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Government plans - state and local - misc

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Puerto Rico Public Pension Fund Joins Government's Bankruptcy Case
"The government's request to include the pension system ... was approved by the oversight board [on May 22].... Guy G. Gebhardt, the acting U.S. trustee for the bankruptcy case, said in court documents that he will appoint a retiree committee for participants in the commonwealth's five public pension systems. An ad hoc retiree committee had already asked the court to form an official committee." (Pensions & Investments)
Puerto Rico Goes to Court Over Failing Public Pension System
"Puerto Rico is seeking help from federal court to restructure the debt of the U.S. territory's public pension system, which is projected to run out of money this year. Gov. Ricardo Rossello said late Sunday that the government has been unable to reach a deal with creditors to whom it owes some $3 billion.... Rossello said retired workers will still receive their pensions, and that the government will dip into its general fund once the pension system itself runs out of money." (ABC News)
Pennsylvania Independent Fiscal Office Evaluates Teacher Pension Funding Bill
"The Pennsylvania Independent Fiscal Office ... concludes that the measure would change its financing but would leave benefit provisions intact.... The bill would ... accelerate the amortization of the unfunded accrued liabilities ... by: [1] computing the unfunded liabilities using the market value of assets; [2] providing for a fresh start amortization of the unfunded liabilities; and [3] providing a schedule of payments that would amortize the unfunded liabilities over approximately 20 years, based on a schedule of payments increasing at specified rates." (National Tax-Deferred Savings Association [NTSA])
[Opinion] New Jersey's Stupid Pension Trick: Let's Use Lottery Money!
"The lottery cash is already being used for something. Moving that cash to the pensions means they have to decide to cut something else. Which they would have to do if they simply said 'we're putting more cash in the pensions'. " (STUMP)
Puerto Rico Bankruptcy Pits Investors Against Pensioners
"Puerto Rico's fiscal tug-of-war with pensioners, bondholders, other creditors and its own finances starts a new, uncharted chapter on May 17. That's when a specially appointed federal judge opens bankruptcy proceedings in a case that dwarfs previous public bankruptcies, with nearly $50 billion in unfunded pension liabilities, $74 billion in bondholder debt and dim financial prospects." (Pensions & Investments)
Retiree Health Care Benefits for State Employees in Fiscal Year 2015 (PDF)
"In 2015, approximately 80 percent of state government units offered health insurance to retirees under age 65 and approximately 70 percent offered the benefit to those over age 65.... This report focuses on OPEB finances for states and state agencies, and all relevant data are sourced from state and statewide retirement system financial reports. A list of the agencies responsible for administering retiree healthcare plans reflected in this report is [included]." (National Association of State Retirement Administrators [NASRA])
Hidden Debt, Hidden Deficits: 2017 Edition (PDF)
32 pages. "The unfunded obligations of the pension systems sponsored by state and local governments in the United States continue to grow. [This] second annual report on the off-balance-sheet pension promises of state and local governments [studies] in detail 649 pension systems around the United States, including all of the main pension systems of the states, the largest U.S. cities, and the largest U.S. counties. [It reports] on both their own measurements of their costs and obligations, and how these differ from market valuations that are consistent with the principles of financial economics." (Hoover Institution)
[Opinion] New Jersey's Big Pension Gamble
"[T]his latest attempt to shore up its chronically underfunded state pensions by using lottery proceeds is a desperate move which will only kick the can further down the road. It will help at the margin, especially for the state teachers' pension fund, but it's doing nothing to address serious structural flaws that continue to hamper the state's pensions." (Pension Pulse)
NJ Gov. Christie Introduces Plan to Use Lottery Revenue for Pensions
"The state says the plan would immediately reduce unfunded obligations by $13.5 billion for the state's separate pension funds for teachers, public employees, and police and firefighters ... [and] raise the funded ratio of the retirement system from 45 percent to 59 percent. It would provide $37 billion over 30 years." (U.S. News & World Report)
PublIc Pension Funded Ratio Regains Ground Lost in Q4, Surges to 72.0% (PDF)
"The strong equity returns in Q1 led public plan asset growth to outpace the rise in pension liability, increasing the estimated funded status of the 100 largest U.S. public pension plans by $78 billion from the end of December 2016 through the end of March 2017 ... During the first quarter, the deficit dropped from $1.392 trillion to $1.314 trillion. As of March 31, the funded ratio stood at 72.0%, up from 70.1% at the end of December." (Milliman)
Closing a Governmental Pension Plan Increases Costs for Taxpayers
"In 1997, Michigan closed the Michigan State Employees' Retirement System (MSERS), the pension plan for state employees.... [E]mployer contributions to MSERS have risen sharply, from $145 million to $750 million, in the years since the plan was closed to new hires in 1997. This has occurred even as the payroll base has declined by more than $1 billion." (National Public Pension Coalition)
CalSTRS Employer Contributions Are Doubling, But Is That Enough?
