Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 12-17-2011, 10:36 AM   #21
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Mulligan's Avatar
 
Join Date: May 2009
Posts: 7,376
Quote:
Originally Posted by jazz4cash

ok....I shoulda left the part out about games being played....that really was not the point and I did not intend to be negative. I shoulda just said how do you know the funding % of your pension since it is not stated explicitly in the annual statement?
I didnt take it as negative at all. I just wanted to impress myself by using the word " actuarial assumption" . What Ive learned has been through reading various posts over the years of people on this forum, more in the know than I am. In fact, I think I shouldnt have, because now, I know there is "art" involved which makes you worry over things you have absolutely no control on.
For example, my system says it is about 90% funded which they described as " strongly funded". If that is all I know, there is no worry. But no, I have to dig deeper and find part of the assumptions are based on 8% returns. Then you look deeper and realize the allocations of the fund make it hard to reach that. A certain percentage has to be in short term investments for liquidity, then " safety" in government bond, etc. We know where the interest rates are on those. So what does the market portion of the fund have to do to pull this all up to 8%? It certainly appears it needs to be a lot more than 8%. I need to be more like some of my fellow retired peers who just "cash the check" and wait the for the next one. That is all they know. Some didnt even know if they got a COLA, or even when they get it, if they did.
__________________

__________________
Mulligan is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 12-17-2011, 11:28 AM   #22
Dryer sheet aficionado
 
Join Date: Nov 2011
Posts: 48
The expected return on assets has no impact on how well the plan is funded. That is based on the value of the liabilities and assets on a particular date. What they hope to achieve in asset returns in the future didn't matter when you look at how well the plan is currently funded.

T
__________________

__________________
Tif7 is offline   Reply With Quote
Old 12-17-2011, 12:52 PM   #23
Thinks s/he gets paid by the post
Spanky's Avatar
 
Join Date: Dec 2004
Location: Minneapolis
Posts: 4,046
Quote:
Originally Posted by grumpy View Post
There were a lot of frustrations and drawbacks to a career as a federal employee.
.. or as an employee in the private sector.
__________________
May we live in peace and harmony and be free from all human sufferings.
Spanky is offline   Reply With Quote
Old 12-17-2011, 12:59 PM   #24
Thinks s/he gets paid by the post
 
Join Date: Apr 2011
Posts: 1,557
What pension?
__________________
gerntz is offline   Reply With Quote
Old 12-17-2011, 01:04 PM   #25
Thinks s/he gets paid by the post
Spanky's Avatar
 
Join Date: Dec 2004
Location: Minneapolis
Posts: 4,046
Quote:
Originally Posted by Bestwifeever View Post
Our retiree healthcare through DH's megacorp, which I believe we pay 100% toward the group rate and which can be cancelled at any time, will end for sure when DH hits Medicare age of 65. That has always been written in stone, and I think that is pretty standard.
Our corporate medical plan is similar. Retiree pays 0 - 80% of group rate until medicare kicks in.
__________________
May we live in peace and harmony and be free from all human sufferings.
Spanky is offline   Reply With Quote
Old 12-17-2011, 01:09 PM   #26
Moderator
ziggy29's Avatar
 
Join Date: Oct 2005
Location: Texas
Posts: 15,612
Quote:
Originally Posted by 97guns View Post
my brother retired around 4 years ago from the grocers union, he has a nice pension of $2800/ month with full medical. they are taking 100% of his medical away and i am afraid they will be making more cuts in the near future.
I see this as a double-edged sword. There's a part of me that feels like taking away promised retiree health insurance benefits (especially before age 65) should be illegal on those who have already retired (you may have just busted their retirement by doing so). On the other hand, if you make it impossible to take away from current retirees, many of the dwindling number of employers which still offer this benefit will pull it away from new hires and those not yet retired.

Damned if you do, damned if you don't.

As long as health insurance is foolishly tied to employment, these frustrations will continue.

My first Megacorp eliminated retiree medical for folks under 50 back around 1996 and froze my pension about year later. Yay for me.
__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

RIP to Reemy, my avatar dog (2003 - 9/16/2017)
ziggy29 is offline   Reply With Quote
Old 12-17-2011, 01:19 PM   #27
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Mulligan's Avatar
 
Join Date: May 2009
Posts: 7,376
Quote:
Originally Posted by Tif7
The expected return on assets has no impact on how well the plan is funded. That is based on the value of the liabilities and assets on a particular date. What they hope to achieve in asset returns in the future didn't matter when you look at how well the plan is currently funded.

