Pennsylvania Gov. Tom Wolf sat down with PennLive this week to discuss the state’s pension system.
The first topic of discussion is a possible transition to a 401(k) system – an option favored by the state’s Republican lawmaker but opposed by Wolf.
Wolf also discusses the long-term funding of the system and comments on the state making its full actuarially required contribution.
Video Credit: PennLive
For the second straight year, Russia has decided to freeze its contributions to its pension funds and instead use the money to plug budget holes elsewhere.
Russia says the money will be used for more pressing needs elsewhere in the budget. But critics claim the action could be a costly one. Russia Beyond The Headlines reports:
For the second year in a row, the Russian government has decided to freeze the portion of pension contributions allocated for investment.
Contributions for 2013, amounting to some 550 billion rubles ($15.2 billion), have already been frozen, with the government intending to do the same with a further 700 billion rubles’ worth of pension savings for 2014.
The move, which the Ministry of Labor and Social Protection says is necessary in order to finance current pension payments, will leave major Russian companies without investment and will force banks to raise interest rates.
The negative effects are already being felt by ordinary Russians: At the end of last year, minimal interest rates for individuals started at 8 percent, whereas in 2014 loans have become 2 percent more expensive, with interest rates starting at 10 percent.
This year’s situation will be further exacerbated by the departure of foreign investors, Baranov adds.
“This will result in the cost of loans and debt refinancing growing in 2015 for banks and corporations, for the federal and regional finance ministries. It is hard to estimate the exact figure that they will have to pay extra, but it will be comparable with the amount of frozen funds, i.e. the very same 700 billion rubles or maybe even more,” Baranov says, predicting the potential consequences.
Russia’s pension funding is experiencing turbulence due to a demographic shift that has more people retiring and less people contributing to the system. From RBTH:
Sergei Khestanov, an economist for the ALOR Group, explains that the deficit in the Pension Fund has occurred because of the country’s demographic decline. The population is aging, and while 20-30 years ago there were 6 workers to one pensioner, now there are fewer than two, and their contributions do not cover current needs.
That demographic shift won’t be reversing itself anytime soon. So while the pension freeze helps plug current shortfalls, it only exacerbates future problems.
Reuters reported earlier this month that there was “deep disagreement” among Russian officials regarding the contribution freeze.
When it comes to pension reform, this isn’t New Jersey Gov. Chris Christie’s first rodeo.
Christie signed his state’s initial pension overhaul back in 2010. A major part of the law was the requirement that New Jersey slowly work its way up to paying its full actuarially required contribution into the state pension system.
But that plan never came to fruition, as Christie is using a large portion of the state’s pension contributions this year and next to fill budget shortfalls elsewhere.
Now, Christie says he’s going to give pension reform another shot. Last week, he announced plans to create a panel to analyze the state’s pension system and brainstorm ideas for cutting costs. From the NJ Star-Ledger:
The Pension and Health Benefit Study Commission will review the history of New Jersey’s public retirement system, which has been neglected by governors of both parties since 1997, who did not make required contributions whenever they ran into budgeting difficulties. Christie’s special commission will also look at reforms implemented in other states and then recommend changes to the governor.
Although Christie has been on the town-hall circuit this summer speaking of the need to reduce current contributions for public workers, those benefits in some cases are protected by the state constitution – and could be hard to claw back.
Christie, however, may be able to reduce health benefits, which are not as strongly protected as pensions under New Jersey law. He could also try to increase pension contributions for future workers, and their retirement age, as he did in 2011. Still, a Democratic-controlled Legislature is unlikely to go along with those moves.
Today, he announced the people that will populate the panel. Here’s a breakdown of who they are:
Thomas J. Healey – Partner, Healey Development LLC
Mr. Healey joined Goldman, Sachs & Co. in 1985 to create the Real Estate Capital Markets Group, and founded the Pension Services Group in 1990. He became a Partner in 1988, a Managing Director in 1996, and remains a Senior Director of Goldman Sachs. Prior to joining Goldman Sachs, Mr. Healey served as Assistant Secretary of the U.S. Treasury for Domestic Finance under President Ronald Reagan.
He is Chairman of the Rockefeller Foundation Investment Committee and is actively involved with other charitable institutions. Mr. Healey graduated from Georgetown University in 1964 and Harvard Business School in 1966.
Tom Byrne – Founder, Byrne Asset Management:
Tom founded Byrne Asset Management in 1998. He serves as the Managing Director and Head of Equity Portfolio Management and brings over 35 years experience in the securities industry to his clients.
