At its August 24, 2005 meeting, the Alabama Pact Board interviewed three candidate companies who had applied to provide actuarial services to the board.
The three firms interviewed were: Actuarial Resources, Milliman, and Buck Consultant.
The presentation given by Mr. Bill Reimert of Millman (Agenda Item IV. A. (3.) is jaw dropping:
Mr. Reimert discussed information about his firm. He then called the Board's attention to his presentation concerning the current PACT trust fund deficit. He stated that he was concerned about the 9% rate of return assumption and discussed his thoughts on the future of prepaid programs in general. He discussed his belief that the programs were not viable without full faith and credit or some other backing.
Surprise! He didn't get the job….
But the man is hardly a slouch as an actuary. Read his bio… gee… he can look at my books anytime! Unless, of course, I don't want to know the truth.
And this is certainly not the only warning the board received. Learn more on the flip…
At the 5/19/2004 PACT Board meeting: (begins on page 18 in the PDF file with minutes)
Chairman Ivey introduced Mr. Dale Goode, a PACT purchaser who had asked to present his concerns to the Board. Mr. Goode has four PACT contracts and had expressed his opinion that all of his contracts whould be guaranteed. He asked for a written guarantee from the board that full benefits would be paid for all of his contracts and expressed his desire that the Board seek “full faith and credit” for the program, or establish some sort of “rainy day” fund to secure all future benefits.
The board gave him a pat on the head and sent him on his way.
Only to learn at its 8/25/2004 board meeting (pages 27& 28 in the above-linked PDF) from Jay Kloepfer of Callan Associates that the board's assumed 9% return on investments represented:
“…a heroic assumption and higher than the expected case return for even the most aggressive asset mix examined in the study.”
Geee…. so maybe Mr. Reimert well, knew what he was talking about! As did these other people!
The minutes of the PACT Board meetings present a revealing picture of a group of people who were warned about problems as early as 2004 (they haven't released the earlier minutes), but they, by turns, ignored the problem, or – even worse it seems now – jumped from fund manager to fund manager for higher returns on ever more risky investments.
Truly, these things are worth the time to read. Here they are listed again for your “enjoyment:”
I can't get the 2009 link to work, but maybe it'll get fixed. The 2006 minutes are the most fun because they're an actual transcript of the meeting, not just a list of motions.