Re(1): Mr. Loper's letter 10/07 Ref: Status of PRAA the COLA Account IP: 72.184.12.239 Posted on November 1, 2007 at 01:08:42 PM by david keene
REBUTTAL TO LETTER FROM FORMER ATTORNEY OF F & P PENSION FUND
ADDRESSED TO WHOM IT MAY CONCERN AND
DATED OCTOBER 17, 2007
It has been stated in this letter that the PRAA has not suffered any permanent damage. Not only has the PRAA suffered permanent damage the Base Fund has suffered permanent damage as well.
This has occurred because the TOTAL FUND has to compound by 5% annually. This is contractual (see section 2B subsection 3). When the Pension Board approved the methodology to allow negative adjustments of the PRAA, it amounted to a $210 million transfer to the Base. The TOTAL FUND cannot compound by its required 5% because the $210 million dollar loss assigned to the PRAA (and the TOTAL FUND) was not and will not be made up. For our FUND to be actuarially sound, by contract, it MUST compound by 5% annually. And I mean the TOTAL FUND.
Section 23 (1) explains how the PRAA is calculated. Every year the TOTAL FUND must compound by 5% BEFORE any new monies are added to the PRAA. According to the contract ALL negative investment return must be made up and this has not happened. The TOTAL FUND is short $210 million dollars (PRAA) and the Base will be short every year. (5% X $210 million). Remember the BASE account is where the 5% growth occurs. It is important to keep in mind that the Base plus the PRAA is referred to as the FUND in the contract. The FUND is understood to mean TOTAL FUND.
The letter also SUMS up by saying that there is no fear that retirees could lose their cost of living adjustment previously awarded. Of course we know different. The Board’s actuary said that the Allocated PRAA is not a liability or an obligation, “…we just call it that.” The Board’s actuary also made a recommendation that the contract be changed to allow the first one percent of Cost of Living Awards to come out of the Base. This was after he stated that there was a slight chance that the PRAA could drop to ZERO dollars in the future. If the PRAA is empty you cannot pay COLA, which was why he made the recommendation to change the contract. Before the changes there was no fear of the PRAA dropping to ZERO.
We retirees had every right to question what has been done to our contract and our Pension. A contract means very little in America today. I don’t agree with a thing that the Judge has done but we’ve got to live with it. We as a group of retirees need to stay strong and get together with other groups that have been burned and work to get decent people elected when the time comes.
David Keene
October 31, 2007
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