Governor Chris Christie appointed Tom to the New Jersey State Investment Council. The Council oversees New Jersey’s public pension fund assets, currently about $73 billion. Tom also serves as a trustee and treasurer of The Fund for New Jersey and is a trustee of several other civic organizations. He also served two terms as Chairman of the Democratic State Committee in New Jersey.Tom is a graduate of Princeton University (1976) and Fordham Law School (1981).
Ray Chambers –Special Envoy, United Nations:
Ray Chambers is a United Nations Special Envoy for Financing the Health Millennium Development Goals and For Malaria (United States). [He] is a philanthropist and humanitarian who has directed most of his efforts towards at-risk youth.
He is the founding Chairman of the Points of Light Foundation and co-founder, with Colin Powell, of America’s Promise — The Alliance for Youth. He also co-founded the National Mentoring Partnership and served as Chairman of The Millennium Promise Alliance.
Chambers is the founder and Co-Chairman of Malaria No More, with Peter Chernin, President of News Corporation. He is taking a leave of absence from that role to focus on his appointment as the United Nations Secretary-General’s Special Envoy for Malaria.
Leonard W. Davis – Chief Investment Officer, SCS Commodities Corp:
Mr. Davis has organized and managed private equity, technology, and natural resource companies. He has been the principal financial manager in a private equity company and has been the Chief Financial Officer to the lead investor of a natural resource company active in metals and energy.
Mr. Davis received his B.S. in Accounting from Spring Garden College and is a Certified Public Accountant.
Carl Hess – Managing Director of Americas, Towers Watson:
Carl A. Hess (age 52) has served as Managing Director, The Americas, of Towers Watson since February 1, 2014, and has also served as the Managing Director of Towers Watson’s Investment business since January 1, 2010. Prior to that, he worked in a variety of roles over 20 years at Watson Wyatt, lastly as Global Practice Director of Watson Wyatt’s Investment business. Mr. Hess is a Fellow of the Society of Actuaries and the Conference of Consulting Actuaries, and a Chartered Enterprise Risk Analyst. He has a B.A. cum laude in logic and language from Yale University.
Ethan Kra – Founder, Ethan Kra Actuarial Services LLC:
Ethan Kra is an independent actuary, specializing in litigation support/expert witness, advice on multi-employer plan exposures and strategies and the financial aspects of executive benefits. Previously, he was a Senior Partner and Chief Actuary-Retirement of Mercer, where he consulted in the areas of the design and funding of pension and group insurance benefits, structuring and funding of non-qualified pension benefits and the proper accounting for expense of employee benefits.
He specializes in analyzing the economic and accounting implications of financing strategies and vehicles for employee and executive benefits. For over 17 years, he chaired Mercer’s Actuarial Resource Network, a committee of the senior technical actuaries throughout the United States.
Ken Kunzman – Partner, Connell Foley LLP
Kenneth F. Kunzman was Chairman of the Connell Foley Executive Committee from 1995 to 2002. He has been a partner in the firm since 1968 and has been responsible for a variety of areas of law.
Additionally, Mr. Kunzman serves as Chairman and Trustee of the Corella A. and Bertram F. Bonner Foundation of Princeton, NJ which provides scholarships for needy students of 26 colleges based upon community service. He is Trustee Emeritus of Caldwell College, former Trustee of St. Peter’s Prep, and Co-Chairman Emeritus of Seton Hall University Pirate Blue Fund. Mr. Kunzman served as Captain, US Air Force from 1962-1965.
Mr. Kunzman serves as a member of the Board of Trustees and the Executive Committee of the Scholarship Fund for Inner City Children and is the former Chairman of the Essex Legal Services Foundation, where he continues to serve as a Trustee.
Larry Sher – Partner, October Three Consulting LLC
Larry Sher is a member of the actuarial consulting team and part of the senior leadership for October Three. Larry also is head of our dispute resolution practice, which provides support to clients in disputes related to their retirement plans, both in litigation and otherwise. Larry’s experience in this area is extensive, having served as an arbitrator outside of litigation and as an expert in many lawsuits, including prominent cases involving cash balance pension plans. Larry is a highly sought after expert and advisor.
Margaret Berger – Principal, Mercer Consulting
One thing is certain: the panel has no shortage of impressive resumes. But it’s ideas, not resumes, that will effectively reform New Jersey’s Pension System. Pension360 will keep you updated on subsequent developments surrounding the The Pension and Health Benefit Study Commission.
