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Things We Learned from Day 1 of #NCPERS16
NCPERS 74th Annual Conference Annual Conference & Exhibition began today in San Diego, California at the Hilton Bayside.
1. When NCPERS was established in 1941, Americans' wages averaged $1,750 a year. Citizen Kane had just hit the movie theaters, the average price of a car was $850, and filling it with gasoline cost 12 cents a gallon.
2. What are the fundamental principles of the new post-employment benefit standards? View the cost within the context of an ongoing, career long employment relationship, use an accounting based vs funding based approach to measure and report an net pension liability on the statement of net position, require effective communication and coordination efforts between the plan, the employers, the actuary, and the auditor.
3. What are the key differences between OPEB and pensions? the discount rate to calculate the liability is the municipal bond rate w/o consideration of the long term expected rate of return, the employer reports the liability w/o netting plan net position (the total OPEB liability), a sensitivity analysis on the healthcare cost trend rate (in addition to the discount rate).
4. Pension Obligation Bonds (POBs) replace a ‘soft liability' with a ‘hard liability'.
5. The Benefit Bonds window is the period of time an issuer of benefits bonds can invest bond proceeds in the stock market without witnessing lower stock prices in the subsequent economic recession.
6. POBS are not for the faint of heart; it is very difficult to put them together at the spur of the moment, so have these discussions early with your plan sponsor.
7. Proposed new 113 of bankruptcy code – from Manhattan Institute- would allow states to petition bankruptcy courts to override existing law so that pension benefits could be cut.
8. Five reasons why undermining pensions increases economic volatility—1. When we undermine pensions, we undermine financial and economic stability provided by pension funds, 2. When we dismantle pensions, we undermine the economic cushion that pension checks provide to local economies during economic downturns, 3. When we convert DB into DC plans, we increase the probability or irrational rise in asset prices/ bubbles by forcing people with little or no investment knowledge or experience to make investment decisions that were made by pension boards and professionals, 4. When we shift to DC plans, we expose people to economics of manipulation and deception, 5. When we undermine pensions, we exacerbate income inequality.
9. For each 1% shift to DC plans, economic volatility increases by approximately 2%, financial volatility rises by 8%, and revenue volatility increased by 54%.
10. Taxpayer money given to global corporations through loopholes and subsidies often ends up in overseas tax havens, while pension checks are spent in local economies.
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