"The 2014 legislation freezes rates paid by school districts at 20.5 percent of pay, after they more than double to 19.1 percent by the end of this decade. But ... the state rate can continue to increase up to 0.5 percent of pay each year.... Actuaries said CalSTRS, only 64 percent funded last June, is still on track to reach 100 percent funding by 2046. Whether CalSTRS remains on the path to full funding ... will largely depend on whether the state pays enough under the new plan." (Calpensions)
State and Local Government Pensions at the Crossroads
"Underfunding, questionable investment decisions, imperfect assumptions on future market returns, declining interest rates, and the structure of defined benefit plans have created a fiscal crisis for many public pension funds. The implementation of several recent GASB pronouncements has made these problems more apparent and distinct to the public. The authors examine the current reporting challenges, describe the approaches taken by some governments, and suggest their own potential solutions." (The CPA Journal)
75% of State and Local Government Workers Were in DB Plans in 2016
"In March 2016, 75 percent of state and local government workers participated in defined benefit pension plans. Of these workers, 57 percent participated in frozen defined benefit plans, or plans that are not open to new employees. For 98 percent of workers who participated in defined benefit pension plans, employee benefits are based on a percentage of their earnings during a specified number of years, usually at the end of their careers. The other 2 percent of workers participated in cash balance plans, where employees are credited with a specified contribution and a rate of interest on the contribution; the benefits are provided as a lump sum and may be converted to an annuity." (U.S. Bureau of Labor Statistics [BLS])
Actuarial Inputs and the Valuation of Public Pension Liabilities and Contribution Requirements: A Simulation Approach
"Discount rates, salary growth rates, cost methods, and mortality tables all influence funding ratios and contribution requirements. Without considering these effects, comparisons of funding ratios across pension systems will produce biased results. The discount rate assumption is the most influential actuarial input on funding ratios and contribution requirements.... The effects of actuarial inputs greatly depend on plan characteristics such as demographic profiles and asset levels[.]" (Center for Retirement Research at Boston College)
Texas Senate Passes Bill Overhauling Houston's Troubled Pension Systems
"[The legislation provides that,] if the police or fire systems have less than 65 percent of the money they will need to cover future retirement costs after 2021, new employees will have to ... [enter] a cash balance plan.... Currently, the city's police system is funded at 62 percent, the firefighter fund at 81 percent and the municipal fund at 48 percent[.]" (The Texas Tribune)
How Lavish Benefit Promises Are Coming Back to Haunt Public Sector Workers
"Benefits are taking a big bite out of school budgets in a number of states that have made lavish pension and retiree health care promises to workers. Connecticut, with one of the worst-funded state pension systems, has seen the cost of supplying benefits to its school employees rocket by 123% over 10 years, so that benefits alone now consume 27% of its public education budgets, up from 18% a decade ago.... In many states, there's little hope that this pressure will end soon." (Investor's Business Daily)
[Opinion] Start Spreadin' the News: Time to Defuse NYC's Pension Bomb
"New York City's pension costs will soon displace social services as the second-biggest spending category in the city budget, consuming the equivalent of more than 80 cents out of every dollar raised by the city's personal income tax. But even with annual contributions approaching the once-unimaginable level of $10 billion a year -- more than the entire budgets of all but a handful of large cities -- the city remains vulnerable to a pension funding crisis within the next few years." (New York Daily News)
Why Pensions Matter: The History of Defined Benefit Pension Plans in the U.S. (PDF)
