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Old 03-30-2010, 09:34 AM   #81
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Count me in as one of those who is not thrilled about paying for someone's pension.
I don't directly look at it as "paying for someone else's pension." To the extent the value of the pension contributions is part of a reasonable compensation package, it's just part of what public employees are paid. In reality, if solvent and sane pension plans are adequately funded every year, I don't care whether taxpayers pay $40,000 with $20,000 worth of benefits or $55,000 with $5,000 worth of benefits. I don't really care whether it's paid out into salary or into a pension fund. At least not in general principle and as long as the pension fund is solvent and sustainable. All I care about is that we're paying $60,000 overall to someone, and that's either reasonable or it isn't depending on what the "market value" is for that occupation, education and experience.

The problem comes when reckless and overpromising plans hit an air pocket and they want to put all the burden of "fixing" it on taxpayers, many of whom have lost their own private sector pensions, had their own 401K matches suspended and are hoping to dodge a lot of pink slips. I'll agree it's unfortunate that government employees have taken too much of the outrage over it; they didn't make these rules or these unsustainable promises. But that doesn't change the fact that a lot of people are feeling screwed and that they have already seen their own retirements postponed or ruined in the last few years even as they are asked to pay more to secure the (often early) retirement of others. It's the policy makers and those who set benefit levels requiring unrealistic rates of return who should be scapegoated here -- not the workers.

I guess it's easier to feel benevolent when it feels like a rising tide is lifting all boats together. But when your boat has sprung a leak and isn't rising, you may not want to spend your time and money helping someone else's boat continue to rise while yours is still sinking. The taxpayer isn't a bottomless money supply, and we can't have a sustainable model where public labor costs continue to rise faster than the private sector tax base. And given how many wages have been frozen or even slashed in the last couple years....
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Old 03-30-2010, 09:55 AM   #82
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I agree with you the problem was a combination of bad planning and bad luck. I have philosophical problems with defined benefits for any type of pension, although defined contributions have their own problems also.

Coloradoretiree points out the problem quite well "Well, shortfalls in billions have a way of affecting legal interpretations.". Most of public pension plans have laws or even in many cases state constitutional projections. The Colorado case is just the canary in the coal mine. Laws and even constitutions can and will be changed. Voters pension plans have also been terminated like Ziggy's, their employee 401K contribution eliminated, and their balances decimated. Instead of mere furloughs lots have gotten pink slips. Frankly, I wouldn't put a lot of stock in the value of the laws protecting your pension benefits in this environment.
Once they get turned over to PBGC, its over for good, as PBGC only covers at most 60% of the old pension plan, and PBGC is as "unfunded" as FDIC is...........


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Compared to rest of society, public servants are overrepresented on this forum. For the rest of us, we generally have significant saving compared to the rest of the country. Meaning we are actually able to pay of higher taxes without having to make huge sacrifices. So if you detect some anger on this forum you would be right, but I suspect it is nothing compared to what you hear at tea party convention.
I agree. The anger I have is at the arrogance of union leaders and local leaders who don't CARE about the economy and just think raising taxes can go on indefinitely to fund benefits most folks just dream about. The latest craziness in Washington basically means the costs will just keep going up.

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To personalize the numbers a bit, I'll have to fork over roughly $30K to properly funded Hawaii's pension plans (10K for the pension and 20K for the completely unfunded medical liability). I actually have the money to fork it over, most of my fellow citizen don't. 30K *4 SWR=$1,200 or $100/month. Now if you ask me to give up $100/month for the rest of my life, than I think it is entirely reasonable for me to ask you to give up things, like they are doing in Colorado and accept a 2% COLA instead 3.5%.
A 2% COLA is pretty good in this environment.........

