Nevada’s Pension Debt Soars to $18B, Teachers Pay Nation’s Highest Retirement Costs

Link: https://www.npri.org/pension-debt-soars-nv-teachers-now-pay-highest-rates-in-us/

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PERS consists of two separate plans: one for police and fire members (the safety plan); and one for everyone else (the regular plan).

The annual contribution rates for safety plan members will rise to 50 percent in July — which means taxpayers must send PERS an additional 50 cents for every $1 in salary paid to police officers and firefighters. The contribution rate for regular plan members, which includes teachers, will rise to 33.5 percent of salary.

PERS costs are split evenly between taxpayers and the employee, with the employee typically paying their half through an equivalent salary reduction. This means that regular plan members, which include teachers, will see their paychecks reduced by nearly 17 percent annually starting this July — a rate that is higher than what any other group of comparable public employees nationwide pays for their respective PERS plan.

Unfortunately, these record-high contributions will not be enough to stop PERS’s debt from continuing to grow, according to the system’s just-released actuarial report.

Indeed, PERS’s actuary had determined that much larger rate increases are needed (37.5 percent for regular plan members and 57.5 percent for safety members), but the PERS Board directed the actuary to “phase-in” the necessary cost increase incrementally over four years, rather than all at once. But there is a cost to delaying the implementation of the necessary contribution rate increases — more debt, and thus a greater likelihood of future rate hikes.

Author(s): Robert Fellner

Publication Date: 9 Jan 2023

Publication Site: Nevada Policy Research Institute

BIDEN PROMISES NEARLY $36 BILLION FOR NATIONAL PENSION BAILOUTS

Link: https://www.illinoispolicy.org/biden-promises-nearly-36-billion-for-national-pension-bailouts/

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The Biden administration promised nearly $36 billion to stabilize pension plans for Teamsters nationwide after forecasts predicted the system’s default by 2026. Union members would have seen their retirement benefits slashed by 60% if the system defaulted.

President Joe Biden announced Dec. 8 the federal government will use nearly $36 billion to stabilize failing Teamsters union pension plans nationwide, preventing severe benefits cuts for more than 350,000 union workers.

….

Illinois is home to more than 20 Teamster’s chapters and the nation’s worst pension debt, estimated at nearly $140 billion by state authorities in 2022. Private investor services projected that debt as high as $313 billion, using more realistic assumptions on returns.

In September these state pension funds had just 47 cents for every dollar in promised pension benefits.

Springfield lawmakers cannot routinely rely on federal authorities to bail out overly generous and underfunded state and local pensions. Illinois public servants deserve to receive the retirements they’ve been promised in full – not the 40% that would remain after default.

Author(s): Patrick Andriesen

Publication Date: 12 Dec 2022

Publication Site: Illinois Policy Institute

ILLINOIS PUBLIC PENSION DEBT GROWS TO $140B

Link: https://www.illinoispolicy.org/illinois-public-pension-debt-grows-to-140b/

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Illinois’ five statewide pensions system saw their debt increase by nearly $10 billion to a grand total of $140 billion in fiscal year 2022. Pensions will cost the state nearly $11 billion next year, but that’s still $4.4 billion too little.

Illinois’ state pension debt now stands at $139.7 billion, according to a new report from the Illinois General Assembly’s Commission on Government Forecasting and Accountability.

That is up $9.8 billion from 2021, when state pensions were benefitting from healthy investment returns. After markets cooled substantially, state pension debt in the fiscal year that ended July 1 continued to grow, increasing for the 11th time in 15 years.

Author(s): Bryce Hill

Publication Date: 14 Dec 2022

Publication Site: Illinois Policy Institute

Reality check: New actuarial report says Illinois’ biggest pension, TRS, sunk $6 billion further into the hole in FY 2022 – Wirepoints Quickpoint

Link: https://wirepoints.org/reality-check-new-actuarial-report-says-illinois-biggest-pension-trs-sunk-6-billion-further-into-the-hole-in-fy-2022-wirepoints-quickpoint/

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The first actuarial report is out for an Illinois pension for fiscal year 2022, which ended on June 30. It’s for the TRS, the Teachers Retirement System, which accounts for well over half of Illinois state-level pension debt.