10 pages. "Pensions, in the broadest sense of the term, have existed since ancient Rome.... Governments began offering pensions because they are the most effective and cost-efficient way for working families to prepare for retirement.... This report will explore the history of defined benefit public pensions in the United States, why they were implemented in the first place, and why they continue to remain today." (National Public Pension Coalition)
[Opinion] Houston's Financial Future Will Be Decided in Large Part in This Legislative Session
"Houston currently owes $8.2 billion in pension debt -- more than any other city in Texas. It does not have enough money to pay for nearly half of the retirement benefits workers have already earned.... Under the [pension reform proposal currently pending in the Texas legislature], the city would lower its assumed rate of return on investments for all plans from 8 percent or more to 7 percent; reduce benefits for public workers; and implement a financial corridor provision that would cap the city's contributions to the pension plans." (Laura and John Arnold Foundation)
Jacksonville City Council OKs Bill to Close Pension Funds
"The Jacksonville City Council unanimously approved a bill closing the $2 billion Jacksonville (Fla.) City Retirement System and $1.8 billion Jacksonville Fire & Police Pension Fund. The retirement systems will close Sept. 30 and employees hired on or after Oct. 1 will be automatically enrolled in the city's $24 million ... retirement system [which] consists of the general employees' and corrections officers' pension funds." (Pensions & Investments)
Public Pension Reporting and Disclosure: The Current State of Practice, and Examples of What Works Well
"[1] A majority of systems follow GFOA reporting standards in producing their Comprehensive Annual Financial Reports, with nearly half of the sample also developing a plain language annual financial report; [2] Virtually all of the systems develop an actuarial valuation (annually), an experience study (at an average of every five years), and have a funding policy produced by the system and/or established in state statute; [3] Active engagement with key stakeholders is a hallmark of systems with robust communications and reporting initiatives; [4] Leveraging social media and/or establishing advisory committees has helped systems garner detailed feedback from their stakeholders." (Center for State & Local Government Excellence)
Understanding Public Pensions: A Guide for Elected Officials
"Since 2009, all states have made modifications to their retirement plans to help ensure their long-term sustainability.... [T]here are no one-size-fits-all solutions from state to state or even from plan to plan to ensure that pension plans are properly financed and effectively managed to pay benefits for the long-term.... Any modifications should be carefully considered to avoid unintended consequences or costs." (Center for State & Local Government Excellence)
[Opinion] Are State Pension Systems Failing to Deliver?
"[T]here should be a detailed breakdown of fees paid to brokers, advisors, lawyers, and pretty much all service providers at any public pension plan.... All public pensions should report all their returns net of all fees and costs because that represents the true cost of managing these assets.... [M]ost US state pensions ... [are] clinging on to their pension rate-of-return fantasy which will never materialize. They do this to keep contributions low to make their members and state governments happy but sooner or later, the chicken will come home to roost[.]" (Pension Pulse)
[Opinion] Laws of Unintended Consequences: Pension Reform Gone Awry (PDF)
"The Public Employees' Pension Reform Act (PEPRA), effective January 1, 2013, was passed to rein in [California] pension costs that were viewed as unsustainable.... Similar to how the Legislature took a blunderbuss rather than a surgical approach to pension reform in PEPRA, some courts have launched comprehensive, rather than targeted, attacks on the 'vested rights' doctrine. In recent months, their rulings have started to gain momentum." (Jeffrey R. Rieger, of Reed Smith LLP)
Puerto Rico Pension Participants Sue to Stop Cuts
"Public sector employees and retirees in Puerto Rico filed suit [on April 12] to prevent the governor and oversight board from implementing a fiscal plan that calls for 10% reductions in benefits paid by the Puerto Rico Government Employees' Retirement System, Hato Rey, beginning in 2020." (Pensions & Investments)
