The Great Pension Deficit

[Bullitt]

Anybody ready for our next crisis?

The US public pension system faces a higher-than-expected shortfall of more than $2,000bn that will increase pressure on many states’ strained finances and crimp economic growth, according to the chairman of New Jersey’s pension fund.

http://www.ft.com/cms/s/0/bd1c2552-f966-11de-8085-00144feab49a.html?nclick_check=1

 

[grandma]

Anybody ready for our next crisis?
http://www.ft.com/cms/s/0/bd1c2552-f966-11de-8085-00144feab49a.html?nclick_check=1

I know the local Fire & Police depts in area towns are having a difficult time and holding many discussion meetings on how to try to save the Funds & still have pay-outs of some adequate amount or another.........
The cities themselves are involved, and it seems the depatments the public needs the most are the first to get hammered........

 

[Bullitt]

It's only getting worse, but we knew this was going to happen. Pension Funds are piling on the risk in hopes of making up lost ground. So much for the senseless propaganda they spit out to us that, "Slow and steady wins the race."

Many say, "Big deal, when the market tanks, I'll just be sure to get out before everyone else." Is that what these guys are thinking now too? This is complete insanity. In 2008 these big funds piled into commodities such as lumber only to get steamrolled in the crash. Has anybody learned anything from the past 10 years?

Pension Funds Are Adding to Risk to Raise Returns

http://www.nytimes.com/2010/03/09/business/09pension.html?pagewanted=1&hp

 

[Warrenlm]

They're doing more than accepting greater risk...the states will use accounting methods for budget purposes...giving a double whammy. Virginia is considering deferring some contributions.

 

[Viva_La_Migra]

At what point do you think they'll go after our retirement system again?

 

[merlin]

Some of our rep's have already proposed cuts in our retirements system.

 

[Frixxxx]

Some of our rep's have already proposed cuts in our retirements system.

Reduce the government and that will reduce the retirement.....If I hear one more politician complain that government workers are a problem, I'm going to ask that they give up everything first!

 

[nnuut]

Some of our rep's have already proposed cuts in our retirements system.

They have already done that with FERS, NOT AGAIN!!

 

[Bullitt]

I think the bottom line here is that not only are households short on earnings projections but so are pensions and municipalities. The Fed Gov't doesn't care because they have a tool nobody else does, a printing press. Local Governments are forced to make the tough decisions, (even though they do everything in their power to defer) and meanwhile pensions can just take on higher margin and speculation.

Governments don't think long term; instead it's, "We have all this money and if we don't spend it this fiscal year, we won't get it again next year". In turn the locals dump excess cash on things like road salt in March. The rub is, if the economy goes down, they won't have a 'savings' account to draw off as their tax income goes down the tubes. That's what we have going on now. Think of how much money is (or was) collected from property taxes. The housing bubble caused elected officials to project the boomin' bubble days into forever land and never felt the need to save money.

Right now we also have what's called the Wealth Effect going on. Speculators- I wish I could say Investors, but nobody invests anymore- are spending again because the stock market is up. Hence, the reason why at the end of the day, the ONLY thing that matters to politicians is the stock market. It's like a little scorecard in real time on 'how we're doing'. Right now the algos and margin traders are in a desperate and frantic push to 'get back to even' after being destroyed in 2008. A very rare few were able to come out ahead in 2008 and I'd say even less bought in March and are still holding on today.

Happy days are here again, and as long as the music is playing, you might as well drink some Kool Aid from the punchbowl and dance. Be careful, the Kool Aid once wiped out 918 souls in Jonestown.

"When the music's over, turn out the lights," Jim Morrison. The music ended over two years ago.

 

[OBGibby]

When many state and local police officers and firefighters have the ability to make more per year in pension retirement than they made while on the job, eventually that bill will have to come due. Thanks Unions!

When you have state pension funds giving their business to money managers who have friends in high places it spells trouble.

 

[Warrenlm]

There's a story about Oklahoma teachers' pensions imposing a $9,000 liability per OK household. Eyecatching for the reader. The stories will keep coming because the media is drawing a bullseye on overpaid government workers with incredibly generous benefits. It seems inevitable that there will be some effect at the local and state level and cause some changes in their pension rules. When is debatable, and probably related to the liberal vs conservative struggle underway. We are kicking every other can down the road.:blink:

The Vallejo, CA story is probably only one of many lurking in the background that will pop up when/if federal support stimulus payments dry up. What's the timeframe for that? 2012?

