago Sun Times commentary and through the release of a report, “Understanding – and Resolving Illinois’ Pension Funding Challenges” (which is an update of a prior proposal). This proposal, which is directed at Illinois pensions but is clearly meant based on other comments to be an all-purpose fix, sounds innocuous, as merely a sort of “refinancing” as one might with a mortgage, but it’s really much more as he proposes to

  • Reduce the funded status target from 90% to 80%, based on the claim that the GAO deems this funded status to be the right target for a “healthy” plan (whether he deliberately misleads or not, he is wrong here, the National Association of State Retirement Administrators or NASRA clearly explained more than a decade ago that 100% funding is always the right target and the only significance of an 80% level is that private sector pension law requires plans funded less than 80% to take immediate corrective action rather than have a long-term funding schedule, and the American Academy of Actuaries more explicitly calls this a “myth”);
  • Issue large sums of Pension Obligation Bonds, which were questionable already when they first began promoting this but are now a terrible idea with our current high bond rates, all the more so for a low-credit-rating city such as Chicago; and
  • Move contributions from last day of the fiscal year to the first day, which he argues would be a gain of a year’s investment return while forgetting that it requires the city to have this money on Day 1 and forgo the other uses it would have.

Author(s): Elizabeth Bauer

Publication Date: 1 Aug 2023

Publication Site: Forbes

Billionaire Ken Griffin Sues IRS Over Leak Exposing Taxes Paid By 25 Richest Americans

Mary Pat Campbell

Link: https://www.thewealthadvisor.com/article/billionaire-ken-griffin-sues-irs-over-leak-exposing-taxes-paid-25-richest-americans

Excerpt:

Hedge fund billionaire Ken Griffin, who founded and helms trading powerhouse Citadel, has sued the Internal Revenue Service and Treasury Department for alleged negligence in maintaining safeguards for confidential tax returns after a bombshell report last year cited a trove of IRS data in a series of articles detailing the incomes and taxes paid by some of the world’s richest people.

KEY FACTS

In a federal suit filed with the Southern District of Florida, Griffin alleged the IRS has “willfully and intentionally” failed to establish adequate safeguards to protect confidential tax return information after nonprofit news outlet ProPublica published an article citing the data in June 2021 and then followed up with several pieces, including some targeting Griffin’s political lobbying.

The suit, first reported by Wall Street Journal, claims the disclosure of Griffin’s tax return information to ProPublica was not “requested by the taxpayer,” and as a result entitles the billionaire to punitive damages totaling at least $1,000 per unlawful disclosure and attorneys’ fees, according to a section of the tax code.

It is a felony for a federal employee to leak a tax return or information about a tax return, but the source of the data remains unknown despite some lawmakers claiming there “is little doubt” the confidential information “came from inside the IRS;” the IRS and Justice Department have stated they are investigating the leak, but no formal charges have been filed.

Author(s): Jonathan Ponciano

Publication Date: 13 Dec 2022

Publication Site: The Wealth Advisor, Forbes

Two Key Takeaways From The New CDC Life Expectancy Data

Mary Pat Campbell

Link: https://www.forbes.com/sites/ebauer/2022/09/02/two-key-takeaways-from-the-new-cdc-life-expectancy-data/?sh=6ce149f31cfc

Excerpt:

To what extent, are these drops of life expectancy due to Covid-19, rather than other causes?

From 2019 to 2020, the CDC reports that 90% of the drop in Hispanic life expectancy was attributable to Covid; the corresponding rates were 68% for whites and 59% for blacks. (No breakdown was provided for the AIAN or Asian categories.) However, the CDC data splits its breakdowns into “contributions to decreases” and “contributions to increases” rather than overall net effect. Those readers who are used to looking at data and charts will expect a “waterfall” style chart; the CDC version is not this, and is not particularly helpful.

In any event, relative to the 2020 baseline, the further decreases in life expectancy during 2021 had multiple causes. Only among the White demographic group was Covid the cause of over half of the decline; unintentional injury (including overdoses) was the second-largest contributing factor and for the AIAN demographic group, worsening rates of death due to chronic liver disease and cirrhosis played almost as substantial a role.