T
That is my understanding too, (but I am not extremely knowledgable in this matter). But in looking forward, not hitting a possible target rate of an assumed 8% return will have a future impact on how well the plan is funded down the road, correct? I know that cant just say bond rates are horrible and we have to figure that into our assumptions for the next 5 years, but ultimately it will have an impact, correct?
__________________
Mulligan is offline   Reply With Quote
Old 12-17-2011, 03:45 PM   #28
Moderator
Alan's Avatar
 
Join Date: Jul 2005
Location: Eee Bah Gum
Posts: 21,085
Quote:
Originally Posted by Mulligan View Post
That is my understanding too, (but I am not extremely knowledgable in this matter). But in looking forward, not hitting a possible target rate of an assumed 8% return will have a future impact on how well the plan is funded down the road, correct? I know that cant just say bond rates are horrible and we have to figure that into our assumptions for the next 5 years, but ultimately it will have an impact, correct?
If the company is still around then it means they have to make larger contributions to keep it fully funded. This has happened a couple of times with my MegaCorps including the one that was bought out by another MegaCorp about 5 years ago. Part of the deal was that they agreed to contribute an extra $Xm /year for following 5 years and then continue to keep it solvent. The pension fund itself has not had employee contributions for many years after it was closed to newcomers in the 90's.
__________________
Retired in Jan, 2010 at 55, moved to England in May 2016
Now it's adventure before dementia
Alan is offline   Reply With Quote
Old 12-17-2011, 03:51 PM   #29
Thinks s/he gets paid by the post
Spanky's Avatar
 
Join Date: Dec 2004
Location: Minneapolis
Posts: 4,046
Quote:
Originally Posted by gerntz View Post
What pension?
It's unfortunate that pension is becoming a distant memory in the private sector.
__________________
May we live in peace and harmony and be free from all human sufferings.
Spanky is offline   Reply With Quote
Old 12-17-2011, 03:56 PM   #30
Dryer sheet aficionado
 
Join Date: Nov 2011
Posts: 48
Quote:
Originally Posted by Mulligan View Post
That is my understanding too, (but I am not extremely knowledgable in this matter). But in looking forward, not hitting a possible target rate of an assumed 8% return will have a future impact on how well the plan is funded down the road, correct? I know that cant just say bond rates are horrible and we have to figure that into our assumptions for the next 5 years, but ultimately it will have an impact, correct?
I donít think it will. Think of it this way - how well the plan ends up being funded down the road will depend on what the value of assets and liabilities are at that time. The expected return on assets should not change that. For example, if the plan is 100% funded today and 5 years from now it turns out to be 80% it doesnít matter what rate of return was assumed Ö.2%, 8%, 20% Ö.you will still be at 80%.

Horrible bond rates does change the funded % for the worse, since it increases the value of the liabilities. So now you have huge asset losses and increasing liabilities cutting down the funded %.

T
__________________
Tif7 is offline   Reply With Quote
Old 12-17-2011, 04:15 PM   #31
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
clifp's Avatar
 
Join Date: Oct 2006
Posts: 7,450
Quote:
Originally Posted by Tif7 View Post
The expected return on assets has no impact on how well the plan is funded. That is based on the value of the liabilities and assets on a particular date. What they hope to achieve in asset returns in the future didn't matter when you look at how well the plan is currently funded.

T
Wrong

The funding levels of pension plan are based on numerous actuarial assumption; life expectancy, wage growth, inflation, percent of current workers who leave before vesting, number of new workers hired etc etc, and one of the key assumptions is the future returns on investments. For most pension plans these were 8-8.5% a few years ago and now are 7.5-8%.

The funding level is determined after factoring in all of actuarial assumptions.

You can read about this assumption generally in the appendix or foot note section of your pension plans comprehensive financial report. (This is different than the summary that most send out). It is generally available on a website, but in some case you have to ask for them.


After reading about dozen of these over the last few years I've gotten reasonably good at understanding them.
__________________
clifp is offline   Reply With Quote
Old 12-17-2011, 05:14 PM   #32
Dryer sheet aficionado
 
Join Date: Nov 2011
Posts: 48
Quote:
Originally Posted by clifp View Post
Wrong

The funding levels of pension plan are based on numerous actuarial assumption; life expectancy, wage growth, inflation, percent of current workers who leave before vesting, number of new workers hired etc etc, and one of the key assumptions is the future returns on investments. For most pension plans these were 8-8.5% a few years ago and now are 7.5-8%.

The funding level is determined after factoring in all of actuarial assumptions.

You can read about this assumption generally in the appendix or foot note section of your pension plans comprehensive financial report. (This is different than the summary that most send out). It is generally available on a website, but in some case you have to ask for them.


