General Ret system 2012 report

[Wesley Mouch]

Didn't Orr stop the city's contributions to the pension funds too? If so, that will only exacerbate the shortfall.

If he 'stopped' the contributions, he was only doing so as part of 'righting the ship'. He knows what's going on the the pension funds. He feels that money is better used by the City to stay afloat and be able to participate in a 'Grand Bargain'.

Stopping contributions doesn't exacerbate the shortfall. It may actually help the retirees by enabling the 'Grand Bargain'.

Pouring money towards the funds regardless of the impact on the city might have rather accelerated their collapse.

[corktownyuppie]

If he 'stopped' the contributions, he was only doing so as part of 'righting the ship'.

I'm not even sure that it was Orr's decision. Given that the way they had been funding the pension contributions in the past [[I believe) was to borrow the money to make the necessary deposits, the contributions had to stop once the lending stopped.

CoD's ability to borrow has been impaired for some time now, and at the time of the Consent Agreement, the city was required to sign it in order for the State to step in and send them some needed to money to make cashflow.

[Packman41]

I could be wrong, as I haven't looked deeply into it, but this is also my wheelhouse so take that for what it's worth.. Generally, "credit rating risk" and "debt portfolio" refers to fixed income and bond investments, not stock investments.

CTY, Of course you are correct. This is in my wheelhouse too and I mistakenly said stocks when I really meant bonds. Thanks for bringing this to my attention - I have corrected my original post so as not to confuse anyone else. This is important stuff and needs to be explained correctly.

To be clear, the bond portion of the investment portfolio is generally the safest, most risk adverse part of an overall investment strategy. So when I see that the VAST majority of the bond assets are non-invest grade or not ever rated for risk, then I would be VERY nervous.

Frankly, I don't even know where any reputable investment fiduciary would be able to find that many Non-Rated bond assets.

[Eber Brock Ward]

So quick question: Did the state package of bills require oversight of the pension boards?

I think this is a key piece of this for both the city/residents and the pensioners, in both cases because if the boards are investing in phony baloney vehicles, then we'll be right back where we found ourselves, since we can't get out from pensions like a VEBA, and the city/residents are still going to be on the hook for any shortfalls, even after the BK is over.

[[^ How's that for a run-on?)

[Dumpling]

I appreciate everybody's input and comments, thanks everyone. One comment from
CTY was:

[[5) the offer from the Grand Bargain to reduce your shortfall to 5% [[and the risk that losing in court means losing a quarter of your pension),

so when I look over the mailing with the ballot I will look for if the shortfall is somehow
GUARANTEED to be 5% or less. If the pension system is as dicey as some comments
make it out to be then maybe in the future there will be a situation where pensions are
much less than they should be but with no legal recourse since we agreed...but I'm not
at that point; am still looking at the 2012 GRS report.

[corktownyuppie]

So quick question: Did the state package of bills require oversight of the pension boards?

Yes it does.

http://insurancenewsnet.com/oarticle...l#.U5e-Bie9KSM

-- HB 5570, sponsored by state Rep. Ken Yonker, R- Caledonia, would tighten restrictions on travel and expenses for the city's pension boards and establish an investment committee that has the authority to recommend or reject pension investments.

http://voiceofdetroit.net/2014/05/14...in-bankruptcy/

HB 5570 establishes an investment committee to recommend or reject pension investments

[Eber Brock Ward]

Ty. Not that I'm doubting you, but they may have gotten it wrong.

Looks like SFA analysis says committee recommends, then existing board could approve/reject recommendation. [[Though for disapproval, not sure what plan of adjustment says, which us what the bill references):http://www.legislature.mi.gov/docume...SFA-5570-L.htm

[Dumpling]

I still haven't voted on the Grand Bargain yet [[I know I need to within the next few days).
Am perusing the Plante and Moran audit at the michigan.gov link that Packman posted
above.
This sort of thing is not at all my wheelhouse, and I don't understand parts of the audit
and parts of the GRS annual report, but aside from the City of Detroit not paying in
its previous customary fashion, I don't see the GRS floundering at this point in time.
To wit, in the Plante and Moran audit, there was a shift from AAA to AA for corporate
securities. Out on the web, it says, "Standard & Poor's lowered its long-term
sovereign credit rating on the U.S. to AA+ in 2011 - only 4 U.S. nonfinancial companies
remain AAA: ADP, ExxonMobil, J&J, and Microsoft".

[Dumpling]

It is a little unnerving to see such a large chunk of NR investments as well as
such a large year over year corporate debt uptick of NR in the Plante & Moran
audit that Packman posted a link to. However the State of Michigan law limits
pension investments to fairly safe ones - though there may be a large NR loophole
in this law that should be corrected - and currently, even if this NR is speculative
grade, the recent default rate for speculative grade is at a historic relative low
of 2%, average speculative grade default rate being 4.5%.

[Dumpling]

The Plante & Moran had some details on the pension "back office". The main
pension bank is Bank of New York. The local bank handling benefits transactions
is First Independence Bank. The auditors felt that this bank should have a
nominal monthly balance of zero at one point during a month since the bank
was simply to handle the inflow and outgo. Instead this bank has typically
an extra $20 million of pension money on hand at any given time; again this
is not my arena at all so I can't say whether this is good or not.

[Dumpling]

For a little while the online link to the GRS website wouldn't work for me. So I had
to locate my $15 glossy hard copy of the report and study that. I mostly trust the
current board of trustees as listed on page six and I will include Dave Bing as
trustworthy for pension fiduciary duty although some might not. These are mostly
current and former city employees and appointees, not investment professionals,
as noted. However, various segments of the pension funds are managed by investment managers as noted on page 35.
I think there may be an additional layer of investment advisers to the pension fund as
well, and then there is state law, and then there is an annual audit.

[Dumpling]

So I am fairly confident about the quality of the GRS investment advisers. However,
good advisers charge commensurate fees, and one of the considerations when building
an investment portfolio is that lower fees are more advantageous especially for smaller
portfolios. This shouldn't be so much of a concern for the GRS since it is a large fund
but I don't know whether the GRS fees are reasonable.

[Dumpling]

On page 20 there is a list of retirants and beneficiaries tabulated by year
of retirement. The real old folks have a monthly allowance that is stunningly
low.
There is 1 person for retiring in 1950 or before whose monthly allowance is a
MEASLY $341.
For the class of 1971-1975, the average monthly allowance is $587.
I think that inflation in the eighties outpaced the cost of living increases for
this set of retirees and there has been no subsequent special adjustment.
In contrast the highest average monthly allowance is for the 2012 retirees - there
are 406 in this class and it is $2,374.

[Dumpling]

Another highlight.

"Duty disability rates were found to be higher than previously assumed".

I will take it that this is partly due to poor working conditions due to the city's poor
financial condition so in the future rates should go down.

[Dumpling]

Group Averages:

Age: 48.5 years
Service: 15.4 years
Annual Pay: $41,385

Just mostly us grandmas and grandpas working here at the city.