Looking for a Retirement Lifeline in Puerto Rico
"Out of every three workers ages 35 to 64 in Puerto Rico, one is saving for retirement and two are not. One in five (19%) workers in this age group is contributing to a retirement savings plan. Forty-four percent (44%) of workers have no access to a retirement plan through their employer. Defined benefit plans are offered to thirty-six percent (36%) of workers surveyed and a similar share (38%) has access to a defined contribution plan. Nineteen percent (19%) have access to both types." (AARP)
[Opinion] Watching the Money Run Out: Applying a Simulation to a Chicago Pension Fund
"The reason the pension assets run out is because the starting assets are insufficient, and the contributions are really insufficient. This is why [the author's model considers] at what the increase in contributions would have to be to cover the outgoing cash flows. In this case, the increase is over 300%. So if you think the current contributions are too high, how are 4x the contributions going to be affordable? If you think pre-funding the pensions is expensive, wait until you have to do pay-as-you-go. It's really expensive." (STUMP)
State and Local Government Spending on Public Employee Retirement Systems (PDF)
"On a nationwide basis, contributions made by state and local governments to pension trust funds account for 4.5 percent of direct general spending.... This update provides figures for public pension contributions as a percentage of state and local government direct general spending for FY 2014, and projects a rate of spending on pensions on an aggregate basis for FY 2015." (National Association of State Retirement Administrators [NASRA])
Appeals Court Unanimously Vindicates San Diego's 2012 Pension Revisions
"California's Fourth District Court of Appeal unanimously overturned a 2015 state labor board ruling that said the cutbacks were illegal ... The initiative, Proposition B on the June 2012 ballot, replaced guaranteed pensions with 401(k)-style retirement plans for all newly-hired city employees except police officers." (The San Diego Union-Tribune)
Evaluating Pension Reform Options with the Public Pension Simulator
"[The authors] used the Urban Institute's new Public Pension Simulator to estimate how potential reforms to Pennsylvania's teacher pension plan might affect employer costs and teacher benefits. [The] report looks at various reform options, including eliminating early retirement benefits, raising the normal retirement age, changing the benefit formula, and eliminating cost-of-living adjustments (COLAs) provided to retirees. The results show that eliminating the early retirement option would significantly reduce costs while safeguarding pensions received by teachers with shorter careers." (Urban Institute)
Public Pensions Matter -- Just Ask Michigan and West Virginia
"In the 1990s, both West Virginia and Michigan closed public pension plans. West Virginia was first, closing its teacher pension plan in 1991.... In 1997, Michigan closed its traditional pension plan for state government employees. What happened next is a warning to other states or cities considering a similar course." (The Hill)
South Carolina Legislature Passes Pension Reform Bill
"[T]he new law ... would increase the employer contributions to the state pension fund 2 percentage points to 13.56%. For employers contributing to the Police Officers Retirement System, the 2 percentage point increase will raise the contribution rate to 16.24%. Both employer contribution rates will increase after fiscal year 2018 by an additional 1 percentage point per year through the end of the 2023 fiscal year." (Pensions & Investments)
De-Risking Strategies for Governmental Pension Plans
"Governmental as well as private-sector sponsors have taken de-risking actions related to plan design (i.e. reducing future benefits in some manner).... Some governmental sponsors have implemented two-tiered benefit provisions, with less-generous benefits provided to employees hired after a certain date.... Other governmental organizations have frozen plan participation and cover newly-hired employees under a defined contribution plan." (Cowden Associates, Inc.)