After reading about dozen of these over the last few years I've gotten reasonably good at understanding them.
Maybe we are taking about different things here. When you say funding levels, do you mean an actual funded % or are you referring to some expected future funding level? If itís the latter then I agree, what you assume for expected future returns is key.

For actual funded %, the expected future returns donít matter. The assets are what they are, and what you assume for future returns wonít change that.

T
__________________
Tif7 is offline   Reply With Quote
Old 12-17-2011, 05:46 PM   #33
Moderator
ziggy29's Avatar
 
Join Date: Oct 2005
Location: Texas
Posts: 15,612
Quote:
Originally Posted by Spanky View Post
It's unfortunate that pension is becoming a distant memory in the private sector.
And unless the fortunes of the average private sector worker stop eroding, there's probably no way to stop from happening in the public sector, too.
__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

RIP to Reemy, my avatar dog (2003 - 9/16/2017)
ziggy29 is offline   Reply With Quote
Old 12-17-2011, 07:16 PM   #34
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
clifp's Avatar
 
Join Date: Oct 2006
Posts: 7,450
Quote:
Originally Posted by Tif7 View Post
Maybe we are taking about different things here. When you say funding levels, do you mean an actual funded % or are you referring to some expected future funding level? If itís the latter then I agree, what you assume for expected future returns is key.

For actual funded %, the expected future returns donít matter. The assets are what they are, and what you assume for future returns wonít change that.

T

Imagine a pension plan which as of Dec 31, 2011 has $1 billion of assets. The fund has 3,000 retirees. The company/government changed pension plans and current employees are in a new system so this pool of money will need to fund these 3,000 retirees for the rest of their life.

If a pension is 100% funded than this amount of money will sufficient to send out retirement checks, based on assumptions of life expectancy, inflation, and rate of return. If it is 80% funded you would need 1.25 billion.

It is pretty pointless to talk about funding level of a pension without
talking about future liabilities.

We maybe talking about different things. Are you talking about the difference between the actuarial value of pension plan and the market value?
__________________
clifp is offline   Reply With Quote
Old 12-17-2011, 07:20 PM   #35
Thinks s/he gets paid by the post
John Galt III's Avatar
 
Join Date: Oct 2008
Posts: 1,285
When laid off from MegaCorp in 1998, they had already forced us into a "cash balance" pension. As "former employees" were able to cash out anytime, or start taking monthly lifetime payments, also anytime, no matter your age, or just let it accrue interest and not touch it. I agonized over it for a few years, and decided to start taking monthly payments. So far I have been taking the monthly payments for about 7 years, seamlessly. If I get just 3 more years worth out of it, I will have matched the lump sum amount ($80,000). Of course inflation is killing me, but that went into the decision too. No Cola. I get annual statements from Mega telling me all is well with the funding, although it is actually indecipherable to me. Since the monthly amount is not large ( less than 1k) PBGC will supposedly replace all of it, month by month, should Mega decide to default.
__________________
John Galt III is offline   Reply With Quote
Old 12-17-2011, 07:24 PM   #36
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Chuckanut's Avatar
 
Join Date: Aug 2011
Location: West of the Mississippi
Posts: 6,323
It is sad that pension benefits, already earned by the working people, can be reduced and taken away after the fact. One would think there would be strong laws requiting proper funding of pension benefits, separating the funding from the regular company assets and guaranteeing them if a company goes belly up. Yes, this might mean that pension benefits might be less than they are now, but at least the worker would know where he/she stands and that it cannot be taken away by poor management or corporate greed.

My state reformed public pensions years ago. The pension with the best 'deal' has been closed for over 35 years. The next best one is funded at 90% the last time I checked. The newest is a hybrid of defined contribution and defined benefit. It is also well funded. I pay about 6% of gross income into the plan as my contribution. This is over and above SS. Another reason why laws should be strengthened to protect pension assets - it's my current and future income at risk.
__________________
The worst decisions are usually made in times of anger and impatience.
Chuckanut is offline   Reply With Quote
Old 12-17-2011, 09:54 PM   #37
Dryer sheet aficionado
 
Join Date: Nov 2011
Posts: 48
Quote:
Originally Posted by clifp View Post
It is pretty pointless to talk about funding level of a pension without talking about future liabilities.
I’m with you 100% on that. I’m not sure why you think I suggested otherwise.

In your example there are 1B in assets. If you say it’s 100% funded then that means there are 1B in liabilities. Let’s say all 1B of the assets are invested in Wellesley. It makes no difference if unclemick expects Wellesley to return 4%, 8%, 20% …..the funded percentage is still 100% (1B/1B in all cases).

