Featured Post

Was it constitutional for Proposition 124 to replace PSPRS' permanent benefit increases with a capped 2% COLA?

In this blog I and multiple commenters have broached the subject of the suspect constitutionality of PSPRS' replacement of the old perma...

Monday, December 16, 2013

PSPRS webinar synopsis

The following is a brief synopsis of the PSPRS webinar, hosted by PSPRS Administrator Jim Hacking, that took place on December 11, 2013:

  • Financial status: The bulk of the webinar covered the financial status of PSPRS, CORP, EORP and the investment returns of the combined funds.  While the combined fund earned a return in excess of the expected rate of return, each pension has seen its funding ratio decrease since the end of last fiscal year.  The full consolidated annual financial report (CAFR) for the fiscal year that ended on June 30, 2013 is now available online, so a future post will deal more specifically with PSPRS' status.  For those who want to check out a shorter summary for each pension, the annual report summary for each system can be accessed at the corresponding link: PSPRS, CORP, and EORP.
  • Investment allocation:  There was an explanation of the current investment allocation and a comparison to allocations in the past. The point was that current diversification has made the investment pool less volatile, unlike in the past where investments were too heavily concentrated in equities.
  • COLA's:  There was an explanation about the new COLA system that went into effect with the passage of SB 1609, and the thresholds in both funding ratio and previous year's returns that need to be met in order to pay a COLA.  Though it was not discussed in the webinar, it should be noted that only eligible CORP retirees will receive a post-retirement benefit adjustment (i.e. COLA).  The CORP CAFR states that it will be less than 1% and use almost $6.5 million in excess returns from the past fiscal year.
  • Cost to change to defined contribution pension system:  In response to EORP closing its defined benefit pension system to new members, an actuarial report was commissioned to determine the cost of doing the same thing to PSPRS or CORP.  The report requires more explanation, but the conclusion from PSPRS staff is that the costs of this type of change would be too great and not feasible.  It was also made clear that PSPRS staff is not advocating such a change.
  • Lawsuits: PSPRS states that they have no idea when the Arizona Supreme Court will rule on lawsuits against EORP and PSPRS.  The Fields v. EORP case had oral arguments heard before the Court on June 4, 2013.  This case is by retired judges who contend that changing the COLA formula after they retired was unconstitutional.  There is also a case against EORP by active judges who are also disputing the change in the COLA formula, as well as the increases in their contribution rates.  These active judges contend that they were vested under the rules of the system into which they were hired, which included the old COLA system and lower employee contribution rates.  Retired and active PSPRS members are also suing PSPRS for the same reasons; the ultimate disposition of these cases will follow whatever precedent is set in the judges' cases.  As just a minor point of interest, Mr. Hacking stated that PSPRS will only get 24 hours notice prior to the Supreme Court decision being announced.  Also, the Fields case is the only case argued during Supreme Court's last session that has not had a ruling.

Monday, December 9, 2013

PSPRS, CORP, and EORP members: December 11, 2013 webinar and condensed financial report available online

On December 11, 2013, PSPRS will be broadcasting a two-hour "Fiscal Year 2013 Financial Update" webinar from 10:00 AM to 12:00 PM.  Registration is required and can be done here for those interested in viewing.  It will be hosted by PSPRS Administrator Jim Hacking.  This will be a good opportunity to hear directly about your pension without information being filtered through media, politicians, or union representatives.

For those not interested in sitting through this presentation, please take a look at this report from PSPRS.  This is a condensed, 34-slide version of the Fiscal Year 2013 Consolidated Annual Financial Report (CAFR) that contains the most pertinent information about PSPRS, CORP, and EORP.  This report and your own employer's actuarial report should be required reading for anyone concerned about his or her retirement.

Tuesday, December 3, 2013

PSPRS members: Yes, Virginia, your pension can be cut

If you feel confident that your state constitution will protect your pension from being reduced, see this story by Nathan Bomey of the Detroit Free Press.  U.S. Bankruptcy Court Judge Steven Rhodes today ruled that Detroit's pensions have no special status in a municipal bankruptcy, in spite of a clause in the Michigan Constitution which forbids their diminishment or impairment.  Arizona has a similar clause in its Constitution.

Of course, there will be more legal wrangling, but this a very important precedent that will likely carry over state lines.