Establishment Tries To Suppress "Dissident Actuaries" Explosive Report On Public Pensions

Tyler Durden's picture

Submitted by Walter Russell Mead via The American Interest,

America’s slow-motion public pension train-wreck (by some estimates, the shortfall currently exceeds $3 trillion) has been kept in motion for years by deeply dishonest accounting practices employed by state and local governments, which presume unrealistically that pension funds can consistently earn white-hot annual returns approaching eight percent. So it’s disappointing, but not particularly surprising, that the actuarial establishment moved to suppress a report pointing this out.

Pensions and Investments reports:

The American Academy of Actuaries and the Society of Actuaries Monday abruptly disbanded its longtime joint Pension Finance Task Force, objecting to a task force paper challenging the standard actuarial practice of valuing public pension plan liabilities.


“This paper (is) being censored by the AAA” and SOA, said Edward Bartholomew, who was a member of the former task force, in an interview. “They didn’t want it to get out.”


Others who were members of the task force also said in interviews the two actuarial groups are trying to suppress publication of the paper.

There are powerful interests that don’t want public pensions to be governed by the same kinds of accounting principles used in the private sector because… well, because if they were, public pensions would go from seriously underfunded to catastrophically underfunded.

Union officials and state legislators (in both parties) seem to believe that it makes more sense to allow public pension funds to play “let’s pretend” with public money. To be sure, the sudden imposition of a tougher standards would cripple business as usual in many state and local governments, so there can and should be some reasonable accommodations made to allow the adjustment to take place in a less disruptive fashion. Governing by catastrophe is almost never a good idea, and a series of small and incremental changes is usually (though not always) a better way to manage public affairs.

In the long run, shifting to a more portable system of public pensions—defined contribution, rather than defined-benefit—wouldn’t just help save states and municipalities from fiscal ruin. It would also do much to improve the performance of the civil service. The current system creates a jobs-for-life mentality in public employment because workers need to stay at their positions for decades to collect the full value of their pensions. Somebody who was a good teacher at 30 but wants to leave and should leave at 40 is currently trapped. Also, one of the reasons the unions fight quality evaluations so fiercely is that the loss of job and pension is so much more draconian than simply losing a job.

The report from dissident actuaries might have helped push state and local pension systems down a more sustainable path. And the conduct of American actuarial leaders—disbanding a reputable task force that had prepared a report that the bureaucracies didn’t like, and then hinting at legal action if the report is published—is irresponsible at best and corrupt at worst. Is it any wonder that Americans are fed up with experts and the institutions they manage?

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InsaneBane's picture

They are trying to fish in troubled waters..were truth resides in clear water.

Stuck on Zero's picture

I definitely want everyone to ignore the problems until the crackup boom. If politicians see problems ahead they'll raise taxes through the roof to pay for the inflated pensions of government workers.

InsaneBane's picture

"There are powerful interests that don’t want public pensions to be governed by the same kinds of accounting principles used in the private sector because… well, because if they were, public pensions would go from seriously underfunded to catastrophically underfunded."

They will never succeed!

Antifaschistische's picture

everytime the FED cut interest rates two things should have happened.

FED cuts rates by 1%

a) cut pensioneer benefits by 1%

b) force employees under the probram to pay 1%

....and let EVERYONE know that this is the result of the FEDERAL reserves decision.  (i.e. Wall Street Bankers cutting the rate at which they can borrow money)

by the time we cut 7% their would have been a compete revolt against the FED by public sector employees.

SweetDougisaTwat's picture

Brilliant!  And, I am not being sarcastic whatsoever.

MalteseFalcon's picture

This shortfall must be hidden or the pitchforks come out now.

If you live where there a a large public union pension shortfall, consider moving.


InsaneBane's picture

Just take back your birth certificate and know your universal need to study, because .gov has answers to revolting proles.

Bastiat's picture

$3 trillion?   Is that a problem?  How many trillions went to bail out the banks?

philipat's picture

I feel sure that Wikileaks would be happy to assist?i

JamesBond's picture

Clinton is already campaigning to raise taxes on the middle class.  

yogibear's picture

I can see why Warren Buffet was clapping, what about the rest of the idiots?

lasvegaspersona's picture

Her statement was the dumbest thing I have ever heard in politics. You just don't actually say those things!

Who was in that audience anyway. They were applauding!

Must have been 100% politicians who need those taxes to fund their retirement plans.

divingengineer's picture

$3Trillion, is that a lot?

I have no concept anymore, I just picked up a head of cauiflower  at whole foods this week and saw that it was $6.

For a fucking head of cauliflower.

JRobby's picture

Wow! Whole Foods while most people are eating crappy half foods or less....Gettin Real!

Offthebeach's picture

1. It's organic.
2. Grown in people's non profit cooperative.
3, Picked by Danish exchange schoolgirls.
4, Indavidually broght to your Whole Fools by elderly Japanese man, in his front wicker basket, covered by damp virgin silk, on a antique british 3 speed.

( whole foods, aspirational foods.
Please, we're made it drink from puddles and eat road kill )

yogibear's picture

Don't buy it there anymore. Whole paychecks a reputation of gouging all in the name of organic.

It would make you more irate if you were paying 50%  in taxes to pay for illegals and public unions.

lasvegaspersona's picture

The celibate cauliflower is cheaper.

SeattleBruce's picture

"$3 trillion?   Is that a problem?  How many trillions went to bail out the banks?"

When added together with all the other bubbles, yes.

DeadFred's picture

Yes brilliant, but are you willing to hold your breath until this happens?

lasvegaspersona's picture


I have every confidence they can achieve "catastrophically underfunded"

junction's picture

Maybe half those public employees with super high pensions are former cops, who still carry sidearms.  Do anything to cut their pensions and they will get violent.