And, finally, it is important to understand that the CDC data shows a continued improvement in life expectancy due to reductions in death due to such causes as influenza/pneumonia, COPD/emphysema, Alzheimer disease, diabetes, and perinatal conditions (infant deaths). In fact, strikingly, in 2021, heart disease was a contributor to increased life expectancy in the Black, Hispanic, and Asian demographic groups, but a contributor to decreased life expectancy for the White and AIAN groups.

Again, though, the way the CDC provides its information means that, when it comes down to it, there is much that is simply missing; we do not know the magnitude of the improvements in life expectancy due to these causes, just that it exists. It even seems likely, or at least possible, that some of the apparent improvement in mortality due to these factors was actually because deaths were actually recorded as Covid deaths instead (whether due to multiple causes of death or other reasons).

Author(s): Elizabeth Bauer

Publication Date: 2 Sept 2022

Publication Site: Forbes

Ohio Teachers Pension Touts Past Transparency Awards, Fails To Disclose Special Investigation By State Auditor

Mary Pat Campbell

Link: https://www.forbes.com/sites/edwardsiedle/2022/05/23/ohio-teachers-pension-touts-past–transparency-awards-fails-to-disclose-special-investigation-by-state-auditor/

Excerpt:

The nearly $100 billion State Teachers Retirement System of Ohio never tires of telling its members of past transparency awards it has received from Ohio State Auditor Keith Faber. The fact that Faber’s office is currently conducting a special investigation into the pension’s transparency practices, prompted by public records lawsuits and numerous member complaints—the results of which could, says the auditor, affect the retirement system’s rating in the future—is not disclosed by the pension.

In April 2022 Board News under the heading, “STRS Ohio earns auditor of state’s top rating from transparency for second year,” the State Teachers Retirement System of Ohio’s website boasts:

…..

Perhaps not surprising, this self-professed paragon of transparency is not touting the following ugly facts provided to me by the auditor’s office in a recent email:

“In October 2021, Auditor of State Keith Faber informed STRS that his office was launching a special audit after receiving numerous complaints, following the release of a report issued by Benchmark Financial Services Inc. titled “The High Cost of Secrecy: Preliminary Findings of Forensic Investigation of State Teachers Retirement System of Ohio,” commissioned by Ohio Retired Teachers Association.

….

In other words, it appears the Auditor of State’s transparency rating system merely asks whether a public agency has policies and procedures addressing transparency, not whether the agency is, in fact, being transparent in its dealings with the public in compliance with applicable laws. Such a rating system is of limited value to stakeholders, in my opinion, and presents the very real risk of being misinterpreted, as well as unduly relied upon, by the public.

Author(s): Edward Siedle

Publication Date: 23 May 2022

Publication Site: Forbes

A Guide To The Public Pension Funds Divesting From Russia

Mary Pat Campbell

Link: https://www.forbes.com/sites/lizfarmer/2022/03/11/the-pension-plans-divesting-from-russia/

Excerpt:

As economic sanctions against Russia for its invasion of Ukraine spread, state and local public pension plans are looking at selling off their Russian-related assets and some are already doing so.

Lawmakers in at least a dozen states are pressuring their pension funds to divest from Russian-related investments. Divestment isn’t likely to have much impact on the funds themselves as Russian-domiciled investments make up less than 1% of most (if not all) state portfolios. But collectively, it sends a message. For example, California’s CalPERS is the largest pension fund in the world and it alone holds nearly $1 billion in Russian assets.

However, it’s likely that at least some (if not all of) these funds will be selling at a loss. Here is a snapshot of what’s happening across the U.S.

Author(s): Liz Farmer

Publication Date: 11 March 2022

Publication Site: Forbes

Putin, Russian Pals “Mystery” Partners In Public Pension Deals?

Mary Pat Campbell

Link: https://www.forbes.com/sites/edwardsiedle/2022/03/10/putin-russian-pals-mystery-partners-in-public-pension-deals/?sh=3057aa8524af

Excerpt:

America’s state and local government pensions invest as much as 40 percent of their assets in secretive, offshore “alternative” hedge, private equity, real estate and venture funds which warn that certain unidentified “mystery investors” pay lower fees, are provided greater information about investment strategies and portfolio holdings, have been granted liquidity preferences and receive superior net performance—all at the expense of America’s public sector workers. How many wealthy Russians are “mystery investors” in these pension deals which, according to an internal FBI document leaked last year, criminals and foreign adversaries regularly use to launder money? Wall Street refuses to say and public pensions have promised not to ask. Ironically, the invasion of Ukraine and calls to dump Russian investments to punish the country are drawing attention to the ugly fact that America’s public pensions have long consented to being kept in the dark by Wall Street, abrogating their duty to monitor and safeguard workers’ retirement savings.

