In defending his Dec. 26 Commentary on "The high cost of failing to police public plans," Martin Stempel in an April 17 letter to the editor criticized Thomas J. Cavanaugh's April 3 Commentary, "Public pension plans and funding adequacy," noting that Mr. Cavanaugh used information prepared by the Public Pension Coordinating Council.
Mr. Stempel noted the PPCC "is supported by administrators of state and local retirement systems."
From his statement it would be reasonable for a reader to conclude that Mr. Stempel believes at least the following:
Administrators of state and local retirement systems lack integrity;
Administrators for state and local retirement systems are not concerned about the financial well-being of the plans they administer; and
The PPCC is intentionally presenting slanted information.
As chairman of the PPCC's survey committee I would like to assure your readers that the PPCC and the large number of administrators who support the survey effort are very intent on seeing that complete and balanced information is available to all interested parties. (One of our motivations is, of course, to be positioned to refute the type of incomplete unbalanced information presented by Mr. Stempel in his Dec. 26 commentary.)
It seams clear that, in view of Mr. Stempel, the Pension Research Council of the Wharton School does provide high-quality information. If he had done his homework he would have learned that the PRC relies on the PPCC for public plan data. It is curious that in two brief paragraphs he has managed to characterize the same data as being both biased and independent.
At a minimum, Mr. Stempel owes a public apology to the state and local retirement community at large and specifically the PPCC.
Furthermore, he should apologize to the members of the actuarial profession who have been "fortunate enough" to be retained by the public sector retirement systems.
His sour grapes implication that such actuaries are biased fringes on violating the code of profession conduct of the actuarial profession and certainly violates any reasonable standard of judgment and good taste.
Gary W. Findlay
Executive Director
Missouri State Employees'
Retirement System
Jefferson City, Mo.
Gary W. Findlay's letter overlooks the basic point of my Commentary on the funding of public pension plans (Pensions & Investments, Dec. 26).
The point of the article and my response to Thomas J. Cavanaugh's April 3 Commentary was not to cast aspersions on the dedicated public servants who administer public pension plans nor the actuaries who assist them.
The point is that, based on the data reported in the press which I believe is accurate, public plans are less well-funded overall than private plans for which federal funding regulation exists. Even with that regulation, the underfunding of private plans remains a concern, especially with regard to the soundness of the Pension Benefit Guaranty Corp., which "insures" the pension benefits of private plans that terminate without adequate funds. Based on that concern, federal funding rules were tightened further in the recent GATT legislation.
My commentary referred to a published figure for the unfunded liabilities of state and local pension plans of $125 billion. The article also pointed out that this figure, however large, is dwarfed by the unfunded liabilities for pension benefits of federal civilian and military employees to an aggregate unfunded liability of $1.24 trillion.
Many state and local plans are well-funded but the fact remains that the total unfunded liability for public plans - state and local as well as federal - is a staggering sum, even when compared to the national debt. This unfunded liability represents about $5,000 for every man, woman and child in the United States. These liabilities appear on no public or individual balance sheet, except the relatively obscure financial statements of the public plans themselves.
In an era of decreased retirement security through private defined benefit pension plan coverage of many Americans, anxiety over Social Security funding and diminished governmental fiscal powers at all levels, the huge liabilities of federal and other public plans remains a serious concern.
Martin Stempel
McGinn Actuaries
Anaheim, Calif.
We missed the deadline for this year's Pensions & Investments annual directory of money managers, published in the May 16 issue.
Harris Bretall Sullivan & Smith Inc., located in San Francisco, is primarily an active domestic equity manager. On Jan. 1, we had $1.446 billion in institutional discretionary tax-exempt assets under management. Our equity approach is large cap growth, qualitative and bottom up. Our fixed-income approach is active and is based on yield spread.
On Jan. 1, the asset mix was 71% stocks, 16% bonds and 13% cash.
W. Graeme Bretall is chief investment officer; Jeffrey D. Anderson is client contact at (415) 765-8357.
Ken Cimino
Associate managing director
Harris Bretall Sullivan & Smith Inc.
San Francisco