Not My Real Name's picture

"Cops still carry sidearms. Do anything to cut their pensions and they will get violent."

You speak as if the taxpayers who are footing the bill for these gold-plated pensions don't have sidearms too. 

JRobby's picture

Agreed, that additonal tax would really eat in to our weapons purchases.

"kept in motion for years by deeply dishonest accounting practices"

Every aspect of societal "norms" are fabrications. The entire construct is a lie and there are alot of people lying.


Crisismode's picture


"I just found out there's no such thing as the Real World,

just a lie you've got to rise above."


-- John Mayer


Rigger's picture

'Experts' lol. I'd like to see all these experts swinging from lamp posts in my lifetime.

GRDguy's picture

What's one more lie in a sea of lies?

Anopheles's picture

It won't be taken seriously until the checks bounce.  And then the finger pointing will start.  Along with all the accusations that they've known about this for years and did nothing, yada, yada, yada....

Here2Go's picture
Here2Go (not verified) Anopheles Aug 6, 2016 8:29 PM

"they've known about this for years and did nothing"


Yeah, just wait until the dindu nuffins who got their comfy little government jobs because of affirmative action quotas start seeing those checks bounce.


Once again, they'll blame Rich Whitey.

True Blue's picture

No way they let Gov't pensions fail; which is why they did nothing and will do nothing, because it allows for bountiful corruption and endless feeding at the trough all backstopped by the magic Ctrl-P of Janet Yellen. At least I hope they give it an honest name, like "Operation Twist it into the Taxpayers' Back'" "Operation: We Zimbabwe'd your Ass," "Operation: Government Employees are worth more than You Little People" or suchlike.

And every one involved with them knows this, presenting the biggest moral hazard of all time.

SeattleBruce's picture

Yes, it would be like letting SNAP fail...but at some point they will lose control of extend and pretend.

WTFUD's picture

A Group Hug, 3 Kumbaya's and a reach around 'll fix this gig. Always works for me when i run out of cash and it's my shout at the bar!

i_call_you_my_base's picture

"public pension funds to play “let’s pretend” with public money."

In theory, a pension fund should not be "public money", it's the money the employees paid in. The problem is that they mix and shift the funds around for other purposes and pilfer the money. And 8.5% might be a delusional target, but the gap would be much smaller if it wasn't for the fucking fed.

Doom Porn Star's picture

Under DEFINED BENEFIT PLANS it doesn't matter if the money was ever put in, or if it was lost in the crooked Wall St. casino: they demand the taxpayers pay again to make their pensions whole.

The pensions could be wildly 'overfunded' but if the 'investments' tank they run right back to the taxpayers and jack them as second time to top off the pension fund AGAIN so as to cover the guaranteed payouts...

SeattleBruce's picture

Fortunately we taxpayers have endless resources!/s

ZD1's picture

"In theory, a pension fund should not be "public money", it's the money the employees paid in."


Some public employees don't have to pay anything into government pension funds while other public employees only contribute a small portion to fund their government pensions.


For example in Oregon, the state negotiated a deal with its workers that it they forgo most of a pay raise then the state will pick up the 6 percent workers contributed to their retirement. The state also allowed workers to retire at any age with 30 years of service.


State workers hired before 1996 were typically leaving state service with retirement benefits that equaled 100 percent of their three highest years of salary -- which itself could be above their actual salary as it included such add-ons as unused sick leave.

sun tzu's picture

It public money that is being used to pay the employees and fund the pensions and public money will be used to bail out the pensions

medium giraffe's picture

task force fuckers need to learn the subtle art of massaging performance figures per managerial requirement.  amateurs. 

Food Loaf Junkie's picture

I am well aware of what ZIRP and mismanagement has done to pension funds across the board.  As a retiree receiving one of those pensions I know there is nothing I can do about the disaster looming.  I just take a deep breath and quickly utilize each payment towards food, hard goods, PMs and Liquor for trading.  (I have secured pb and nitrocellulose for reloading previously.) 

Fuku Ben's picture

I appreciate the actuaries integrity. It's hard to find that in any part of the totally criminally corrupt hierarchy nowadays. Nobody can say it enough that these criminals running this global financial scam of a system are going to steal it all. 100% of it if they can. It's already starting with pension cuts and rejected bailouts. Anyone saying that 7.5% expected annual returns on a pension is reasonable should have their licenses pulled.

I was explaining to a someone the other day to expect their pension and benefits to get cut possibly all of it. They glossed over with cognitive dissonance. Plan accordingly if you can.

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BeanusCountus's picture

Also been a recipient of the "blank stare" when trying to explain how it works in this low interest rate environment, stock markets that are up a few percent since 2000 and extended lifespans. The oncoming train gets closer every day and it's picking up speed.

Cloud9.5's picture

When will the Floridaretirement fund go broke? 

DocBerg's picture

Then there is Illinois.  One of my mentors who is a justly renowned public finance expert told me several years ago that he fully expects to get IOUs from the State Universities Retirement Fund, instead of money.

True Blue's picture

I thought he already did: they call them 'Federal Reserve Notes.'

sun tzu's picture

Texas is far behind Illinois, NY, NJ, California etc in underfunded pensions. TX is talking about a 401k plan for state employees and the problem goes away.

Huh Reeeally's picture

When Canadian snowbirds can no longer afford to flock to Florida every winter. /s

Stroke's picture

Believe it or not, Florida's pensions are fully funded

spanish inquisition's picture

Jesus, simple math will no longer be tolerated.