Sunday, July 16, 2017

Somethings Never Change: the Actuary and the Assumed Interest Rate

In September, 2015 I wrote a posting about the new NYCERS actuay, Sherry Chan, who was appointed in May, 2015. She is currently being paid an annual salary of $279,000.

Specifically I wrote:

The assumed interest rate is the key component of the annual pension costs that the city and the other participating employers must pay to the pension funds each year. It will be interesting to see where Ms. Chan stands on the 7% net of fees rate. She will be required to make a recommendation this winter for a new five year rate effective July, 1, 2016 and Albany will have to enact enabling legislation by June 30, 2016.

I suspect she will punt and ask for a one year extension of the old rate. North did this all the time. It is a bad fiscal policy and contributes to the under-funding of the pension funds.

Sure enough on June 30, 2016, the governor signed Chapter 61 of the Laws of 2016 which was a one year extension of the 7% (net of fees) interest rate. Ms. Chan stated that she was to busy during her first year to recommend a new five year rate.

This year, on June 29, 2017, the governor signed Chapter 71 of the Laws of 2017 which was again a one year extension of the 7% (net of fees) interest rate. This time Ms Chan stated that she chose not to recommend a five year interest rate because she was waiting for the completion of the two year actuarial audit.

As a point of reference the previous two year actuarial audit was completed in 2016.

I could yell and scream but, what the hell, nothing is going to change.