Tag Archives: funding

12.23.24
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ARPA Update as of December 20, 2024

By: Russ Kamp, Managing Director, Ryan ALM, Inc.

Happy Holidays from all of us at Ryan ALM, Inc. We wish you and yours a joyous holiday season and a spectacular 2025 filled with great health, abundant friendships, and calm markets.

Despite the onset of the holiday season, the PBGC was still at work implementing the ARPA legislation. Santa arrived early for one plan, as Roofers Local No. 75 Pension Fund received approval for its SFA grant. They will receive $6.8 million for the 275 plan participants. This was the initial filing for this non-priority group member. Congrats!

In other ARPA-related news, there were no new applications submitted as the PBGC’s efiling portal remains temporarily closed. There are currently 28 applications under review, including one Priority Group 5 member and two Priority Group 6 members. Fortunately, there were no applications denied or withdrawn during the previous week.

Lastly, there was one fund that repaid excess SFA assets due to census errors. Gastronomical Workers Union Local 610 and Metropolitan Hotel Association Pension Fund repaid $696k (or 2.09%) after receiving $33.3 million in SFA. This fund is one of only 3 to repay SFA in excess of 2% of the grant received. In total, $159.3 million has been repaid on grants of more than $41 billion or 0.38% of the allocations.

The Bloomberg chart below demonstrates the significant rise in U.S. rates during the last month. Recipients of SFA funds would be wise to secure the promised benefits with 100% of the grant money. Equity markets appear to be quite frothy. Time to reduce risk, while taking full advantage of the higher interest rates.

06.16.15
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NJ’s Pension Battle – We Are All Losers

Last week the state Supreme Court of NJ ruled that the Christie administration had the right to reduce / eliminate the annual required contribution (ARC) for the public pension system, based on a constitutionally established practice that the responsibility to allocate public funds is embedded in the budget process. What appears to be a victory for Christie and NJ tax payers couldn’t be further from the truth!

In a pattern that has been repeated for nearly 20 years, one NJ “leader” after another has failed to make the necessary payments to adequately fund public pensions. By not making the full contribution again this year, we are once again kicking the proverbial can down the road.

Remember folks, the benefit that has been promised to our public fund employees is a LIABILITY that must be met. Not funding that liability only makes it more challenging for the pension plan in the long-term, as the plan loses the benefit of compounding returns / interest on each contribution.  Just think about the economic impact of not funding the $3.1 billion in 2015, especially if the plan would have earned the state’s presumed return on assets over the next 10-20 years.  By deferring that payment, we create a pay as you go system that is much more costly for everyone.

Furthermore, NJ’s pension issue isn’t just a matter of not making the annual required contribution. Why on earth would NJ’s pension officers decide to invest heavily in hedge funds / alternatives at the bottom of the market in 2009?  This decision has increased management costs, while returns on the funds have substantially underperformed cheap equity beta. DB plans have a relative objective (liabilities) and not an absolute objective (ROA). Using absolute product in a relative return environment makes little sense.

Our elected officials are kidding themselves If they think that the pension liability is somehow going away.  By not appropriately funding the liability now, they are only making it more difficult for the state the future.  Think that pensions are taking a big slug of NJ’s budget now, just wait for another 15-20 years.