Unfunded liabilities grew about $6 billion from $74.7 billion to $80.7 billion on a fair asset value basis. Its funded ratio worsened from 46.2% to 43.8%. The drop occurred despite a one-time, special contribution by taxpayers to the fund of $173 million that was in addition to their annual, scheduled contributions.

Expect Illinois’ other pensions to suffer similarly dismal results as their 2022 reports are published.

Author(s): Mark Glennon

Publication Date: 7 Dec 2022

Publication Site: Wirepoints

Candidates discuss Illinois’ unfunded pension debt

Link: https://www.thecentersquare.com/illinois/gubernatorial-candidates-discuss-plans-to-shore-up-illinois-unfunded-pension-debt/article_d4ee1dcc-5acc-11ed-ba1f-5f5508ee672f.html

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Candidates for Illinois governor are taking different approaches on how they’d tackle the state’s unfunded pension liabilities.

Illinois has among the most unfunded public sector employee pension liability. State numbers indicate around $151 billion unfunded, but some place like the American Legislative Exchange Council place the debt at $533 billion.

State Sen. Darren Bailey, who’s running against incumbent Democratic Gov. J.B. Pritzker, said he’ll use reduced state spending to pay down pensions.

“We’ll find the fat in the budget and we’ll begin to apply that to get this pension situation under control, but first and foremost, I will be sitting at the table with pensioners,” Bailey, R-Xenia, told The Center Square. “I fear that the pension debt may be that large looming problem that will sneak up on Illinois if we continue to ignore it as J.B. Pritzker has.”

Pritzker touts on his campaign website “fully funding pension contributions” as a way to reduce state pension liabilities, “going above and beyond with payments and expanding the employee pension buyout program.”

Pritzker’s campaign did not return requests for an interview.

Author(s): Greg Bishop

Publication Date: 2 Nov 2022

Publication Site: The Center Square

5500 – Central States – 2021

Link: https://burypensions.wordpress.com/2022/10/20/5500-central-states-2021/

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With the 5500 filing season done it is time to tentatively get back to some blogging – starting with the plan that was likely to bring the PBGC (and the entire private pension system) down before the SFA bailout and now will be another cog in the hyperinflation wheelbarrow.

We had some 5500 history in an earlier blog through 2016. This is where the plan was last year based on their 5500 filing for 2021:

Plan Name: Central States, Southeast & Southwest Areas Pension Plan

EIN/PN: 36-6044243/001

Total participants @ 12/31/21: 357,056 including:

  • Retirees: 189,449
  • Separated but entitled to benefits: 117,511
  • Still working: 50,096

Asset Value (Market) @ 1/1/21: 10,409,440,502

Value of liabilities using RPA rate (2.43%) @ 1/1/21: $58,623,837,073 including:

  • Retirees: $34,084,275,398
  • Separated but entitled to benefits: $15,801,905,005
  • Still working: $8,736,875,945

Funded ratio: 17.76%

Author(s): John Bury

Publication Date: 20 Oct 2022

Publication Site: burypensions

Examining the Experiences of Public Pension Plans Since the Great Recession

Link: https://www.nirsonline.org/reports/greatrecession/

PDF of report: https://www.nirsonline.org/wp-content/uploads/2022/09/compressedExamining-the-Experiences-of-Public-Pension-Plans-Since-the-Great-Recession-10.13.pdf

Webinar slides: https://www.nirsonline.org/wp-content/uploads/2022/09/FINAL-Great-Recession-Retro-Public-Webinar.pdf

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This report finds that state and local government retirement systems on the whole successfully navigated the 2007 to 2009 Global Financial Crisis. Moreover, public retirement systems across the nation have adapted in the years since the recession by taking actions to ensure continued long-term resiliency.

Examining the Experiences of Public Pension Plans Since the Great Recession is authored by Tyler Bond, NIRS Research Manager, Dan Doonan, NIRS Executive Director, Todd Tauzer, Segal Vice President and Actuary, and Ronald Temple, Lazard Managing Director and Co-Head of Multi-Asset and Head of U.S. Equity.