 

[James48843]

There's a story about Oklahoma teachers' pensions imposing a $9,000 liability per OK household. Eyecatching for the reader.

Really?

Now who is it that controls the legislature in that state, that is responsible for ensuring the legal requires set in federal law are met? You know- the ones that all pensions are required to be fully funded?

How did that state fail to pay it's required pension contributions?

Oh- wait. I forgot. State pensions aren't subject to the same federal regulations that private companies and the federal government are both required to follow.

So what you are saying is that the poor state workers, who make a small amount, are to blame for the state legislature failing to allocate enough money to pay what is owed it's workers?

In the private sector- companies have gone bankrupt and out of business over failing to pay their required pension costs in advance.

http://www.dol.gov/ebsa/pensionreform.html

 

[Bullitt]

It seems inevitable that there will be some effect at the local and state level and cause some changes in their pension rules.

Ready for it? Sooner than later the retirement age will be raised at least 5 years.

I just don't see any way possible, unless there is some unknown unknown out there waiting to be discovered, for us to cover our deficits in the pension arena. With deteriorating demographics as a result of the lifestyles Americans prefer to live today coupled with the stresses of city life and work, the whole entire concept is a ponzi scheme. Our great leaders continue to project every minuscule second of goodness when it comes to the economy into the distant future instead of saving for that rainy day.

 

[James48843]

Ready for it? Sooner than later the retirement age will be raised at least 5 years.

I just don't see any way possible, unless there is some unknown unknown out there waiting to be discovered, for us to cover our deficits in the pension arena. .

At the risk of being called a conspiracy theory guy- there is a different solution....

I am waiting for Glenn Beck to announce that he's figured it out-- Pension shortfalls? It's Obama's fault! and that Obama has decided instead of raising the retirement age, he's simply going to direct the Death Panels to start the killing of the elderly sooner.

I bet we hear that soon.

 

[James48843]

When many state and local police officers and firefighters have the ability to make more per year in pension retirement than they made while on the job, eventually that bill will have to come due. Thanks Unions!

Unions are the reason that Pensions even exist.

Without Unions- there would be no pensions. Period.

 

[James48843]

• Pension plans won by Unions:

Standard Oil of New Jersey (1903); U.S. Steel Corp. (1911); General Electric Co. (1912); American Telephone and Telegraph Co. (1913); Goodyear Tire and Rubber Co., (1915); Bethlehem Steel Co. (1923); American Can Co. (1924); and Eastman Kodak Co. (1929).

