Québec Droite

3 études expliquent le risque élevé que l’État prend, en acceptant des rendements de 8% pour les fonds de pension de la fonction publique.

Comme j’ai mainte fois mentionné, les fonds de pension de la fonction publique (inclues les villes) ont des déficits actuariels qui augmentent chaque année. Parce qu’ils sont basés sur un rendement de 8%, malheureusement ce qui ne représente pas la réalité, juste le RRQ dans la dernière décennie n’a fait que 2.9 % de rendement.

Donc les gestionnaires de ces fonds pour tenter d’atteindre le 8 % prennent des risques spéculatifs très élevés, d’où la perte de 40 milliards de la CDP.

Puisque cette approche est un ‘risk free’ pour les prestataires (employés d’État), car c’est le peuple qui va payer le manque en gagner, on se retrouve avec des obligations actuarielles qui vont nous obliger à augmenter les taxes  ou à réduire les services, ce qui est complètement irresponsable et inéquitable.

Si les fonds de pension de la fonction publique veulent prendre des risques à obtenir un rendement de 8 %, c’est à eux d’assumer les risques, non le peuple !

Voici certaines recommandations :

1)      Réduire les prestations des prestataires actuels, car ils ont sous financés leurs régimes.

2)      Accepter un rendement de 4 % qui est beaucoup plus réaliste et moins risqué, et réduire les prestations futures.

3)      Augmenter les cotisations des participants actuels.

En ne prenant aucune décision, on ne fait que retarder l’inévitable, un jour ou l’autre l’État va être en défaut de paiement, et ça va juste faire plus mal.

Extrait de: Going For Broke: Reforming California’s Public Employee Pension Systems, Stanford University’s School of Public Policy, April 2010

·         California’s three biggest pension funds are as much as $500 billion short of meeting future retiree benefits.

·         The funds estimate average annual returns of 7.5 percent to 8 percent. The funds ought to use a more conservative calculation of 4.14 percent; you should not use an 8 percent rate when the liabilities are set in stone.

Recommended that the state:

1)      decrease benefits to retirees,

2)      increase future contributions from plan members

3)      and invest in less risky assets

·         California taxpayers are on the hook for over a half trillion dollars. That’s nearly six times the size of our entire state budget.

·         Since pension liabilities are effectively riskless, we believe they should be discounted and reported at risk-free rates. Adjusting the discount rate used on liabilities to a risk-free rate, we estimate the combined funding shortfall of CalPERS, CalSTRS, and UCRS prior to the 2008/2009 recession at $425.2 billion (see Table 2).

Extrait de : The Market Value of Public-Sector Pension Deficits, By Andrew G. Biggs, American Enterprise Institute for Public Policy Research, April 2010

As a result, while states recognize that their public-employee pensions are underfunded, the situation is far worse than their accounting demonstrates. Without taking proactive steps now, taxpayers will be made to cover an enormous shortfall when the bills come due.

As a result, while states recognize that their public-employee pensions are underfunded, the situation is far worse than their accounting demonstrates. Without taking proactive steps now, taxpayers will be made to cover an enormous shortfall when the bills come due.

·         Public-sector pensions use accounting methods that are incompatible with economic theory, the practice of financial markets, and the accounting standards required for private sector pensions.

·         These methods fail to account for the risk of public-sector pension investments or the fact that, unlike corporate pensions or Social Security benefits, public-pension benefits are effectively guaranteed to be paid.

·         Current pension accounting methods report plans’ funding shortfalls assuming that pension investments in stocks, bonds, hedge funds, and private equity will produce forecasted rates of return with certainty.

·         Market valuation methods account for the uncertainty inherent in such investments by recognizing that risky investments cannot produce a guaranteed return. While many steps must be taken to put public pensions on a sustainable track, it will be difficult to achieve these steps until the plans incorporate accurate accounting.

·         Current state pension accounting practices are inaccurate and outmoded. Private pension plans would not be allowed to use such methods.

·         Market valuation of pension shortfalls more accurately shows the risk to state budgets and taxpayers.

·         Pension contributions, benefits, and retirement ages must be reformed, but this will be difficult until states adopt accurate accounting methods. 

Actuarial Valuation of Plan Financing

·         Rates of return on plan assets are either projected by plan managers or established in statute. State pensions on average project future nominal returns of 8 percent; the lowest projected return for a state pension is 7 percent and the highest is 8.5 percent.

Ø  The following example illustrates the problems with discounting liabilities using the expected interest rate on a risky portfolio: imagine a pension that owes a lump-sum liability of $10 million to be paid fifteen years from now. If we discount that liability by the 8 percent return typically projected for pension assets, it has a present value of $3.15 million. A public pension would consider that liability fully funded if it held at least $3.15 million in assets. The practical problem is that those assets are risky while the liability is certain. A simple simulation of market returns shows that, even if we assume that the average long-term return is accurately predicted at 8 percent, volatility from year to year means that $3.15 million in assets today would have only around a 40 percent chance of reaching the goal of $10 million in fifteen years. The remaining 60 percent of the time the plan’s investments would fall short.

