Pension crisis: Fully funded ones a rarity

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Moliere
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Re: Pension crisis: Fully funded ones a rarity

Post by Moliere »

Image
"The world is suffering more today from the good people who want to mind other men's business than it is from the bad people who are willing to let everybody look after their own individual affairs." - Clarence Darrow
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GreenGoo
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Re: Pension crisis: Fully funded ones a rarity

Post by GreenGoo »

Where's the salary growth table?

Plus, welcome to baby boomers.
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Moliere
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Re: Pension crisis: Fully funded ones a rarity

Post by Moliere »

GreenGoo wrote:Where's the salary growth table?
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"The world is suffering more today from the good people who want to mind other men's business than it is from the bad people who are willing to let everybody look after their own individual affairs." - Clarence Darrow
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Pyperkub
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Re: Pension crisis: Fully funded ones a rarity

Post by Pyperkub »

Moliere wrote:Image
Choosing a single pre-bubble ( budget) year as a baseline for CalPERS is disingenuous as the state pays less into the fund when the investments are doing well as I recall. I believe there have been some years when the state paid nothing to the fund.
Black Lives definitely Matter Lorini!

Also: There are three ways to not tell the truth: lies, damned lies, and statistics.
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Moliere
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Re: Pension crisis: Fully funded ones a rarity

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Neither Major Party Gubernatorial Candidate Has a Serious Plan to Fix New Jersey's Pension Crisis
Murphy seems to be a runaway favorite in tomorrow's election—though some polls show Guadagno closing the gap, slightly, in the race's final weeks—so let's start with his proposal. He says he will fully fund the state pension system, which is a step in the right direction.

Underfunding the pension system for decades is a major reason why the state now finds itself in such dire straits. But Murphy has given himself a lot of wiggle room with that promise. "We will fully fund our pension obligations, and we'll get there as fast as we can," he said last month, according to Philly.com.

Getting there will require either massive tax increases or huge cuts to government services. Fully funding the pension system this year would have required a $4 billion contribution, but the state is paying just $700 million. Even if Murphy is able to deliver on his promise to generate $1.5 billion in new revenue by legalizing and taxing marijuana, and increasing taxes on New Jersey's highest earners, he won't get close to meeting the pension obligations.

"We have a very, very, credible plan to … fully fund the pensions over the next several years as rapidly as possible," Murphy said during October's debate, according to NJ.com. "At least as fast—I hope a lot faster than this administration has been funding them."

Despite the fact that he's a Democrat, Murphy's plan sounds a lot like the Republican Christie's: ramping up contributions too slowly to make a dent in what the state owes. Most recently, Christie proposed shifting revenue from the state lottery into the pension system, a risky gamble considering that lottery sales have been declining in recent years.

Guadagno says fixing the pension problem is in everyone's best interest. "This problem will only be resolved by sides sitting down at the negotiating table and hammering out a solution," her campaign website proclaims. She's got some good ideas for structural reforms to the pension plan, like moving employees into so-called "cash balance" plans, a bit more like private sector retirement plans, and removing loopholes that allow some public officials to "double dip," or collect a pension from one public sector job while continuing to work at another.
More libertarian propaganda for everyone to say "ain't no thang" and shrug it off.
"The world is suffering more today from the good people who want to mind other men's business than it is from the bad people who are willing to let everybody look after their own individual affairs." - Clarence Darrow
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Moliere
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Re: Pension crisis: Fully funded ones a rarity

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The State Pension Funding Gap: 2016
In 2016, the state pension funds in this study cumulatively reported a $1.4 trillion deficit—representing a $295 billion jump from 2015 and the 15th annual increase in pension debt since 2000. Overall, state plans disclosed assets of just $2.6 trillion to cover total pension liabilities of $4 trillion.

Investment returns that fell short of state assumptions caused a major part of the increase in the funding gap. The median public pension plan’s investments returned about 1 percent in 2016, well below the median assumption of 7.5 percent—a disparity that added about $146 billion to the debt.1 Assumption changes—primarily states lowering the assumed rate of return used to calculate pension costs—accounted for another $138 billion in increased liabilities.

Even if plan assumptions had been met in 2016, the funding gap would have increased by $13 billion because states did not allocate enough to their systems. As a whole, they would have needed to contribute $109 billion to pay for both the cost of new benefits and interest on pension debt; the actual amount contributed, $96 billion, fell short.
"The world is suffering more today from the good people who want to mind other men's business than it is from the bad people who are willing to let everybody look after their own individual affairs." - Clarence Darrow
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Pyperkub
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Re: Pension crisis: Fully funded ones a rarity

Post by Pyperkub »

Moliere wrote: Fri Apr 13, 2018 1:29 pm The State Pension Funding Gap: 2016
In 2016, the state pension funds in this study cumulatively reported a $1.4 trillion deficit—representing a $295 billion jump from 2015 and the 15th annual increase in pension debt since 2000. Overall, state plans disclosed assets of just $2.6 trillion to cover total pension liabilities of $4 trillion.