The report finds:

  • The majority of public pension plans recovered their pre- recession asset levels within six years, while continuing to pay over a trillion dollars in benefits. In recent years, public plans have reported record-high asset levels.
  • Discount rates, or the assumed rate of return on investments, have broadly decreased from eight to seven percent for the median public pension plan, based on actuarial and financial forecasts of future market returns.
  • Generational mortality tables, possible today with more advanced financial modeling software, have been broadly adopted by nearly all large public plans and future longevity improvements are now incorporated into standard financial projections.
  • Many public plans have shortened amortization periods, or the period of time required to pay off an unfunded actuarial accrued liability, to align with evolving actuarial best practices. Tightening amortization periods, akin to paying off a mortgage more quickly, has had the effect of increasing short- term costs. In the long run, plans and stakeholders will benefit.
  • The intense focus on public plan investment programs since the Great Recession misses the more important structural changes that generally have had a larger impact on plan finances and the resources necessary for retirement security.
  • Plans have adjusted strategic asset allocations in response to market conditions. With less exposure to public equities and fixed income, plans increased exposure to real estate, private equity, and hedge funds.
  • Professionally managed public defined benefit plans rebalance investments during volatile times and avoid the behavioral drag observed in retail investment.

Author(s): Dan Doonan, Ron Temple, Todd Tauzer, Tyler Bond

Publication Date: October 2022

Publication Site: NIRS

The State Pension Funding Gap: Plans Have Stabilized in Wake of Pandemic

Link: https://www.pewtrusts.org/en/research-and-analysis/issue-briefs/2021/09/the-state-pension-funding-gap-plans-have-stabilized-in-wake-of-pandemic

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Since the fiscal 2019 reporting period ended, an unprecedented $5 trillion in federal stimulus and other government interventions have buoyed financial markets and strengthened plan balance sheets.2 As a result, state plans earned returns of over 25% in fiscal 2021—a highwater mark not seen since the 1980s. Pew estimates that total unfunded liabilities dropped below $1 trillion by the end of fiscal 2021, which would push state plans to be more than 80% funded for the first time since 2008. (See Figure 1; for more detail, see also Appendix G.) The significant improvement in plans’ fiscal position is due in large part to dramatic increases in employer contributions to state pension funds in the past decade, which boosted assets by more than $200 billion. Since 2010, annual contributions to state pensions have increased by 8% annually, twice the rate of revenue growth. And for the 10 lowest-funded states, the yearly growth in employer contributions averaged 15% over this period. As a result, after decades of underfunding and market losses from risky investment strategies, for the first time this century states are expected to have collectively achieved positive amortization in 2020—meaning that payments into state pension funds were sufficient to pay for current benefits as well as reduce pension debt.

An increase in pension contributions of the size seen over the past decade signals a shift in budget priorities by state policymakers and a recognition that the costs of postponing obligations are untenable if left unaddressed. Although this has improved the outlook for state pension plans, it has also crowded out spending on other important programs and services and left states with less budgetary space to sustain future rises in pension payments.

Author(s): Greg Mennis, David Draine

Publication Date: 14 Sept 2022

Publication Site: Pew Trust

Measuring Public Pension Health

Link: https://www.ncpers.org/files/ncpers-pension-metrics-2022.pdf

Webinar slides: https://www.nirsonline.org/wp-content/uploads/2022/03/FINAL-Pension-Health-Webinar-September-2022.pdf

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This report describes a “scorecard”, a standardized summary of pension valuation results (shown on next page), as well as three new metrics, of varying degrees of novelty, to appear on it:


 The Scaled Liability is a measurement of pension liabilities against the size of the economy that supports these liabilities.
 The UAL Stabilization Payment (USP) is an objectively defined cash flow policy standard comparable to
the funding ratio, an objectively defined balance sheet policy standard.
 Risk-Weighting Assets is a proposed method to assess the value of a plan’s assets, taking into account
its capacity to endure the downside risk it has taken on through its allocation of investments.


Author(s): Tom Sgouros

Publication Date: September 2022

Publication Site: NCPERS

New Report Measures Public Pension Health

Link: https://www.ai-cio.com/news/new-report-measures-public-pension-health/

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The National Conference on Public Employee Retirement Systems recently released a report entitled “Measuring Public Pension Health: New Metrics, New Approaches” that introduces new mechanisms to account and judge the sustainability of pension plans.

