I just received a valuable email from a seasoned actuary taking me to task a bit for focusing on how similar pension plans in Chicago and Illinois are using base mortality tables from 2000, in some cases, and 2014, in other cases.
I think I’ve still raised questions worthy of understanding and debate, however.
She assumed I thought too-simply that they were using 2000 and 2014 mortality expectations, when the actuaries use these tables in ways that update the base year over time.
I appreciate her response, and look forward to learning more from her in the future. And I’ve recently been interviewed and/or quoted saying strong-ish things that didn’t include the word ‘may,’ and may have to apologize for that.
Things get complicated in this area – too complicated. But I was aware of the qualifying language in the assumptions, and didn’t write things too strongly. I am still trying to move the question whether the choice of using (and updating) the 2000 table instead of using the 2014 table has significant implications for the amount of the reported pension liabilities.
All of the Chicago plans are using the base 2000 table – all but one. The Chicago police plan reported using a 2014 table in its 2016 actuarial valuation. Why the cops, and not the firefighters?
In turn, all the large Illinois plans are using the base 2014 mortality table. Why Illinois, and not Chicago?
Let’s hope a debate pulls back the curtain a little bit.
For some of us trying to make sense of government financial reporting, it can be easy to lose confidence in the system of accountants, actuaries, credit rating agencies, and other entities that got us into this mess.
In its latest annual report, the City of Chicago reported an unrestricted net position of negative $33.9 billion for 2016, compared to negative unrestricted net assets of roughly $5 billion (on a different accounting basis) a decade earlier. How much of the nearly $30 billion deterioration was due to accounting and actuarial changes, and how much of it was reality? Are new accounting and actuarial methods to be trusted, going forward? What can citizens rely on, in holding their government accountable?