Investment returns that fell short of state assumptions caused a major part of the increase in the funding gap. The median public pension plan’s investments returned about 1 percent in 2016, well below the median assumption of 7.5 percent—a disparity that added about $146 billion to the debt.1 Assumption changes—primarily states lowering the assumed rate of return used to calculate pension costs—accounted for another $138 billion in increased liabilities.

Even if plan assumptions had been met in 2016, the funding gap would have increased by $13 billion because states did not allocate enough to their systems. As a whole, they would have needed to contribute $109 billion to pay for both the cost of new benefits and interest on pension debt; the actual amount contributed, $96 billion, fell short.
Per the site the US Average Pension is funded at 66% of total future liabilities. CalPERS is probably a hair north of that (68-70%, I think), however (form Feb 2018):
Pension fund hits milestone: It’s earning more money than it’s paying out

For the first time in years, CalPERS is stable enough that it no longer expects to run deficits into the middle of the century.

Though still underfunded, the $345 billion pension fund has a better financial outlook because it’s collecting more money from employers and making the most of recent stock market gains, its chief investment officer said on Monday. That should help it avoid scenarios where it has to sell investment assets to pay pensions.
So, basically, it's about as stable as you can get with a funding level just barely ahead of the US Average of 66%, and based upon the Actuarial Basis Of Accounting (which is how most pension plans are run, not "fully funded" AFAIK), it has enough assets + (projected) income on assets + budgeted payments to cover every single current and projected liability ONCE IT COMES DUE.
What is 'Actuarial Basis Of Accounting'

A method used in computing the periodic payments that a company must make to fund its employee pension benefits. The actuarial basis stipulates that total contributions from the company plus investment returns on pension assets must match the required annual contribution from the pension fund. Assumptions must be made for the length of workers' careers, the rate of return on plan assets, the rate of salary increases and the discount rate used for future benefits.
"Fully Funded" means that the fund could handle all payments in perpetuity if ALL current employees were to retire immediately and stop paying into the system and for the employer to stop paying into the system. This makes sense in the private sector (due to all of the reasons a company can fail), but is idiotic in the public sector.

In other words (at least in CalPERS' case), being able to meet its pension obligations sustainably, it probably only needs a funding ratio of 60-75%, depending on how the economy is doing. Other states may be in the same boat.

This is not panic--worthy for most states, and especially California (at least with respect to CalPERS). For the 9 states below 60%, well, they have some catching up to do, but not quite as much as the "PANIC NOW, MOVE THEM ALL INTO DEFINED CONTRIBUTION PLANS" (so our brokers can make a ton of money skimming off the top) folks would have you believe.
Black Lives definitely Matter Lorini!

Also: There are three ways to not tell the truth: lies, damned lies, and statistics.
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GreenGoo
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Re: Pension crisis: Fully funded ones a rarity

Post by GreenGoo »

I hear Social Security has a surplus. Why not raid that, and then make it a campaign issue in 2018 about how socialism is killing America?

That certainly never happens in private pensions. Ever.
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Re: Pension crisis: Fully funded ones a rarity

Post by Isgrimnur »

CBS News
General Electric said it will freeze the pensions of 20,000 U.S. salaried workers, a measure designed to reduce its pension deficit and trim debt. The move will shave GE's pension deficit by as much as $8 billion and its net debt by as much as $6 billion.

As part of the pension freeze, the industrial conglomerate said it will freeze supplementary pension benefits for approximately 700 employees who became executives before 2011. Supplemental pension plans are typically designed for higher-ranking employees and offer benefits beyond the typical pension plan.
...
As part of such efforts, the company said last month it would spend $5 billion to pay down debt. But the effort to reduce debt could also damage employee morale at a time when CEO H. Lawrence Culp Jr. is trying to turn around the troubled conglomerate.

"The impact on employee engagement/morale of some of these pension measures is unlikely to be positive, but in a situation of 'corporate battlefield surgery,' this tends to be a typical, if unfortunate casualty," noted Barclay's analyst Julian Mitchell in a Monday research note.
...
A pension freeze effectively puts a hold on new benefits from accruing to a retirement account, according to the Pension Rights Center. GE said the 20,000 workers affected by the change won't accrue additional benefits nor make employee contributions after January 1, 2021.
...
Like other corporations, GE has been phasing out its pension amid a push toward self-directed retirement plans such as 401(k)s. GE said it hasn't allowed new workers into its pension plan since 2012.
It's almost as if people are the problem.
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