Now, if you turn around and say it is only 80% funded that means there are 1.25B in liabilities. It does not change the fact that you have 1B in assets. And again, it does not make a difference if the expected return is 5%, 10%, 25% you are still 80% (1B/1.25B in all cases).

Now, the expected return does impact earnings. If you have 1B in assets and have a 4% expected return, you would be adding 40M to earnings. If you instead expected 20% you would be adding 200M to earnings. That sure will change my thoughts on EPS, but it has nothing to do with the funded % of the pension.

I’m not sure if everyone here is interested in this level of detail. I’ll gladly discuss over PM if you wish.

T
__________________
Tif7 is offline   Reply With Quote
Old 12-17-2011, 10:21 PM   #38
Dryer sheet aficionado
 
Join Date: Nov 2011
Posts: 48
Quote:
Originally Posted by Chuckanut
It is sad that pension benefits, already earned by the working people, can be reduced and taken away after the fact.
This is not true, at least not in the US. Pension benefits that have been earned cannot be reduced or taken away by your employer, by law. If they go bankrupt that is a different story. In that case what do you expect? They have failed and have no more money. The PBGC steps in and covers benefits up to a certain level. It's the same as a bank failing and the FDIC covering account balances up to certain limits.

T
__________________
Tif7 is offline   Reply With Quote
Old 12-18-2011, 12:08 AM   #39
Full time employment: Posting here.
arebelspy's Avatar
 
Join Date: Apr 2011
Posts: 625
Quote:
Originally Posted by Tif7

I’m with you 100% on that. I’m not sure why you think I suggested otherwise.

In your example there are 1B in assets. If you say it’s 100% funded then that means there are 1B in liabilities. Let’s say all 1B of the assets are invested in Wellesley. It makes no difference if unclemick expects Wellesley to return 4%, 8%, 20% …..the funded percentage is still 100% (1B/1B in all cases).

Now, if you turn around and say it is only 80% funded that means there are 1.25B in liabilities. It does not change the fact that you have 1B in assets. And again, it does not make a difference if the expected return is 5%, 10%, 25% you are still 80% (1B/1.25B in all cases).

Now, the expected return does impact earnings. If you have 1B in assets and have a 4% expected return, you would be adding 40M to earnings. If you instead expected 20% you would be adding 200M to earnings. That sure will change my thoughts on EPS, but it has nothing to do with the funded % of the pension.

I’m not sure if everyone here is interested in this level of detail. I’ll gladly discuss over PM if you wish.

T
I don't think so, but maybe I'm misunderstanding what you're saying.

How do you determine liabilities except by what you will have to pay out in the future? And how will you know how much you can pay out without having a projected rate of return?

To put it another way, let's look at an example. We have 3,000 people we need to fund for X years. It is COLA'd, so we need Y dollars earning Z% to fund that in the future. If we have Y dollars now and project we can earn Z%, we are 100% funded. If we have, say 80% of Y, we're 80% funded. HOWEVER, if we change Z% to be lower, we'll need to up Y to compensate. So say, for example, that our new projection is to only earn (Z-2)%, or whatever. Now then to be fully funded we'll need Y to be higher, or suddenly we're only partially funded.

Thus, your projected rate of return does indeed affect the amount that the pension is funded at. No?
__________________
arebelspy is offline   Reply With Quote
Old 12-18-2011, 11:07 AM   #40
Recycles dryer sheets
 
Join Date: Aug 2005
Posts: 480
As someone may have noted, the math for a continuing pension plan is calculated differently from one that is being terminated. And other things can change.

Just before 9-11, the United Pilots Defined Benefit Plan was said to be funded something like 110%. After 9-11, the investments took a big hit and the airline got permission to suspend pension contributions for a couple of years in hopes the company would recover. We all know how that turned out. Then when the PBGC took over, they redid the math. From memory, they used the worst (pension) contract you've had within the last 5 years, then presume you retired 3 years before the plan is actually terminated. And even though I was required by the FAA to retire at age 60, the PBGC says that's an additional 5 years early based on their unbending rule of retirement at 65.

We used to ay that:
"The mission of the Pension Benefits Guarantee Corporation is to Guarantee that they never pay Pension Benefits to anone.

In the end, my particular case worked out OK. But a lot of people got horribly screwed.
__________________

__________________
Gearhead Jim is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
California proposal for pension reform MichaelB FIRE and Money 88 11-05-2011 10:42 PM
Does a High Deductible Health Plan (HDHP) make sense for me? nico08 FIRE and Money 9 10-07-2011 10:44 PM

 

 
All times are GMT -6. The time now is 01:40 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.