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What I really really fear, is we (the taxpayers, Mayors/Governors, state workers) all end up in a situation like the UAW and the auto industry, with both sides digging in until the tsunami comes and wipes us all out. So it saddens me to see the CO public employee unions launch lawsuits. Government provides lots of useful services, and they pretty much all are provide by rank and file employees not elected officials. Outside of the dangerous jobs you don't get many so I am sympathetic. But, I think you can forgive me and others if I am not thrilled at the opportunity of spend $100 bucks each and every month to pay for public employees pensions, that I've been warning about for years.
There was NO WAY the govt was going to let the car companies fail. However, the pension problem has NOT been addressed yet. Plus, it cracks me up to see that GM will post a PROFIT this quarter. Really, how hard was that to make happen when the taxpayers own 62%?
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Old 03-30-2010, 11:03 AM   #83
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I'll agree it's unfortunate that government employees have taken too much of the outrage over it; they didn't make these rules or these unsustainable promises.
That's true - government workers are not the blame. The problem is that they expect the government to fulfill their obligations or deliver promises that are not sustainable. They are outraged about possible reduced benefits even though the government (the payer) is under pressure to cut huge budget deficits and restore economic competitiveness. I under their frustrations (-- I would be mad also --), but they need to accept the reality that the government simply cannot afford it and major changes will be forthcoming for better or worse. It is highly unlikely that the government will forfeit its obligations as protected by pension laws. However, laws can be changed, which remains to be seen. Let's hope for a better solution.
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Old 03-30-2010, 01:44 PM   #84
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clifp, in 2004 I retired from public safety into the California Public Employees Retirement System (CalPers) and, although their portfolio balance was recently 200 billion in assets, who knows what may happen to that value in the future. They have crawled back from a few periods of tremendous losses since they began in 1932 and have always recovered well. Under state law, California taxpayers are mandated to fund current retirees' pensions should CalPers fail, unless, of course, the nations entire economy takes a complete dump.

Does the Hawaii pension system, and I suppose most other states' pension systems as well, not have similar protections, within reason?
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Old 03-30-2010, 02:15 PM   #85
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Under state law, California taxpayers are mandated to fund current retirees' pensions should CalPers fail, unless, of course, the nations entire economy takes a complete dump.
Laws can certainly be changed.

The more interesting question one might have is who gets funded when the funding isn't there. Are public pensions sacred to the exclusion of schools, roads, and prisons ?

Detroit will be an interesting example to watch of what's to come in many cities.
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Old 03-30-2010, 02:25 PM   #86
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Laws can certainly be changed.

The more interesting question one might have is who gets funded when the funding isn't there. Are public pensions sacred to the exclusion of schools, roads, and prisons ?

Detroit will be an interesting example to watch of what's to come in many cities.
If so, those pensioners had best keep a very low profile.

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Old 03-30-2010, 06:33 PM   #87
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clifp, in 2004 I retired from public safety into the California Public Employees Retirement System (CalPers) and, although their portfolio balance was recently 200 billion in assets, who knows what may happen to that value in the future. They have crawled back from a few periods of tremendous losses since they began in 1932 and have always recovered well. Under state law, California taxpayers are mandated to fund current retirees' pensions should CalPers fail, unless, of course, the nations entire economy takes a complete dump.

Does the Hawaii pension system, and I suppose most other states' pension systems as well, not have similar protections, within reason?
The good news is that according to the PEW study and my own back of the envelope calculations, is in pretty good shape. CalPERS is was given a score 3 out of 4, (needs improvement) and the pensions are 83% funded. In looking at various Pension funds, I found the CalPERS report to be more transparent and more complete compared to other states. On the other hand, CalPERs is still projecting an 8% return going forward, which is quite possibly to optimistic.

In contrast Hawaii got a score of 1 and Colorado got a score of 0. In Hawaii, the legislator a few years ago passed a law preventing the legislator from underfunding the pension. (In both Hawaii and Seattle during the boom years in the market late 90s, Hawaii/Seattle underfunded contributions cause the pension funds were making a ton of money in the stock market.

The bad news I think for California pensioners is that rest of the state is in such wretched financial shape, I can' imagine a bail out of CALPERs actually ever happening. I am sure I don't need to tell you but California has lots of law mandating that schools get X amount, that property taxes can only go up Y amount, 3 strikes offenders have to spend 25 years in prison etc etc and oh and budgets have to be balanced and be finished by June. I'll simply point out what the law tells the state they have to do and what actually gets done don't always exactly coincide.
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Old 03-31-2010, 12:20 AM   #88
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(snip)Coloradoretiree points out the problem quite well "Well, shortfalls in billions have a way of affecting legal interpretations.". Most of public pension plans have laws or even in many cases state constitutional projections. The Colorado case is just the canary in the coal mine. Laws and even constitutions can and will be changed. Voters pension plans have also been terminated like Ziggy's, their employee 401K contribution eliminated, and their balances decimated. Instead of mere furloughs lots have gotten pink slips. Frankly, I wouldn't put a lot of stock in the value of the laws protecting your pension benefits in this environment.(snip)
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Once they get turned over to PBGC, its over for good, as PBGC only covers at most 60% of the old pension plan, and PBGC is as "unfunded" as FDIC is...........(snip)
PBGC covers zero percent of public pensions. I attended a "get ready to retire" seminar put on by the Retirement System last month and asked specifically whether our pension benefits were guaranteed by PBGC. The person giving the class didn't know, so I asked her to check. She got back in touch with me a few days later—the answer was that PBGC covers only corporate pension plans, not governmental ones.
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Old 03-31-2010, 01:39 AM   #89
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(snip)Compared to rest of society, public servants are overrepresented on this forum. For the rest of us, we generally have significant saving compared to the rest of the country. Meaning we are actually able to pay of higher taxes without having to make huge sacrifices. So if you detect some anger on this forum you would be right, but I suspect it is nothing compared to what you hear at tea party convention.