To create these, the report’s author, Tom Sgouros, fellow and co-chair at The Policy Lab at Brown University, formed and hosted the Pension Accounting Working Group, a group made up of actuaries and public pension experts. The group assembled to measure the health of plans, and create new metrics to generate greater insights into a pension’s sustainability, so that trustees and policymakers could make better and more informed decisions.

The working group came up with three new metrics. The first is “scaled liability,” a measurement of pension liabilities against the size of the underlying supporting economy. The second is “unfunded actuarial liability (UAL) stabilization payment,” an objectively defined cash-flow policy standard comparable to the funding ratio. And last is “risk-weighting asset values,” a method to assess the value of a plan’s assets that accounts for a plan’s capacity to endure the downside risk it has taken through the allocation of its assets.

The scaled liability measurement uses economic strength as a proxy for tax capacity. This measurement helps decisionmakers get a read on a plan’s sustainability by providing a comparison between a pension plan and the economic strength of its sponsor. The Federal Reserve includes a comparison of net pension liability with measures of GDP and state revenues in the “Enhanced Financial Accounts” component of its “Financial Accounts of the United States” report.

Author(s): Dusty Hagedorn

Publication Date: 23 Sept 2022

Publication Site: ai-CIO

Citizens must be accurately informed for government to work

Link: https://www.news-gazette.com/opinion/columns/sheila-weinberg-citizens-must-be-accurately-informed-for-government-to-work/article_5d93e9cf-73c5-54c9-b762-133f91a94824.html

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An example of questionable disclosure practices is found in the Illinois budgeting and financial reporting process, specifically regarding pension contributions. In 1994, then-Gov. Jim Edgar led an effort to pass a bipartisan bill to solve the state’s $15 billion pension deficit. The plan would resolve the deficit within 50 years. The plan was structured to pay down the debt very slowly in the first 15 years and accelerate at the end. This ensured that sitting politicians in the early days of the plan would not be required to make the necessary tax increases or budget cuts to pay down the debt in a meaningful way.

This program is shown in charts to look like a skateboard ramp, appropriately named the “Edgar Ramp.” The problem is, the plan doesn’t work.

It is so unsuccessful that the Illinois pension deficit has grown from $15 billion to $317 billion as of June 30, 2020, according to Moody’s Investors Service. The state’s latest bond offering document emphasizes, “The state’s contributions to the retirement systems, while in conformity with state law, have been less than the contributions necessary to fully fund the retirement systems as calculated by the actuaries of the retirement systems.”

The latest Illinois Annual Comprehensive Financial Report discloses cash-flow problems, significantly underfunded pension obligations, other post-retirement benefit deficits and multiple references to debt-obligation bonds.

Author(s): Shiela Weinberg

Publication Date: 7 Aug 2022

Publication Site: News Gazette

The Government Pension Reckoning Cometh

Link: https://www.wsj.com/articles/the-government-pension-reckoning-cometh-equable-institute-report-11660084312?st=j8a7o7efyyvjtdp&reflink=article_email_share&utm_source=Wirepoints+Newsletter&utm_campaign=24f39fc2e0-RSS_EMAIL_CAMPAIGN&utm_medium=email&utm_term=0_895ee9abf9-24f39fc2e0-30506353#new_tab

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The California Public Employees’ Retirement System reported a negative 6.1% return for the year, which includes a 21.3% positive return on private equity and 24.1% return on real estate as reported through the second quarter of 2022. What will happen if real-estate prices start to fall and some leveraged private-equity buyouts go south amid rising interest rates?

Collective-bargaining agreements limit how much workers must contribute to their pensions, so taxpayers are required to make up for investment losses. Employer retirement contributions—that is, taxpayers—make up 20% of government worker compensation. That amount has soared over the past decade as pension funds tried to make up for losses during the 2008-2009 financial panic.

A recent report by the Equable Institute found that state and local pension plans now are only 77.9% funded on average, which is about the same as in 2008. But some like Chicago’s are less than 40%. Advice to taxpayers in Illinois: Run.

Author(s): WSJ Editorial Board

Publication Date: 9 Aug 2022

Publication Site: WSJ