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Rating the Job Public Pension Actuaries Are Doing


drakecohen

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Thanks for providing these links.

I particularly thought the one about California was interesting when one of the interviewees said that it made no difference if the pension fund was solvent or not. The taxpayers are going to have to make up the difference.

I was under the impression that pension benefits were funded to a great extent.

Rather, it was the retiree health benefits that were funded on a pay-as-you-go basis.

Maybe the problem is much worse than I thought.

Don Levit

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OPEBs are horribly underfunded as a new GAO study documented (linked to here):

http://blog.nj.com/njv_johnbury/2009/12/ga..._opeb_debt.html

with a funded ratio of 4.3%. They're a bigger problem because most states don't have trust funds and insurance companies don't take IOUs.

Pensions aren't an immediate problem (except in Prichard, AL) since there remain trust funds and even if the governments themselves don't contribute, workers do so there is some input to keep what have become ponzi schemes working. In NJ for example I peg the funded ratio at 30% with about 5 years at the rate they're going before it's a true ponzi plan (i.e. remaining assets consisting of only employee contributions).

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I personally think this problem is not limited to pensions, public or otherwise. Consider "cash for clunkers". A benevolent government will give me $$$ for that piece of junk that is rotting out behind the barn. Where does the money come from? From the government of course, silly!

Let's cover another 30 million for health care, reduce costs, lower taxes, etc... How? Why the government will pay for it, of course. Silly me.

We need to reduce our carbon foot print! Hey, I know. Make energy more expensive. Those people who said the changes to healthcare would kill Grandma were wrong. Let's freeze her to death. Turn that thermostat down to 32.

When I was a kid my Dad taught me there is no free lunch. Dad must have been wrong since Uncle Sam can just print more money and buy us all some lunch, right?

Inflation? Didn't Al Gore say that more inflation in our tires would save the planet? Hey, combine the issues. Print more money and have better tire pressure and save gas, and.... John Lennon would be proud!

Oh, I feel so smart today. :P

Having braved the blizzard, I take a moment to contemplate the meaning of life. Should I really be riding in such cold? Why are my goggles covered with a thin layer of ice? Will this effect coverage testing?

QPA, QKA

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You two are making a lot of sense.

I share many of your concerns, not only about trust funds and the pending health legislation, but also how social insurance has been utilized up to now.

We know that the trust finds for Social Security and Medicare are not like trust funds in the private sector, or like the trust funds for state employees.

The private sector trust fund is a separate account that is supposed to be used fpr the exclusive benefit of the participants.

Not so with Social Security and Medicare.

"The government does not set aside assets to pay future benefits or other expenses associated with earmarked funds (payroll taxes). The cash receipts collected from the public for an earmarked fund are deposited in the U.S. Treasury, which uses the cash for general purposes.

This is from the Fiscal Year 2008 Financial Report of the U.S. govewrnment, page 96.

Go to: http://www.gao.gov/financial/fy2008financialreport.html.

From Accounting for Social Insurance, Revised published by the FASAB, which develops accounting principles and standards for the U.S. government

Page 85 - Social insurance is not an employee benefit. The accounting methods for employee retirement benefits reflect the fact that employees voluntarily exchange lower wages during their working years to receive certain future benefits. Suich an exchange does not occur with social insurance benefits.

Page 87 - A non exchange transaction arises when one party receives value without directly giving or promising value in return. In regards to social insurance benefits the federal government gives value to beneficiaries without receiving value in return. The fact that benefits paid are not based on the amount of taxes paid confirms the nonexchange nature of social insurance.

Go to: www.fasab.gov.

Click on Exposure Drafts and Documents for Comment.

Don Levit

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Below Ground is onto something very important.

There are probalby many variations of this around:

A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policy, always followed by a dictatorship. The average age of the world's greatest civilizations has been 200 years.

Great nations rise and fall. The people go from bondage to spiritual truth, to great courage, from courage to liberty, from liberty to abundance, from abundance to selfishness, from selfishness to complacency, from complacency to apathy, from apathy to dependence, from dependence back again to bondage.

Possibly, "always followed by a dicatorship" is hyperbole, but the risk of collapse is real.

I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.

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David:

That is an apropos quote, not only from the collecfive standpoint, but also from an individual perspective.

It is part of our nature to vacillate between our best and worst selves, and everything in between.

We need to make bondage part of our minority and spiritual truth as part of our majority.

In today's environment, spiritual truth is not much part of our collective way of thinking, speaking, and acting.

If an election were held today, bondage would win hands down.

Spiritual truth will set us free, but first, it will make us miserable.

Instead of deferring the misery through debt and overspending, we need to work through it.

All we can do is our parts, bring others along, and hope that we are on the right track.

Don Levit

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Assuming that a civilizatiion's life span is 200 years, I wonder how far along we are.

I also wonder what stage we are at ? IMHO it seems we already have complacency and are getting apathy.

George D. Burns

Cost Reduction Strategies

Burns and Associates, Inc

www.costreductionstrategies.com(under construction)

www.employeebenefitsstrategies.com(under construction)

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I also wonder what stage we are at ?

I've heard that another sign of decline is ending sentences in prepositions.

:lol:

I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.

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It seems that complacency is part of the "dumbing down" of our society.

I hope that your response is not showing apathy towards my complacency regarding ending with a preposition which practice has become very common and probably soon will be acceptable.

That is also not something to laugh at. Webster's also classifies "at" as a noun.

George D. Burns

Cost Reduction Strategies

Burns and Associates, Inc

www.costreductionstrategies.com(under construction)

www.employeebenefitsstrategies.com(under construction)

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Webster's also classifies "at" as a noun.

...if it refers to the element astatine (atomic number 85).

I've heard that ignorance and apathy are things up with which we should not put. But then, who knows, and for that matter, who cares? :D

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In Webster's it is At(symbol) for astatine not at. The at(noun) is something else.

George D. Burns

Cost Reduction Strategies

Burns and Associates, Inc

www.costreductionstrategies.com(under construction)

www.employeebenefitsstrategies.com(under construction)

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Absolutely correct. "at" is a noun when it refers to money in Laos. One kip = 100 at, where a kip is a sort of Laos dollar and an at is a sort of Laos penny.

In this context, "at" is a perfectly proper word with which to end a sentence. :lol:

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David:

Can you tell me who may have originated that quote?

Also, do you know the context in which it took place?

For example, what democracies was he or she referring to?

I plan to use this in a "sermon" i am giving at my church on Sunday.

Happy new year to you and all involved with Benefits Link.

Don Levit

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