To personalize the numbers a bit, I'll have to fork over roughly $30K to properly funded Hawaii's pension plans (10K for the pension and 20K for the completely unfunded medical liability). I actually have the money to fork it over, most of my fellow citizen don't. 30K *4 SWR=$1,200 or $100/month. Now if you ask me to give up $100/month for the rest of my life, than I think it is entirely reasonable for me to ask you to give up things, like they are doing in Colorado and accept a 2% COLA instead 3.5%.
You say because you would be giving up $100 a month, I (as a prospective public pension recipient) should be willing to give up something too. This is ignoring the fact that government employees and retirees pay taxes just like everyone else. If the Washington State system, or the county pension system, or the City of Seattle system ends up receiving any assistance, or if there is any Federal bailout of any system, I will be taxed to pay for it just as much as a private sector employee with the same income.

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What I really really fear, is we (the taxpayers, Mayors/Governors, state workers) all end up in a situation like the UAW and the auto industry, with both sides digging in until the tsunami comes and wipes us all out. So it saddens me to see the CO public employee unions launch lawsuits. Government provides lots of useful services, and they pretty much all are provide by rank and file employees not elected officials. Outside of the dangerous jobs you don't get many so I am sympathetic. But, I think you can forgive me and others if I am not thrilled at the opportunity of spend $100 bucks each and every month to pay for public employees pensions, that I've been warning about for years.
Yeah, that's a scary thought. The more I think about the upcoming changes in the Seattle system the more nervous I get. I think if the reduction in benefits is significant, and imposed all at once, a lot of people (possibly including me) who are close will decide to retire now rather than later. I for one, because of the degree of underfunding, would be real tempted to take one of the options with a reduced benefit and a cash lump sum instead of the straight monthly benefit. There could be a bunch of relatively higher paid, higher pension employees who retire, and are replaced, if at all, with people on lower rungs of the salary scale, or possibly even part time or temporary employees that I don't know if any of their pay goes to the pension fund at all. Problem is, I think the City and the Pension Fund are at cross purposes. The City is up against a multi-million dollar shortfall next year and would probably like nothing better than to get some of us high-seniority employees off the payroll voluntarily. Then, there's a couple of hundred employees (three specific job titles) with layoff hanging over their heads, and I bet there will be not a few pre-emptive retirements among them as well. It sounds like what will help the City will hurt the fund, and vice versa.

I have been trying to come up with some constructive suggestions to take to this informational meeting next month, but if the change in benefits is at all significant, the only thing I can think of that would counter a tendency to rush for the exits is if the new table is phased in gradually instead of applied all at once with a short cutoff date.

I don't want to see lawsuits either. I would rather see representatives of the City, the pension fund, employees and retirees put their heads together and see whether they can come up with a better solution than a court battle that would cost a bunch of money which IMO would be much better spent on almost anything else.
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Old 03-31-2010, 08:53 AM   #90
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PBGC covers zero percent of public pensions. ... —the answer was that PBGC covers only corporate pension plans, not governmental ones.
I'm a little surprised the class leader didn't know this. Also, from wiki:
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The PBGC is not funded by general tax revenues. Its funds come from four sources:

* Insurance premiums paid by sponsors of defined benefit pension plans;
* Assets held by the pension plans it takes over;
* Recoveries of unfunded pension liabilities from plan sponsors' bankruptcy estates; and
* Investment income.
I think that FD's point about PBGC is that you should be *glad* that you are not covered by it. As he said, those covered may see reduced benefits , even those already retired and soon-to-be retired. Plus, our companies had to pay into it. We don't end up going to the taxpayers for help if our plan fails, which you are saying is OK for your case.


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You say because you would be giving up $100 a month, I (as a prospective public pension recipient) should be willing to give up something too. This is ignoring the fact that government employees and retirees pay taxes just like everyone else.
Do you really want to stand by that comment? What % of OR taxpayers are in state pension programs? I won't even go through an example, the flaw in that logic is far too obvious at anything below 100%.

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Old 03-31-2010, 09:26 AM   #91
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So, I've built the foundation of my future retirement on a gov't pension. But a lot of them are in jeopardy it seems. So what am I to do? Plan not to to have a pension AND save significant amounts of my $$ just in case things change?

