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Tuesday, March 10, 2015

We have a new Administrator, eh: The Board of Trustees goes north to keep PSPRS from heading south

The Arizona Republic yesterday published this article by Paul Giblin, Canadian to lead Arizona public safety retirement fund.  Kevin Olineck, the Vice-president, Member Experience for the British Columbia Pension Corporation (BCPC), has been selected as the new PSPRS Administrator.  He will permanently replace James Hacking, who was forced out of the job in July 2014 after it was discovered that he had given staff raises without approval from the Arizona Department of Administration, as required by law.  Mr. Olineck, along with Jared Smout, the current Acting Administrator, and Hewlett-Packard Enterprise Services retirement portfolio executive Amy Timmons, were the final three candidates.  A fourth candidate, Maricopa County Supervisor Andrew Kunasek, dropped out before the Board of Trustees made its final decision.  Following is Mr. Olineck's biography from the BCPC website:
Kevin Olineck joined the BC Pension Corporation as Vice-President, Client Services Division, in May 2009. He is now Vice-President of the Member Experience Division. Prior to joining the Pension Corporation he worked as Vice-President, Pension Services, for the Alberta Pension Services Corporation. In addition to his experience in public sector pension administration, Kevin has held management positions within the Pension and Investment Management Division at Canada Life Assurance Company/Crown Life Insurance Company.
Since joining the corporation, Kevin has focused on defining and implementing a service delivery model for the corporation’s clients as well as providing strategic leadership to the Member Experience Division, which has responsibility for plan board, member and employer communications.
Kevin has a degree in Public Administration from the University of Saskatchewan, a Certified Employee Benefits Specialist (CEBS) designation and a Pension Plan Administration Certificate (PPAC). He has been a member of the Canadian Pension Benefits Institute (CPBI) for many years and is currently a member of the Pacific Council.
Mr. Olineck seems to be an extremely well-qualified choice, and I am personally glad that they brought in a complete outsider, not from within PSPRS, not from the Phoenix valley, not from Arizona, and not even from the the United States.  Mr. Olineck will bring a fresh perspective from his position in British Columbia (BC), Canada, and he is not beholden to any political party, union, business, family member, or other outside connection.  Being a Canadian citizen with a proven track record in his home country, he is probably not even that concerned about his pay and benefits since he could return to Canada and would be hired for another job in about two minutes if he decides to leave the PSPRS job.  Hopefully, this will give him the independence to bring about necessary changes to PSPRS.

BCPC, is an umbrella administrator over BC's five public pension plans.  Unfortunately, BCPC has no pension like PSPRS that covers only public safety employees, so there is no real counterpart to PSPRS.  However, for comparison, the BCPC Municipal Pension Plan (MPP), which is the one that seems to cover most law enforcement and firefighters in BC, will have to do.

The last MPP annual report on the website is for the calendar year 2013.  MPP earned 15.1% that year and had a 5-year and 10-year annualized rate of 9.8% and 7.5%, respectively.  On December 31, 2013 PSPRS had a 1-year, 5-year, and 10-year annualized rate of return of 13.26%, 10.44%, and 5.86%, respectively.  This is not an overly unfavorable comparison with PSPRS.  The MPP is much better funded, though, at 96.5% at the end of 2012.  It was 95% and 97% funded at the end of 2009 and 2006, respectively.  There are several reasons for the MPP's better funding ratio.

The MPP does not guarantee COLA's, which are awarded based on the Board of Trustees' analysis of the plan's ability to pay for them, and they are limited to the rate of inflation as expressed in the Consumer Price Index (CPI).  They also have an independent actuarial valuation every three years to assess the plan's financial health and adjust contribution rates accordingly.  Annual contribution rates are split equally between employees and employers.   Contribution rates are also higher on annual salary over a certain limit.  The MPP uses a high-five year average to determine the pension benefit.  There are multiple "membership groups" but it looks like the newest membership group, Group 5, includes newer firefighters and law enforcement personnel.  In 2013 Group 5 had a contribution rate of 9.74% on salary up to $51,100, and a contribution rate of 11.24% on everything over that.  The Group 5 multiplier is 2.33%, which after 25 years would be 4.25% less than the 62.5% you would get in PSPRS, but it would give you a higher benefit if you (can) retire between 20 and 24 years.

As can be seen, the MPP operates more like the Arizona State Retirement System (ASRS) than PSPRS, and both the MPP and ASRS are in much better financial shape than PSPRS.  This is not by accident.  I previously wrote about the wisdom of ASRS here, but these passages from the "Message from the Trustees," in the 2014 annual report from one of the other BCPC plans, the Public Service Pension, distill some of that wisdom down:
The plan is responsible. 
From plan design to the way we as trustees invest and tolerate risk, we act responsibly. Our decisions are made after careful consideration; our responses to challenges are well considered, well debated and well thought out. Trustees are always keeping an eye on the future.  How else is the plan responsible?  We act responsibly by closely monitoring the plan through regular actuarial valuations and adjusting contribution rates as necessary. We demonstrate the success of our monitoring and rate adjustments by the fact our valuations have shown the plan to be at or near 100 per cent funded for more than a decade.  Agencies that establish credit ratings for governments appreciate the value of BC’s strong public sector pension plans like the Public Service Pension Plan. These agencies cite this strength as a factor in supporting BC’s triple-A credit rating. 
The plan is fair. 
As trustees, we consider fairness when making our decisions. The law mandates us to act evenhandedly and consider the interests of all members when making decisions. Our backgrounds reflect the various employer and member groups participating in the plan. We are diverse, but act together in the best interest of all members.The plan is fair to members of all generations because it is pre-funded. This means each generation pays in advance for its own pensions.  On a broader scale, the plan is fair to taxpayers. Why? Because employees bear more than 50 per cent of the plan’s risks. While contributions to the basic pension benefit are shared 50/50, plan members bear all the risk associated with contingent benefits such as inflation adjustments and group benefits.
Responsibility, careful consideration of decisions, keeping an eye on the future, acting together in everyone's best interest, fairness to all generations, fairness to taxpayers?  What a radical philosophy!  Perhaps Mr. Olineck should nail these passages to the door of PSPRS' headquarters, so that those like the Professional Fire Fighters of Arizona (PFFA), whose horrible reform plan is the antithesis of responsibility and fairness, will know that things must change if PSPRS is to survive.

Congratulations on your new job, Mr. Olineck, and best of luck.  You All of us are going to need it.

1 comment:

  1. His credentials look good, and I hope he can get a better return on the investments.

    As a CORP retiree I need a PBI now and then to keep up with inflation.


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