Rhode Island Treasurer Proposes Bill to Help Municipal Plans Join State Retirement System
"The Healthy Local Pensions, or HELP, bill ... would allow plans to adopt a longer amortization period than the current 20-year period, and would also allow them to gradually move to the [state's Municipal Employees' Retirement System] over several years.... While the 116 municipal plans in the state system have an average funded status of 83%, the pension plans that remain locally administered carry a combined $2.4 billion unfunded liability. Of the 34 locally administered plans, 19 are below 60% funded and 12 are below 40%." (Pensions & Investments)
Quarterly Survey of Public Pensions: Fourth Quarter 2016
"This report provides national summary data on the revenues, expenditures and composition of assets of the largest defined benefit public employee pension systems for state and local governments.... Tables 1 and 3 include data on cash and security holdings; and Table 2 provides data on earnings on investments, contributions and payments." (U.S. Census Bureau)
[Opinion] NJ Pension Proposal Would Exacerbate Pension Problems
"State legislators worried about New Jersey's deep pension debt are contemplating turning over administration of one of the largest retirement funds to workers and retirees. The idea behind the move sounds simple: Workers and retirees, who are beneficiaries of the system, can be relied on to run it well. The only problem is that this has already been tried around the country and has helped create some of the nation's biggest pension fiascos, as workers and unions have managed pensions for their benefit, leaving taxpayers on the hook for huge losses. This is not the kind of reform that Jersey residents facing tens of billions of dollars in pension debt need." (Philadelphia Inquirer)
New Jersey Credit Rating Cut for 11th Time Under Gov. Christie
"Persistent underfunding of the state's public pension system and weak budgetary position contributed to the rating cut." (Reuters)
[Opinion] Pension Crisis Too Big for Markets to Ignore
"Unfunded pension obligations have risen to $1.9 trillion from $292 billion since 2007.... [In] 1952, the average public pension had 96 percent of its portfolio invested in bonds and cash equivalents. Assets matched future liabilities. But a loosening of state laws in the 1980s opened the door to riskier investments. In 1992, fixed income and cash had fallen to an average of 47 percent of holdings. By 2016, these safe investments had declined to 27 percent." (Bloomberg)
Illinois Governor Vetoes Bill to Help Improve Funding Ratio for Two Chicago Pension Plans
"The measure ... was intended to improve the pension plans' funding ratios to 90% each by 2057 through higher contributions for certain employees and increased city contributions. The bill required that Chicago begin making contributions on an actuarial basis to both pension funds in 2023.... The bill would also have raised payroll contributions for participants of both pension funds hired after Jan. 1, 2017, to 11.5% from 8.5% ... Illinois faces roughly $130 billion in combined unfunded pension liabilities across its five state retirement systems." (Pensions & Investments)
Managing Risk While Investing for Governmental Retirement Plans
"[T]here is lasting confusion arising from the fact that these big state-run plans are not subject to [ERISA]... 'But this cannot be taken as these plans having free reign to invest however they please,' [George Michael Gerstein, of Stradley Ronon Stevens & Young] warns. 'They are all subject to state law -- and these state laws vary tremendously. Some are very strict and lay out very specific requirements as to how state money can be allocated.... Many have at least some restrictions on certain vehicles or transactions.' " (planadviser)
[Opinion] Stupid Public Pension Trends: Divestment Expands
"Once the California politicians are done going through removing all the deplorables from being considered from pension investments, they'll be left with some artisanal gluten-free bread company in Vancouver.... [P]oliticians have no fiduciary duty to the pension funds.... In some of these cases, the 'dirty' investments should not be invested in, because the financial outlook is bad. But in some of the cases the depth of analysis seems to be 'we think this stuff is bad, so obviously it can't keep making money.' " (STUMP)
[Guidance Overview] GASB Omnibus Statement Addresses Pension and OPEB Issues
"The issues covered by GASB Statement No. 85, Omnibus 2017, include: ...Timing of the measurement of pension and other postemployment benefits (OPEB) liabilities and related expenditures recognized in financial statements prepared using the current financial resources measurement focus ... Recognizing on-behalf payments for pensions or OPEB in employer financial statements ... Simplifying certain aspects of the alternative measurement method for OPEB." (Governmental Accounting Standards Board [GASB])