….

For example, my second investigation of the Rhode Island state pension revealed in 2015 that contrary to the pension’s financial reports, 40 percent of the pension’s investments—not the 25 percent disclosed—had been allocated to secretive alternative investments.

….

It’s no secret that the FBI suspects that many alternative investment vehicles are widely utilized for money laundering. In 2019, the FBI compiled a report titled “Financial Crime Threat Actors Very Likely Laundering Illicit Proceeds Through Fraudulent Hedge Funds and Private Equity Firms to Obfuscate Illicit Proceeds.” Then, a leaked May 1, 2020 internal FBI report similarly titled “Threat Actors Likely Use Private Investment Funds to Launder Money, Circumventing Regulatory Tripwires” purported to supplement the January 2019 report “by providing recent reporting of hedge funds and private equity firms used to launder illicit proceeds, and expands the threat context beyond financial threat actors to include foreign adversaries.”

Author(s): Edward Siedle

Publication Date: 10 Mar 2022

Publication Site: Forbes

‘We Don’t Have Actuarial Numbers Relative To This Amendment’: Illinois’ Tier 2 Pension In Their Own Words

Mary Pat Campbell

Link: https://www.forbes.com/sites/ebauer/2022/02/20/we-dont-have-actuarial-numbers-relative-to-this-amendment-illinois-tier-2-pension-in-their-own-words/

Excerpt:

In Illinois, this resulted in a Blue Ribbon Pension Commission under Gov. Rod Blagojevich, which issued a report in 2005 with some recommendations which were adopted and others which, well, never saw the light of day. As might be guessed, the changes actually implemented were small scale, but included an anti-spiking measure, a reduction in the guaranteed interest rate used to calculate a minimum pension benefit, and a reduction in the categories of state employees eligible for the more generous alternative formula. This legislation, Public Act 94-0004, also required that any new benefit increase henceforth must be paired with a corresponding funding increase, and must sunset after five years (though recall that this didn’t stop the legislature from increasing benefits for Chicago Firefighters or non-Chicago Police and Fire pensions, both of which involve the state dictating benefits and localities funding them).

In recognition of the small nature of these changes and the very large debts still remaining, the bill also created yet another commission, with no effect, and in subsequent years, still more commissions met. In 2009, the Illinois Pension Modernization Task Force held a series of public meetings, but produced no majority-approved report, only a work product with findings and minority reports.

It is in that context that the Illinois Tier 2 pension system came into being — which avid readers will recall is a new set of benefits for public-sector employees in Illinois hired after January 1, 2011, a set of benefits with changes made that “looked good” to legislators at the time but had no actuarial review, and as a result will sooner or later fail the “safe harbor” test, in which state and local public pensions must provide better benefits than Social Security in order to opt out of the Social Security system. And why didn’t the law have an actuarial review? Because it was created behind closed doors — which makes it all the more worthwhile to repeat the exercise of reading the legislative transcripts of the day it was brought to the floor of the Illinois State House and Senate for a vote.

Author(s): Elizabeth Bauer

Publication Date: 20 Feb 2022

Publication Site: Forbes

‘The Pension Bill Has Something For Everybody’: A Look Into How Illinois Lawmakers Justified Their Pension Benefit Boosts

Mary Pat Campbell

Link: https://www.forbes.com/sites/ebauer/2022/02/03/the-pension-bill-has-something-for-everybody-a-look-into-how-illinois-lawmakers-justified-their-pension-benefit-boosts/?sh=207f9a5233bb

Excerpt:

In my prior article, I laid out the Illinois General Assembly’s repeated unanimous, near-unanimous or strong bipartisan majority support for a series of bills increasing pension benefits for public employees from 1989 – 2000.

….

With respect to the SERS benefit increase, the Senate debate centers around collective bargaining. As Senator Jones says in the May 31, 1997 transcript, “I think Senator Collins had worked hours, and many hours and years to sponsor this piece of – this legislation so that we can arrive at the point we are today. So I – I stand up gladly and proudly to – to support you in this endeavor, but I think we should know where the real, real support originally came from and how it all came about. And it came about as a result of collective bargaining legislation.” (Again, all transcripts can be viewed online.)

