PrefBlog

Some pension notes from the States:

Scituate, Rhode Island, population 10,329, operates a pension plan for its police department. The plan is underfunded to the tune of $8.4 million, a liability that has quadrupled since 1999. That doesn’t sound like a big shortfall until you realize that Scituate’s pension plan has only 33 participants, meaning that it is short by more than a quarter million dollars per employee.

Worse, Scituate isn’t alone. Rhode Island, with just 41 cities and towns, has 36 separate municipal pension systems, and their unfunded liabilities total more than $2.3 billion. Most, like Scituate’s, are less than 50 percent funded. Cranston, Rhode Island’s third-largest city, has funded just 17 percent of its $330 million pension liability. All but one of these plans have fewer than a thousand members.
…
The more promising long-term fix, floated by some Rhode Island lawmakers including State Treasurer Gina Raimondo, is to close municipal pension plans and have one pension system for municipal workers overseen by the state government. This would build on the progress Rhode Island has made in improving its statewide pension systems, which already cover some local employees. A 2011 reform improved the largest system’s funding ratio from 48 percent to 61 percent. Benefits were restructured so that some of the risk of investment returns is shifted from taxpayers to employees.

What a great way to balance the books! Just renege on your promises!

It was a positive day for the Canadian preferred share market, with PerpetualPremiums winning 12bp (as the median YTW dipped below zero again), FixedResets gaining 1bp and DeemedRetractibles up 3bp. Volatility was normal. Volume was above average.

This entry was posted on Friday, February 8th, 2013 at 8:54 pm and is filed under Market Action. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.