Annuity Options in Public Pension Plans: The Curious Case of Social Security Leveling
"Social Security Leveling is an annuity option that allows participants to receive a level income before and after age 62. The retiree receives a larger pension benefit prior to age 62, but then the pension benefit is lowered at age 62 when the individual is expected to claim Social Security benefits. This option is not uncommon in public pension plans ... . [O]ne-third of all [North Carolina public sector] retirees selecting a single life annuity between 2009 and 2014 opted for Social Security Leveling.... [The authors] see higher rates of ex post 'regret' in the annuity choice among those choosing the level income option." (National Bureau of Economic Research [NBER])
Urban Institute Provides Online Public Pension Simulator
"Covering 14 million state and local government employees, public pension plans typically provide lifetime retirement benefits that are based on years of service and the salary earned near the end of a career.... The public pension simulator shows how much state and local government retirees would receive in pension benefits, how much governments will pay for those benefits, and how costs and benefits would change under various pension reforms. Calculations depend on various user-set assumptions." (Urban Institute)
CalPERS Forced to Declare Southern California Agency in Default of Pension Obligations
"The [CalPERS] Board of Administration [on March 15] declared the East San Gabriel Valley Human Services consortium in default and terminated its contract after it failed to pay more than $400,000 to fund its pension plan.... [P]ension benefits will be reduced by approximately 63 percent for 191 members and 24 percent for six members hired after pension reform went into effect in 2013, effective July 1, 2017, if the consortium fails to pay." (CalPERS)
Public Pension Assets Quarterly Update, Q4 2016
"As of the fourth quarter of 2016 (December 31), public pension assets were a record $3.86 trillion, up approximately 1.3 percent, from $3.81 trillion as reported for Q3 2016....The Federal Reserve reported in March that the combined value of defined benefit plan assets held by state and local governments as of Q4 2016 increased by 5.5 percent, to $3.86 trillion, from $3.66 trillion as of Q4 2015." (National Association of State Retirement Administrators [NASRA])
Puerto Rico Oversight Board Approves Fiscal Plan with Pension Changes
"[Puerto Rico's Financial Oversight and Management Board] and the government will take 30 days to work out a specific plan to be finalized by June 30, 2017, based on funding existing pension obligations on a pay-as-you-go basis, liquidating assets and using general fund revenues; enrolling all active members and new hires in defined contribution accounts to pay for future benefits; and progressively reducing total pension benefit payments by 10%. The oversight board has projected that Puerto Rico's three main pension plans could run out of money by fiscal year 2018." (Pensions & Investments)
In Puerto Rico, Teachers' Pension Fund Works Like a Ponzi Scheme
"In Puerto Rico ... the pension funds are so short of cash that money contributed by working teachers basically flows straight out to retirees. None of Puerto Rico's current teachers can expect to get their money back, because the fund is due to run out of money in 2018, long before they retire.... [T]his structure is legal in Puerto Rico because of a complicated series of changes in the law brought about in recent years by the island's financial crisis." (The New York Times; subscription may be required)
The State of State Teachers' Pension Plans
"Teachers' pension plans have always rewarded long-serving veterans at the expense of short-termers. But now, as more and more plans develop shortfalls, states have been imposing cost-cutting measures, and recent research shows that the newest hires are bearing the brunt of the changes, raising questions of fairness." (The New York Times; subscription may be required)
[Opinion] Attention, South Carolina: Closing a Pension is Never a Good Idea
"South Carolina lawmakers unanimously voted to increase contributions to state pension plans -- a system that supports 1 out of every 9 South Carolinians ... However, ... a last-minute amendment added a stipulation that the plans be closed to new employees once full funding has been achieved.... South Carolina legislators need look no further than the states and cities that have closed their pension systems to learn of the costly ramifications that follow." (National Public Pension Coalition)
Indiana House Advances Bill for Offering 401(k)-Style Plan to New Teachers
