THIS time I’ll be presenting facts from audited financial statements. By the way, this information is publicly available at www.opacnmi.com.
The available reports are for fiscal years ending 2009 and 2010. They show the following:
• Net assets held in trust means all the properties (assets) owned by the Retirement Fund minus all obligations (debt). The remainder is for the payment of pension benefits.
The assets should be greater in value than the debt. If the debt is greater than the assets, this is what they call a “deficit.” Meaning, trouble is ahead and management is struggling to find a solution.
Here are the figures: The net assets declined by $15.48 million from the previous fiscal year or by 4.4 percent. Is this a good thing? If you have a time deposit in the bank for $100 then after one year you check your statement and it tells you that you have only $95.60. Will you be happy or sad? Of course you’ll be sad. You’ll probably tell your bank manager, “I placed my money in your bank to make money, not to lose money.”
• Total additions are items that add value to the net assets. Let’s see what those are. The total additions were increased by $25.21 million. This is good! But where did the money come from?
• Wow, the investments made a profit of $24.45 million! Thank you stock market for giving us this check! But wait, something happened: the market value of the investments went down from $332.31 million to $312.33 million. We lost $19.98 million! And $40.86 million was withdrawn from the investments. Why? To cover shortfalls in funding pension obligations. Now I feel sad myself, because my time deposit is for future use and not for today.
• Total deductions are the same as your expenses paid after receiving your paycheck. The report said that in 2010 expenses were $85.03 million compared to $94.07 million that was paid in 2009. There is an added explanation: “The $9.04 million decrease is largely due to lower provision of uncollectible contributions.” What does that mean? You have friend that owes you money and for over 22 years you are not getting paid, so what you do is tell yourself, “Maybe it is appropriate to set aside my expectation of getting paid so that it may reduce my pounding headache.”
• Funded ratios are the ratio of net assets held in trust for pension benefits vs. total actuarial present value of accrued liability.
This is a term used by actuaries. Actuaries calculate the total future obligations of the pension plan and how much are their dollar-value in today’s price: How much are the obligations of the pension plan if we deduct the total net assets that we have today?
The report says “based on the May 2011 Actuarial Valuation Report, 38.8 percent on Oct. 1, 2009, and 44.8 percent on Oct. 1, 2008.” For every $1 of future pension obligations, the Fund only had 39 cents in 2009 and 45 cents in 2008. How come? “This deterioration in funding level was due to a combination of a) the decline in value of net assets held in trust for pension benefits, and b) the increase in total actuarial present value of accrued liability.”
• “Actuarial present value of accumulated plan benefits as of Oct. 1, 2009 and Oct. 1, 2008 were $911,188,782 and $899,440,600, respectively, and of these liabilities, $59,365,592 and $60,057,174, respectively, are the present value of non-vested benefits.”
A large numbers of our retirees and pension beneficiaries are relying on the pensions for the rest of their lives. Cut the pension and they’ll all going to suffer.
In three years, if the Fund members will not unite, this will be our fate. Very sad!
NOEL M. SORIA
Virginia Beach, Virginia