Wish I could afford to do both! I mean I contribute to my pension plan too.
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Old 03-31-2010, 09:55 AM   #92
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PBGC covers zero percent of public pensions. I attended a "get ready to retire" seminar put on by the Retirement System last month and asked specifically whether our pension benefits were guaranteed by PBGC. The person giving the class didn't know, so I asked her to check. She got back in touch with me a few days later—the answer was that PBGC covers only corporate pension plans, not governmental ones.
Seems to me, then, that it would make more sense for the PBGC to start covering public pensions in exchange for the taxpayers no longer being on the hook for the shortfalls (obviously this would require coordinated changes in state and federal laws). I'm fine with funding pensions on a pay-as-you-go basis where the public pension contribution is part of their compensation package (i.e. pension in lieu of extra pay). What I'm not fine with are the laws which put the taxpayer in position of having an unlimited future liability to "make good" on these pension plans.
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Old 03-31-2010, 10:08 AM   #93
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You say because you would be giving up $100 a month, I (as a prospective public pension recipient) should be willing to give up something too. This is ignoring the fact that government employees and retirees pay taxes just like everyone else. If the Washington State system, or the county pension system, or the City of Seattle system ends up receiving any assistance, or if there is any Federal bailout of any system, I will be taxed to pay for it just as much as a private sector employee with the same income.
How about a real world example? I think we can agree that public school teachers are public pension recipients, right? Here's a real story of one of our the contract negotiations between the teacher's union and the School Board for the 2007-2009 school years.

At the time, the teachers paid $0 a month for health care, regardless of how many folks were on it. In addition, under a formula called the QEO mandated by the state, they could only get a COLA increase of up to 3.5%
each year. The union reps wanted to keep the $0 premiums and get the 3.5% COLA increase. Only problem was the health insurance plan is run by the union, so premium costs can't be negotiated. The premiums were to increase 12% so the School Board didn't have the money to give the union what they wanted.

Things got ugly, the union refused to budge and the School Board didn't have the money to give them. In the end, after many days of negotiations, the union begrudgingly agrees that teachers would have to begin paying $25 a MONTH for their health care. I STILL hear the grumbling about that from some of the teachers.........
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Old 03-31-2010, 10:24 AM   #94
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teachers would have to begin paying $25 a MONTH for their health care.
$25 a month - I wish it were only that !

I read similar comments as UAW workers for the first time had to start "participating" in their health care. I had read that with no co-pays UAW members often would skip dental and doctor appointments if something better came along. The dentist/doctors office would bill the UAW for the service but the member just didn't care as there was no penalty for not showing up. Imagine what that does to premiums that someone else has to pay.
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Old 03-31-2010, 10:41 AM   #95
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$25 a month - I wish it were only that !
When my wife was briefly under the teachers' retirement plan and health insurance, the employee received $225 a month toward their health insurance. (Because my Megacorp insurance was better for both of us, we didn't take it and we didn't get the $225. In fact, we declined *all* of her insurance options knowing that we could change our minds if I were laid off.)

That meant the HDHP option for employee-only coverage was $20 per month (actually $245 to the employee less the $225 allowance). However, if you wanted more than employee-only coverage, you had to pay for it all. Employee plus spouse coverage even in the cheapest HDHP option was something like $660 per month, meaning we'd have to pay the entire $415 extra to insure me. And was even higher for employee plus family (spouse and kids).

So there *are* some very cushy public employee benefits out there, but some of them are more moderate (and in this case, my Megacorp health insurance was much better). Same with pensions. The Texas TRS plan (for new employees; long-time teachers get a better deal) provides for 2.3% per year of service with the early retirement option beginning at 60. Where my wife was for a few months, she could have gotten in her 20 years right as she was turning 60 and received 46% of the average of her last 5 years' pay as a pension. IMO, not excessive (though it's moot now since that position turned out to be a bad fit for her). She loves being a substitute, though, and it's just a shame it can't be parlayed into a full time position with benefits.
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Old 03-31-2010, 11:11 AM   #96
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When my wife was briefly under the teachers' retirement plan and health insurance, the employee received $225 a month toward their health insurance. (Because my Megacorp insurance was better for both of us, we didn't take it and we didn't get the $225. In fact, we declined *all* of her insurance options knowing that we could change our minds if I were laid off.)

That meant the HDHP option for employee-only coverage was $20 per month (actually $245 to the employee less the $225 allowance). However, if you wanted more than employee-only coverage, you had to pay for it all. Employee plus spouse coverage even in the cheapest HDHP option was something like $660 per month, meaning we'd have to pay the entire $415 extra to insure me. And was even higher for employee plus family (spouse and kids).