Unions continued to push for help for the poor and elderly across America-

• 1935 -- President Franklin D. Roosevelt signed the Social Security Act.
• 1938 -- The Revenue Act of 1938 established the nondiversion rule and made pension trusts irrevocable.
• 1940 -- 4.1 million private-sector workers (15 percent of all private-sector workers) were covered by a pension plan.
• 1940 -- The Investment Advisors Act of 1940 required delegation of investment responsibilities only to an adviser registered under the act or to a bank or an insurance company.
• 1942 -- The Revenue Act of 1942 tightened coverage standard qualifications, limited allowable deductions, and allowed integration with Social Security.
• 1946 -- The United Steelworkers of America made pensions an issue in their strike against Inland Steel. At this time, the National Labor Relations Act did not cover pensions. Steelworkers Local 1010 in Indiana Harbor took the issue to the National Labor Relations Board.
• 1947 -- Labor-Management Relations Act of 1947 (LMRA or "Taft-Hartley" Act) provided fundamental guidelines for the establishment and operation of pension plans administered jointly by an employer and a union.
• 1948 -- The National Labor Relations Board ruled that Congress intended pensions to be part of wages and that they fell under "conditions of employment" mentioned in the act, although this was not specifically defined.
• 1950 -- General Motors (GM) established a pension plan for its employees. GM wanted to self-fund their pension plan because they wanted to invest in stocks. State law prohibited insurance companies from investing pension assets in stocks. The 1950s saw a bull market caused by the release of pent-up demand, due to wartime restrictions and the need to rebuild Europe and Japan.
• 1950 -- 9.8 million private-sector workers (25 percent of all private-sector workers) were covered by a pension plan.
• 1958 -- Welfare and Pension Plan Disclosure Act of 1958 established disclosure requirements to limit fiduciary abuse.
• 1960 -- 18.7 million private-sector workers (41 percent of all private-sector workers) were covered by a pension plan.
• 1962 -- The Welfare and Pension Plan Disclosure Act Amendments of 1962 shifted responsibility for protection of plan assets from participants to the federal government to prevent fraud and poor administration.
• 1962 -- The Self-Employed Individual Retirement Act of 1962, also known as the Keogh Act, made qualified pension plans available to self-employed persons, unincorporated small businesses, farmers, professionals, and their employees.
• 1969 -- The Tax Reform Act of 1969 provided fundamental guidelines for the establishment and operation of pension plans administered jointly by an employer and a union. The act provided that part of a lump-sum distribution received from a qualified employee trust within one taxable year (on account of death or other separation from service) was given ordinary income treatment instead of the capital gains treatment it had been given under prior law. Under this act, the bargain element on the exercise of statutory options is a tax preference item, unless the stock option is disposed of in the same year the option is exercised.
• 1970 -- 26.3 million private-sector workers (45 percent of all private-sector workers) were covered by a pension plan.
• 1974 -- The Employee Retirement Income Security Act of 1974 (ERISA) was enacted. ERISA was designed to secure the benefits of participants in private pension plans through participation, vesting, funding, reporting, and disclosure rules. It established the Pension Benefit Guaranty Corporation (PBGC). ERISA provided added pension incentives for the self-employed (through changes in Keoghs) and for persons not covered by pensions (through individual retirement accounts (IRAs)). It established legal status of employee stock ownership plans (ESOPs) as an employee benefit and codified stock bonus plans under the Internal Revenue Code. It also established requirements for plan implementation and operation.
• 1975 -- The Tax Reduction Act of 1975 established the Tax Reduction Act stock ownership plan (TRASOP) as an employee benefit.
• 1978 -- The Revenue Act of 1978 established qualified deferred compensation plans (sec. 401(k)) under which employees are not taxed on the portion of income they elect to receive as deferred compensation rather than direct cash payments. The act created simplified employee pensions (SEPs) and changed IRA rules.
• 1980 -- The Multiemployer Pension Plan Amendments Act of 1980 ("MPPAA") increased multiemployer pension plan premiums and provided for payment of liability to plans for contributing employers who withdraw during the year in which the plan is less than fully funded, thereby effectively shifting primary risk of underfunding from the PBGC to contributing employers.

 

[James48843]

Union Workers Have a ‘Union Advantage’ in Pensions

Because they have a voice at work, union workers have a “union advantage” in benefits and are much more likely to have pensions—and good pensions—than nonunion workers.

Seventy-nine percent of union workers are covered by pension plans, compared with 44 percent of nonunion workers.

And 70 percent of union workers have defined-benefit retirement coverage, compared with 16 percent of nonunion workers.

Your employer and in some cases your union can provide details about your own pension plan, but many online resources can help you keep an eye on your future retirement security.

UNION WORKERS ARE MORE LIKELY TO HAVE
HEALTH AND PENSION BENEFITS, 2005

Source: http://www.aflcio.org/issues/retirementsecurity/definedbenefitpensions/
​

 

[Show-me]

Correct and they are the folks that negotiated weekends, holidays, and overtime pay and I am thankful every two weeks. BUT, they are also the folks that protect the trouble makers and can be completely obstructive to operations and profitability while staying just within the boundaries of being legal. It is funny that line between what is legal, ethical, and just right.

It is a double edged sword.

Unions are the reason that Pensions even exist.

Without Unions- there would be no pensions. Period.

 

[Show-me]

The lobbiest and lawmakers figured a way around the pension a long time ago and instead of legislating that a company set up a pension fund and full fund it, they created yet another government entity called the Pension Benefit Guaranty Corporation (PBGC).

Ask the folk at the old United Airline how much their pensions got wacked.

 

[Show-me]

PBGC is like the FDIC, used and abused to the point of broke.