Ø  Alternatively, if the plan discounted the $10 million liability at a safe interest rate—say, at 3.6 percent, equivalent to the yield on U.S. Treasury bonds with a maturity of fifteen years—the plan could be virtually certain of being able to pay its debt. However, the upfront cost would be larger: to be fully funded, the plan would presently need to have $5.88 million in assets instead of $3.15 million. Proponents of actuarial accounting deem these higher funding requirements unnecessary.

·         This alone illustrates the absurdity of public pension accounting standards. Public employees and retirees can take comfort in strong legal protections for their retirement benefits, but these protections are financed at taxpayers’ expense.

Conclusion

Public-sector pensions around the country face very significant funding shortfalls that will put state budgets under pressure for years to come. Pension accounting methods that showed the true market value of these liabilities might have prevented these shortfalls from being accumulated in the first place by encouraging higher contributions by employees and government, more modest retirement benefits, and retirement ages more in line with the private sector. But, given the guarantees afforded to vested public-pension benefits, painful choices are inevitable. Since taxpayers are liable for trillions of dollars in public-pension liabilities, however, a number of steps should be undertaken now.

First, pensions must disclose greater detail regarding investment risk.

These details should include the volatility of their investments and the covariances of returns between different elements of their portfolios. This is basic information that investment managers use; the public deserves tosee it as well. Actuarial firms contracted by pensions should calculate the probability that plan assets will be sufficient to meet obligations, such as is currently done for Social Security by the plan’s actuaries and by the Congressional Budget Office. These simulations would show the absurdity of actuarial methods, which call “fully funded” a plan that has a less-than-even chance of being solvent in practice.

Second, pension plans should reform their accounting methods to include the market value of plan liabilities.

Current accounting methods not only underestimate funding shortfalls, they offer a seemingly painless way to solve them: invest in riskier assets. New Jersey, for instance, faces an actuarially measured $32 billion pension shortfall; however, if it were to shift its investments such that it could project a 10.5 percent average return rather than the current 8.5 percent, its pension books would seemingly be balanced. This, of course, is an illusion: higher-returning assets come with higher risks. But current pension accounting ignores risk, opening the possibility for lawmakers desperate to put off a seeming crisis to take dangerous steps. Market valuation would show that a shift to riskier investments would increase costs, not reduce them.

There is no reason public-sector employees should receive retirement benefits that are either larger or more secure than those received by private-sector workers.

State governments must compete with the private sector for employees while ensuring that taxpayer funds are not wasted. Putting public-sector pensions on a common platform with the private sector will make comparisons easier for both potential employees and taxpayers.

Fichier PDF – The Market Value of Public-Sector Pension Deficits

Extrait de: The Liabilities and Risks of State- Sponsored Pension Plans,  Journal of Economic Perspectives—Volume 23, Number 4—Fall 2009—Pages 191–210, Nortwestern University and Chicago University

When a state government promises a future payment to a worker, it creates a financial liability for its taxpayers. When the worker retires, the state must make the benefit payments. To prepare for this, states typically contribute to and manage their own pension funds, pools of money dedicated to providing retirement benefits to state employees. If these pools do not have sufficient funds when the worker retires, then the states will have to raise taxes or cut spending at that time, or default on their obligations to retired employees.

We show that government accounting standards require states to use procedures that severely understate their liabilities.  

1)      States project the payments they owe to retirees, but in calculating how much those payments are worth today, the states use discount rates that are unreasonably high.

2)      In particular, government accounting standards require them to discount their liabilities at the expected return on their assets, this approach is analytically misguided.

A related question is whether taxpayers should be concerned about the fact that state pension funds are invested in risky assets. Under current pension fund investment policy, there is a wide distribution of possible future funding outcomes. The outcomes are skewed in such a way that there is a small probability of an extremely good outcome and a large probability of poor outcomes.

Choosing an Appropriate Discount Rate

Most state pension funds use an 8 percent discount rate for converting their expected future pension payments into a present value, and there is very little variation in discount rates across states. The use of 8 percent appears to be a rule of thumb, but it does not have a valid economic motivation.

Part of the current crisis for state pension funds is attributable to the fact that they invest in risky assets that have performed very poorly in the last few years, and especially in the later part of 2008.

The fact that states sponsor underfunded plans with risky investments generates a distribution of future pension funding outcomes faced by taxpayers. If pension fund assets perform sufficiently well, taxes will not have to rise to meet pension obligations, and taxpayers could even see money returned to them in the form of lower taxes or increased services. If assets do not perform sufficiently well, deficits will have to be remedied with either tax increases or spending cuts.

Each state plan currently reports only one actuarial number for its pension liability. This number is of limited usefulness, because it is based on a number of ingredients that are subject to substantial discretion. At a minimum, states should be required to report liabilities under several pre-specified discount rates, such as Treasury interest rates and interest rates on taxable municipal bonds. States should also be required to report the sensitivity of the pension liability estimate to different assumptions. Better still, states could be asked to report projected annual cash flows from accrued and projected pension benefits, which are a key component to calculating their liabilities, thus allowing analysts to apply their own assumptions or to use standardized assumptions across states.

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