The July 1, 2013 actuarial reports for the New Jersey pension plans are coming out and if you are of a mind to explain to your teacher friends why they will soon be seeing Detroit-type ‘adjustments’ to their pensions just point them to page 8 of the Milliman report for the Teachers Plan – TPAF – (Buck does the valuations for the other 6 plans in the system) titled ‘Risk Measures.’ Search the Buck reports and you won’t even find the word ‘risk’ mentioned but Milliman beginning with their July 1, 2009 report thought it a good idea to mention that…..
THE PLAN BARELY HAS 50% OF THE ASSETS NECESSARY TO ANNUITIZE ONLY (YES ONLY) THE RETIREES WITH THE OTHER 475,000 PARTICIPANTS HAVING LESS THAN NOTHING.The Risk Measures exhibit on page 8 for the last five years compares the value of the liabilities* for retiree benefits to the market value of assets less the Annuity Savings Fund (accumulated member contributions). That percentage as of July 1, 2013: 50.2%.
Now compare that to July 1, 2000 (when Milliman didn’t feel the need to insert a Risk Measures exhibit). $1,159,146,402 in retiree payouts valued at $12,040,604,827 and easily covered by the $35,839,120,536 in assets even when reduced by the $5,034,537,874 in the Annuity Savings Fund. That percentage came to 255.84% and even considering the dodgy assumptions for valuing liabilities (then and now) there would have been plenty of money to annuitize retirees.