So there *are* some very cushy public employee benefits out there, but some of them are more moderate (and in this case, my Megacorp health insurance was much better). Same with pensions. The Texas TRS plan (for new employees; long-time teachers get a better deal) provides for 2.3% per year of service with the early retirement option beginning at 60. Where my wife was for a few months, she could have gotten in her 20 years right as she was turning 60 and received 46% of the average of her last 5 years' pay as a pension. IMO, not excessive (though it's moot now since that position turned out to be a bad fit for her). She loves being a substitute, though, and it's just a shame it can't be parlayed into a full time position with benefits.
I forgot my disclaimer, my parents are both retired state pension recipients. My dad gets 75% of the average salary of his late 5 years of work (35 years teaching and working in govt funded nursing homes) and my mom gets 67% of the average of her last 5 years of salary (31 years teaching). Neither one has EVER not agreed the got a sweet deal and thank their lucky stars..........
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Old 03-31-2010, 11:47 AM   #97
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Plus, our companies had to pay into it.
Which, just to be clear, really means that you paid into it as an employee. Every cost that an employer pays to have an employee on the books (salary, health care premiums, SS taxes, Medicare taxes, unemployment insurance premiums, retirement costs, and PBGC premiums) is money that would have been paid to the employees directly in an unhindered labor market if these mandated programs were not in place.
In these times of "free money from . . . somewhere," it is worth repeating this.
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Old 03-31-2010, 11:55 AM   #98
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Which, just to be clear, really means that you paid into it as an employee. Every cost that an employer pays to have an employee on the books (salary, health care premiums, SS taxes, Medicare taxes, unemployment insurance premiums, retirement costs, and PBGC premiums) is money that would have been paid to the employees directly in an unhindered labor market if these mandated programs were not in place.
In these times of "free money from . . . somewhere," it is worth repeating this.
Agreed. This is why I've said that I don't care whether we pay someone $30K in salary and $20K in benefits or $50K with no benefits -- either way we pay $50K for someone's services. And if public employees would rather get $30K with health insurance and a DB pension than $50K and no benefits except perhaps for an unmatched 401K, fine with me (as long as $50K in total compensation was reasonable based on the market). As long as that was the end of the taxpayer's liability for the pension, I have no reason to be concerned or care how they choose to be compensated.

The problem comes when the plans are recklessly run, overpromising and the taxpayers are on the unlimited hook for cleaning it up later.
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Old 03-31-2010, 12:06 PM   #99
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Posts: 18,264
Quote:
Originally Posted by samclem View Post
Quote:
Originally Posted by ERD50 View Post
Plus, our companies had to pay into it.
Which, just to be clear, really means that you paid into it as an employee. Every cost that an employer pays to have an employee on the books (salary, health care premiums, SS taxes, Medicare taxes, unemployment insurance premiums, retirement costs, and PBGC premiums) is money that would have been paid to the employees directly in an unhindered labor market if these mandated programs were not in place.
In these times of "free money from . . . somewhere," it is worth repeating this.
Yes thanks, it is worth repeating. I know that you know that, I know that I know that, and I think you know that I know that , but it does need to be spelled out, as others may not think of it that way.

-ERD50
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Old 03-31-2010, 01:45 PM   #100
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Join Date: Mar 2008
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Well I guess no one should be envious of my pension: 33% non-COLA'D. That's not the formula but it is what it works out to. With my company in bankruptcy though even that could be reduced eventually by PBGC. My anger is probably much the same as anyone else either in government or in private with a corporate pension: what we thought was a promised and guaranteed benefit is really promised but not guaranteed. It may actually be worth very little. But what is the answer? If you say 'reasonable' expectations for pension growth, e.g. 6-7%, how do you know that will be reasonable in 25 years? It's better than 8-10% but it could also turn out to be too high. If you in turn say that it should instead by defined contributions through 401k then what do you do about all the complaints about bad 401k plans with unreasonable expenses? And how do you know people will invest in them safely or reasonably? To me much of this comes down to an incredible amount of financial ignorance at every level in the US. Perhaps this crisis will get more people to get educated but I doubt it. If that were possible then I'd say dump pensions and let people put as much as they want in a good 401k plan with reasonable fees, index options. However all this will lead to a new set of problems if the people who invest aren't financially literate. Sadly you can't legislate financial literacy anymore than you can legislate a lot of things. So then you end up back with defined benefit plans, which even with the best of intentions, might promise more than they can deliver. I do have to agree with the original poster that the IL plan looks fairly reasonable given all the problems in my old home state.
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