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Court Approves $18 billion Puerto Rico Bond Restructuring

 

The Wall Street Journal is reporting that Puerto Rico has received approval for a bond restructuring plan that would wipe out 1/3 of its sales tax related debt.

The Wall Street Journal article



Puerto Rico Bonds May Be Invalid

 

The federal control board (FOMBPR) that oversees Puerto Rico’s finances has asked a court to invalidate $6 billion worth of debt issued by the U.S. territory.  The debt includes all general obligation bonds issued in 2012 and 2014 in “clear violation of debt limits established by Puerto Rico’s constitution.  These bonds were used to finance deficit spending.

NBC News Story



Public Pensions: Unrealistic Assumptions

 

One of the reasons public pension plans continue to be so poorly funded are Unrealistic Assumptions.  There are numerous assumptions made by the investment and actuarial industries that serve public pension systems.  Underlying these assumptions is pressure to use overly optimistic assumptions which translates to lower budget demands upon plan sponsors (i.e. states, counties, cities, school districts, etc.)

The Wall Street Journal has an article which highlights just one example of these overly optimistic or unrealistic assumptions.  The median assumed investment return on pension assets is 7.25%.  Over the past 10 years the actual median return was 6.79% and over the past 20 years the actual median return was 6.49%.

The Wall Street Journal article



State Pensions Continue to Fall Behind

 

S&P has released an analysis of the per capita share statewide debt, pension liabilities and other liabilities (primarily health care liabilities).  New Jersey has the highest per person liability at $27,293 and Nebraska the lowest at $242.

CNBC S&P article



Kentucky to Overhaul Severely Underfunded Pension Plans

 

Kentucky officials plan to release an outline of plans to restructure the State’s severely underfunded pension plans.  The Kentucky pension system is one of the most poorly funded plans in the country.  The pension plan covering the State’s non-hazardous employees was 14.80% funded and the teachers’ plan was 35.22% funded.

The outline of the overhaul includes new employees being placed in a defined contribution plan (401(k) style).  No information was made available about what changes the overhaul would include in an attempt to reduce the net pension liability covering existing employees and retirees.

The Bond Buyer article