By: Mark Glennon*


If you were obligated to pay pensioners for their entire lives, would you estimate how much you would need using life expectancies from the 1960s for people born between 1914 and 1918?


Jean Lotus, a reporter at the Forest Park Review, just published a splendid article about a few Illinois municipalities recently doing just that. Outdated mortality tables are one way for governments to hide their pension problems from voters.


For more than a decade up to a couple years ago, according to the article, the actuary for Forest Park and some other cities,

had been using a group annuity mortality table called the GAM-1971. As its name implies the table was created in 1971 using mortality data from police officers and firefighters collected between 1964 and 1968. Life expectancies on the tables tracked public safety workers who, at age 50, would have been born between 1914 and 1918.

Read the entire article, linked here. It’s the best piece on this topic that anybody in the regular media in Illinois has done to date.


According to the article, when one particular actuary changed to updated mortality tables for the municipalities he worked for, “tax bumps took place all over the state. Aurora’s police and fire pension funds discovered a $3 million shortfall. Rockford’s gap was $1.1 million. Highland Park discovered an $800,000 shortfall. Streamwood’s was $300,000 and Oswego’s was $200,000. River Forest, LaGrange and Western Springs all replaced [the actuary].”


A little background: Last month we wrote an article detailing, rather harshly, errors we saw in an earlier piece by Ms. Lotus about pensions. Then an actuary, Tia Goss Sawhney, wrote a further critique for us of Ms. Lotus’ piece. Both those articles received lots of attention nationally because they were re-linked in Pension Tsunami, a comprehensive site covering the pension crisis.


Coincidentally, I ran into Ms. Lotus at an event a few days after writing that initial article. “Please don’t smack me,” I said, “but I’m the guy that wrote the nasty piece about your pension article.” She was totally gracious and listened with an open mind, especially about the mortality table issue.


Well, she apparently really did some homework because she’s turned up so much on this. Kudos to her and to a couple others who have been complaining about this — Ms. Sawhney, who is on a mission to clean up problems in her profession, and Jim Palermo, a Village of La Grange Trustee.


There are plenty more questions still to be answered. We’ll keep digging for answers on these and let’s hope Ms. Lotus does, too:


· What other assumptions are similarly manipulated (aside from rates of return, which we know about)? We’ve been screaming about that since we started here, including this article last year. Actuaries are hired and paid by politicians, so there’s an obvious bias to understate pension liabilities. That’s putting it nicely. John Bury, a New Jersey actuary critical of his profession earlier blasted assumptions used in Illinois’ state pensions, and described some in his profession simply as “whores.”


· How many other pensions are using outdated actuary tables and why isn’t that information readily available? The Illinois Department of Insurance has it but you have to file a Freedom of Information Act request to get it. Inexcusable.


· Are even the supposedly more modern mortality tables accurate? As Ms. Lotus points out, the 1971 tables (called GAM 1971) are based on data three to seven years prior to that. A commonly used modern one is the RP-2000. Is it based on data now 17 to 21 years old?


· Why does the Actuarial Board of Counseling and Discipline, which is the body responsible for handling complaints about things like this, keep the complaints and its proceedings secret?


As we always say, defined benefit pension plans are hopelessly opaque, corrupted and corrupting, and fundamentally incompatible with open government and sane fiscal management.


*Mark Glennon is founder of WirePoints

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6 years ago

…but the Unions have to use 45-year mortality data so they can contribute vast sums to the Democrat Party. The Carpenters & Joiners Union has contributed over $20 million; City of NY has contributed nearly $9 million; NEA,almost $9 million; and the AFL-CIO nearly $6 million. And, these are first the top ten Democrat donors!

6 years ago

The quick solution is to simply outright ban all public employee unions, as they run counter to the interests of the general public.

6 years ago

Actually, their unions push to use these misleading numbers to negotiate richer benefit packages than they would get if there was cost transparency. The union members may not be individually at fault, but their hired representatives are and they should bear the shortfall.

6 years ago

It’s not the fault of the taxpayers either but the retirees act as though it should be.

6 years ago

That’s not the fault of the retirees, and they should not be made to bear financial responsibility.

Tia Goss Sawhney
6 years ago

The use of GAM 1971 GAM is not award-winning for Illinois actuarial work. See page 82 of the 2013 Comprehensive Annual Financial Report of the Metropolitan Water Reclamation District (MWRD) — The disability “rates are from the Hunters Disability Rates Transactions of the Actuarial Society of America, vol XII pp. 44-71”. That sounds reasonable enough until one realizes that the Actuarial Society of America no longer exists and last published its Transactions in 1949 — While I have been unable to determine exactly how old these rates are, they are for sure, at least 65 years old! The… Read more »