Looking at the actuarial reports for their pension plans, it is hard to say.
Pension plans estimate their liabilities with a number of assumptions, including how long plan participants are expected to live. These expectations are drawn from “mortality tables.”
In its actuarial valuation report for 2013, the pension plan for Chicago cops reported that it was using a mortality table from 1994, and reported a market value funded ratio of 32% on that basis. It updated to a 2014 table in 2014, and the funded ratio fell to 28% on that basis. This plan still used that 2014 table in its latest valuation report (for 2016).
How about the firefighters?
The latest actuarial valuation report for the firefighter plan is for 2015, not 2016. It includes an introductory letter dated June 10, 2016. June 10, 2017 is over a month ago now, and the Chicago firefighter pension plan’s actuarial report has yet to peek its head out of the burning building.
What mortality table were they using for the firefighters in the 2015 report? They were using a mortality table from 2000 in 2015, a table that was 14 years older (with lower estimated lifespans) than the table used by the Chicago police pension plan.
Both of these plans began including a “Development of Statutory Contribution” table in 2013, which includes projections for assets, liabilities, funding ratios and the like over the next 25 years. For the Chicago firefighter plan, the funded ratio was projected to rise from 23% to 90% by 2041, in line with current law calling for 90% funding over time. The projections show the market value of the assets in the plan rising from $1 billion to over $6 billion by 2041.
Trouble is, the plan also uses a ‘blended rate’ for the discount rate used to discount future values, which it is required to do if the plan expects to run out of assets.
How can the predictors predict funding rising from less than 25% to 90%, but also predict the plan running out of assets, $6 billion worth, after that?
… and if recent experience is a guide, projections need to be treated with care, period. Since the 2013 projections were first included, the market value of the firefighter plan assets reported in 2015 were 9% lower than they were projected to be, while the actuarial liability was 6% higher than it was projected to be.
The (late) 2016 actuarial report is probably going to be a doozy. Maybe that’s why it’s late.