Second day of the Public Safety Conference
After Harold's remarks, the conference began with a roundtable discussion from Dan Slack, from the Fire & Police Pension Association of Colorado, John Gallagher, from Ohio Police & Fire Pension Fund, and Vijoy Chattergy, from the State of Hawaii Employees' Retirement System. The discussion focused on the challenges and opportunities facing public safety plans. The panelists touched on the appropriate role of trustees with policy makers, funding challenges, and the opportunities in the near future. Ending on a high note, it was generally decided that there is an opportunity to reset the pension dialogue and that the country will pull through this economic crisis in a spectacular faction.
GASB was the topic of discussion during the second hour of the day. Pam Feely from Fire & Police Pension Association of CO and Flick Fornia from the Pension Trustee Advisors, Inc. discussed the 3 main different items with GASB 67 & 68: books, budgets, and bond ratings are now all 3 different under the new rules. The major impacts to funds were also discussed: no more ARC (annual required contribution), much more rapid amortizations, more actuarial calculations required, “entry age normal” (rather than choice among 6 actuarial cost methods).
Investments were the theme of the second part of the day. Thomas Bernhardt from Torrey Cove Capital Partners began the conversation with discussing how real assets fit into public safety plans' portfolios. Lu Yu from Allianz Global Investors continued with the theme of investments with a discussion on emerging markets. A presentation on social security from Mark Buis and Louise Gates from Gabriel, Roeder, Smith & Co. ended the morning.
Greg Stump of Boomershine Consulting Group began the afternoon with a discussion on the problems with 100% funding. Greg discussed the pros and cons of 100% funding; the pros are that it looks good and feels good, the actuarial cost is the actual benefit cost, and there is no “unfunded liability”. The cons are that times change, the risk of overfunding, and volatility (100% funding is the most volatile ratio). Greg's conclusions are as follows: full funding is temporary, benefits cost what they cost (when funding is significantly off target, cost of benefits are distorted), a funding “surplus” is also temporary, 100% funding isn't as great as it seems, 80% funding is not a magic number, but it does have some benefits behind it, and it is essential to understand the implications of funding policies on future funding and contributions.
The second day of the conference ended with Jordan Marks from the National Public Pension Coalition and his update on what he expects to be state pension battles in 2014. Jordan discussed the states where pension reform took place in 2013, and where is expects to see battles for 2014, including the Pew Center for the States' involvement in these battles. Jordan also discussed different communication strategies and how to talk about pensions; most important is to keep the message simple.
Stay tuned for Wednesday's sessions!