"Under [the proposed] plan, teachers new to the system could choose the traditional hybrid plan or the 401(k)-style account. A teacher's employer would be required to contribute an amount equal to 3 percent of the teacher's salary to the new defined-contribution plan, and teachers could contribute up to 10 percent of their salary. The bill would also allow teachers to change their minds after three years and use the pension-style plan going forward." (Indianapolis Business Journal)
Illinois Senate Passes Contribution Bill for Chicago Teachers Pension Plan
"The Illinois Senate on [Feb. 28] passed a bill approving additional state contributions to the $9.5 billion Chicago Public School Teachers' Pension & Retirement Fund, totaling $436 million for the next two fiscal years.... The passage of the current bill is dependent on the passage of 11 other bills affecting the state's fiscal 2018 budget. Four of those 11 bills were also passed by the Senate[.]" (Pensions & Investments)
CalPERS Investment Priority Shifts to Avoiding Loss
"Despite a low funding level little changed since massive investment losses nearly a decade go, CalPERS is focusing on avoiding another big loss, not risky attempts to maximize investment earnings.... CalPERS also sped up its 'risk mitigation' policy this month, lowering the trigger for tiny cuts of .05 to .25 percent in the earnings forecast used to discount future pension obligations. Now cuts will occur when annual earnings are 2 percent above the forecast, not 4 percent." (Calpensions)
In Puerto Rico, Pensions' Decline Pits Retirees Against Lenders
"As Puerto Rico attempts to sort out its tangled financial web, retirees may face bigger cuts than those in past U.S. municipal insolvencies ... Public pensions ... owe $45 billion in benefits ... [T]he pensions have almost no cash and a nearly 100 percent funding shortfall that is thought to be the largest ever for comparably-sized U.S. public pensions. Paying pension benefits out of the island's general fund, on a pay-as-you-go basis, could cost Puerto Rico $1.5 billion a year." (The New York Times; subscription may be required)
Detroit Mayor Proposes Trust Fund to Cover Future Pension Payments
"Under the plan, fund deposits and interest earnings would total $377 million by the end of fiscal 2023 ... Detroit, which exited the biggest-ever municipal bankruptcy in December 2014, has already set aside $70 million for the higher pension payments. The court-approved bankruptcy exit plan had projected city pension payments to spike to $111 million beginning in fiscal 2024 after years of minimal or no payments by the city. But a subsequent actuarial analysis pegged the payment spike at $200 million or more." (U.S. News & World Report)
Investment Return Volatility and the Los Angeles Fire and Police Pension Plan (PDF)
51 pages. "[This report examines] the potential implications of investment return volatility for the Los Angeles Fire and Police Pension Plan (LAFPP) ... one of five plans [selected] to analyze in detail.... [If] LAFPP's investment-return assumption is approximately correct over the long run, the plan has very little risk of becoming severely underfunded in the next thirty years, even if investment returns vary significantly from year to year.... Under plausible alternative investment-return assumptions, the risks of severe underfunding remain small but the city's contribution risks are greater." (Rockefeller Institute of Government)
Public Pension Plan Investment Return Assumptions (PDF)
"This brief discusses how investment return assumptions are established and evaluated, [and] compares these assumptions with public funds' actual investment experience ... [A] 25 basis point reduction in the return assumption, such as from 8.0 percent to 7.75 percent, will increase the cost of a plan that has a COLA, by three percent of pay (such as from 10 percent to 13 percent), and a plan that does not have a COLA, by two percent of pay." (National Association of State Retirement Administrators [NASRA])
CalPERS Passes Risk Mitigation Plan to Further Lower Assumed Rate of Return in the Future
"The new plan puts focus on reducing the investment portfolio's vulnerability to a market downturn but won't go into effect until the fiscal year that starts July 1, 2020. Its implementation will follow the completion of staggered decreases over the next three fiscal years ending June 30, 2020, that will take CalPERS' rate of return to 7% from the current 7.5%." (Pensions & Investments)
CalSTRS Cuts Misreported Pensions for Hundreds of Teachers
"Triggering at least two lawsuits, CalSTRS has cut the pensions of hundreds of retired teachers because extra work or pay was misreported as earnings for pensions, not for a 401(k)-style individual investment benefit with a guaranteed minimum return. An annual audit sample last year found overpayments to 87 retirees from 18 school districts totaling $237,854. The pensions of the retirees will be cut to the corrected amount and overpayments will be recovered by an additional 5 percent cut." (Calpensions)

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