On the House side, there was more discussion. The CGFA’s summary notwithstanding, there were a number of benefit boosts, including a “30 and out” provision. It was explained by Rep. Poe that the bill was “funded” by the fact that during the AFSME contract negotiations, the union accepted a reduced wage increase (relative to what they’d otherwise have demanded) in order to achieve this pension benefit increase, and it was taken on faith that the bill was indeed therefore truly “paid for,” when it ought to simply have been met with incredulity instead.

….

This is, of course, exactly the core of the reason why public sector unions are fundamentally so ripe for abuse, when the individuals who nominally have the role of “employer” gain so much politically from providing these generous benefits.

This brings us to the Teacher’s equivalent and the transcripts of May 21 – 22, 1998. Here the path of the bill was not as simple, as the speaker delayed moving the bill out of the Rules committee.

….

Finally, we have transcripts of the 1989 COLA/pension funding bait-and-switch bill to read. Again recall that this bill was wholly rewritten through negotiations, and presented in its final form on the day it was voted upon, June 30, 1989. 

….

“The pension bill has something for everybody, folks. It’s been designed in such a way that everybody’s got something in here.” 

But as Schuneman continues to speak, it is clear that he is cynical about this design and in fact he is concerned about the cost, and he continues talking about the pension debt as the equivalent to paying the minimum payment on a credit card – but gets no traction. The next speakers are far more interested in clarifying the (even more generous) benefit boosts for General Assembly members, and after some side-tracking Jones picks up his “something for everything” point but not with Schuneman’s cynicism but sincerely calling for passage, citing the governor’s support (and with no mention of costs or the funding plan): 

“Sure, there is something in here for everyone. The Office of the Governor came out very strongly for the workers of the State of Illinois and in strong support for the compounding of the increases for State Employees and retirees. So, let’s give me a favorable vote on this bill, and we will do good for the people who work hard for the State of Illinois.”

Author(s): Elizabeth Bauer

Publication Date: 3 Feb 2022

Publication Site: Forbes

The Pension Combine? Illinois’ Public Pension Unfunding Has A Long And Bipartisan History

Mary Pat Campbell

Link:https://www.forbes.com/sites/ebauer/2022/01/30/the-pension-combine-illinois-public-pension-unfunding-has-a-long-and-bipartisan-history/

Excerpt:

Newcomers to the state of Illinois may find it odd to see the word “bipartisan” show up anywhere in reference to Illinois, but they forget that the state’s history includes jailed governors from both political parties.

….

Nothing especially persuasive emerges from these studies, except for one: “Polarization and Policy: The Politics of Public-Sector Pensions,” by Sarah Anzia and Terry Moe, published in 2017 at Legislative Studies Quarterly.

Their main argument: before the Great Recession, in those states with un/underfunded pensions, both parties were the cause of the underfunding. Simply put, the public at large simply had no interest in pension funding, but was very much interested in a high level of government services and a low level of taxation. There was therefore no incentive for politicians of either side to fund pensions.

….

And a review of the history of Illinois’ pension funding is a case study in how this pre-Great Recession bipartisan pension funding indifference played out. The whole history was outlined in great detail in a 2014 report by Eric Madiar, who at the time served as Chief Legal Counsel to Illinois Senate President John J. Cullerton; while the objective of much of his document is to argue a political point, his history lesson is extremely helpful, and starts with a 1917 report by the Illinois Pension Laws Commission lamenting that pension plans were not being funded and calling for the legislature to begin to fund pensions when benefits are earned. Throughout the 40s, 50s, and 60s, dire reports were issued by similar commissions, to no avail, with the result that the Illinois constitution of 1970 essentially treated the pension protection clause as an alternative to funding pensions.

….

So there you have it: a century-long legacy of unfunded pensions in Illinois.

