Lying to the SEC on pensions

[SoCalActuary]

The SEC has issued a cease & desist order against the City of San Diego, noting that the people who

prepared bond issues were aware that their pension funding obligations were about to explode.

http://www.sec.gov/litigation/admin/2006/33-8751.pdf link will give you the text.

If you ever get a chance to talk with the parties involved, the municipal conflict of interest issues were huge.

The same people approving their own higher benefits were responsible for underfunding the plans and also for the misleading SEC filings.

Thanks to Susan Mangiero, CFA for the information. Her discussion is found at http://www.bvallc.com/pensionblog/

[SoCalActuary]

More headlines from San Diego - Callan Associates paid about $4.5 million to San Diego, because they did not want the publicity.

Now the actuarial firm Gabriel Roeder gets to defend themselves.

I know it's naive, but why don't the San Diego politicians just take responsibility for their own problems and fix them?

[david rigby]

I know it's naive, but why don't the San Diego politicians just take responsibility for their own problems and fix them?

Do you have examples of this happening? anywhere? ever?

[SoCalActuary]

I guess that makes two rhetorical questions in a row.

Actually, you could just terminate the employment of a whole bunch of SD employees, and only rehire them

with a new and more affordable pension plan, and/or outsource their work to private employers without a plan.

But that may be too fiscally responsible and hard-hearted to actually get done.

[leevena]

I am not a pension, or union/labor expert, but I live in San Diego and it's worse than you think.

SoCalActuary...do you really expect any politician to take responsibility?

This goes back years and involves more than just underfunding. Yes, there were years that the City underfunded on purpose. But the pension plan for the employees is something any of us would just die for. In addition to a nice pension formula, there is DROP program, which essentially allows employees to work and collect a pension payment at the same time.

The unions/city negotiated sweetheart deals back and forth. To allow the city to underfund the pension plan, the city allowed union officials to add their union pay into the formula for a city pension. Don't remember the exact figures, but one union official received a pension worht about 100k a year, but never made more than $30k or so a year.

[Guest mjb]

Is there any municipal plan that isnt underfunded? NH state employees pension is underfunded by 2B (only 67% funded). Municipal plans are chronically underfunded because the taxaing authority of the govt will provide revenue in the future to pay benefits. Under 415 employee cannot receive a pension in excess of 100% of comp. RI state plan was almost D'qed because it paid benefits in excess of comp. to state legislators

[SoCalActuary]

mjb - check your 415 rules again. Did you think that Congress would accept 100% pay limit on themselves with all their other gov't service. Look at 415(b)(11) which exempts govt plans and multiemployer plans from the 100% limit.

[Guest mjb]

RI was audited by IRS before change was made to the code. Anyway it dont matter b/c costs will always be pushed off to future taxpayers. By the way what is CA's unfunded liabilty for pensions. It is probably more than the NJ state budget (33B). I thought the governator was going to substitute 401k plans for DB plans for CA employees.

[SoCalActuary]

Someone in CA learned how to spell "unions" for municipal workers. They lobby very effectively.

Arnie tried this in 2005 and lost badly.

The big changes will be coming when GASB disclosures are enforced by the SEC, and municipalities will have to pay for their promises.

However, for part-time school workers, they did implement a contributory cash balance plan, which was pretty good progressive thinking. Actually, they were forced to, since the schools did not want to pay FICA taxes for the part-timers.