Author(s): Elizabeth Bauer

Publication Date: 30 Jan 2022

Publication Site: Forbes

Facebook International Man Of Mystery And GoFundMe Fraudster Disrupt $115 Billion Ohio Pension Forensic Investigation

Mary Pat Campbell

Link:https://www.forbes.com/sites/edwardsiedle/2021/12/20/facebook-international-man-of-mystery-and-gofundme-fraudster-disrupt-115-billion-ohio-pension-forensic-investigation/?sh=3ef0ed262c78

Excerpt:

Who is Facebook international man of mystery Robert Parkle and why is he advising Ohio Public Employees Retirement System stakeholders not to follow through with an expert forensic investigation of their state pension? Why did Kasandra Ward from Aurora, Colorado create a fraudulent OPERS Forensic Investigation GoFundMe page apparently to divert funds from the real project? Our nation’s public pensions have never been more precarious and there are powerful interests working hard to keep pension stakeholders in the dark.  

Earlier this year, a forensic investigation of the $90 billion-plus State Teachers Retirement System of Ohio commissioned by the Ohio Retired Teachers Association and performed by my firm, was completed. The damning preliminary findings were reported to Ohio legislators, regulators and law enforcement in a 100-plus page report entitled The High Cost of Secrecy.

….

In conclusion, I won’t speculate who may be seeking to derail the proposed forensic investigation of the $115 Billion Ohio Public Employees Retirement System on behalf of pension stakeholders, or why. One thing is for certain: One or more persons is seeking to disrupt the investigation into potential mismanagement and malfeasance at the massive pension.

Stakeholders in all 5 Ohio public pensions, including OPERS, should be alarmed and securities regulators and law enforcement ought to investigate any apparent violations of law through social media.

Author(s): Edward Siedle

Publication Date: 20 Dec 2021

Publication Site: Forbes

Washington State’s Celebrated Long Term Care Program Is Headed Towards Trouble

Mary Pat Campbell

Link: https://www.forbes.com/sites/ebauer/2022/01/09/washington-states-celebrated-long-term-care-program-is-headed-towards-trouble/

Excerpt:

A requirement to have paid into the system is characteristic of a social insurance program, and the 10 year contribution requirement is essentially the same as the eligibility requirement for Old Age benefits in Social Security. However, true social insurance programs pay out benefits to those eligible regardless of residence — again, once you’ve paid into Social Security long enough to have earned your benefit, you can collect regardless of where you live, even if you have moved abroad. In fact, even noncitizens who worked in the United States long enough to have accumulated sufficient Social Security credits, can receive benefits after having moved back to their home countries. What’s more, many social insurance systems provide some sort of refund mechanism for workers who do not accumulate enough contribution years to be eligible.

And this hybrid system will likely prove to be unsustainable politically. Even if ordinary Washingtonians are not well-versed in social insurance concepts and theories, it will not sit right with them that those who retire with 10 years of payroll taxes have “earned” their benefits but those with 9 years have not, and, likewise, that those who have “earned” benefits would lose those “earned” benefits merely by moving out of state. How precisely this will play out over the long term remains to be seen, but the new bills are not likely to be the end of the story.

In any case, these problems will not be easy to remedy.

Author(s): Elizabeth Bauer

Publication Date: 9 Jan 2022

Publication Site: Forbes

Revisiting The ‘Retirement Crisis’ And Retirement Legislation In 2022 – What’s In Store In The New Year?

Mary Pat Campbell

Link: https://www.forbes.com/sites/ebauer/2021/12/31/revisiting-the-retirement-crisis-and-retirement-legislation-in-2022whats-in-store-in-the-new-year/

Graphic:

Excerpt:

First, we need to keep a distinction in mind between efforts to ensure the elderly do not suffer actual material deprivation, whether that’s lack of nutritious food or adequate housing or medical needs, for instance, and efforts to help Americans plan for retirement and alleviate their expressed worries about the unknowns of retirement.

Second, issues of well-being, such as social isolation, and larger questions of the “right” form of provision of long-term care assistance, are not simple issues of finances but are nonetheless important as Americans age, and these topics should not be drowned out by a “retirement crisis” narrative. It should also go without saying that we will urgently need to turn our attention to the Medicare system as well.

And, third, in one crucial respect our models may fail us: experts have worked out a set of recommendations for asset allocation and income spend-down in retirement, and a set of projections for building those models, which fall apart if our new low-interest world continues, Japan-like, rather than being a temporary situation that resolves itself as we recover from the pandemic. Whether this is a result of government policies or an inevitable consequence of the changing economy, this could upend both Biggs’ projections of retiree well-being and the path to retirement security envisioned by legislation like the SECURE Act 2.0.

Author(s): Elizabeth Bauer

Publication Date: 31 Dec 2021

Publication Site: Forbes