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Old 11-06-2010, 10:13 PM   #21
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For some perspective, state revenues and pension funds are down primarily because of the recession and the slow recovery.

Pension fund liabilities are over decades.

What is and will undermine public pensions IMO will be the lack of voter support for them.

Politicians are/will build their careers on this.
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Old 11-07-2010, 09:50 AM   #22
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They are less likely to get short-changed if the politicans have to put actual dollars into their 403b accounts, rather than just give them a promise of payment 20 years down the road with no way of actually fulfilling that promise.

If they do get short-changed, at least they will be aware of it and be able to punish the politicans responsible, rather than the people who inherit the mess 20 years down the road.

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It's better to short-change them from the start, so they don't get short-changed at the end. Am I following your thought?
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Old 11-07-2010, 03:11 PM   #23
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Utrecht, I'm really hoping your pension does not get compromised. Unfortunately, there are many examples from the private sector where DB pensions were underfunded and people were left in the lurch (e.g. Nortel). GM, for instance, is a pension fund that happens to manufacture cars. I read somewhere that there are 2-3 pensioners for every GM employee. It's anyone's guess whether those DB pensions can be sustained long term.

The fact is that the DB pension is rapidly going the way of the dodo and has already become almost extinct in the private sector. Currently, in Canada, 77% of public sector employees and 17% of private sector employees have access to DB pensions. Employers are exporting longevity risk to employees. They have to, because people are living longer. Even the Canadian Forces are replacing DB pensions with lump sums for veterans. (This is not going over well, and I sympathize!).

In this country, pension legislation requires an actuarial review of projected future liabilities every 2-3 years, and if the pension plan is underfunded, money from operations has to be used to top it up. This happened after the market crash at my university (although the drop in pension assets was only ~15%). Despite the fact that it's a public institution, and therefore will remain a "going concern", the pension had to be funded on the basis that it could be a private company that could go belly up, and the pensioners had to be protected. Of course, now the investments are back on track. I can only wonder what would happen if there were no money from operations....

I have only a DC pension which would be worth only a fraction of the commuted value of a DB pension. When I ER, those DC funds will be locked in, but can be self administered, used to purchase an annuity (not!) or transferred to the pension plan of a future employer (not!). Of course, I'm going to self administer the funds, where at least I have control.

Basically, trust no-one and continue to LBYM. Hopefully you will be fine.
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Old 11-07-2010, 03:35 PM   #24
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My understanding is that Canadian public opinion/ support for the healthcare system and Social Security is very strong.
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Old 11-07-2010, 03:47 PM   #25
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Rest assured that I will be making inquires on Monday to determine how much the City even has to do with making changes. As far as I know, they make the required contributions but other than the 3 Council members on the Pension board, the City has no say so about what is done with the money

So far the only thing that has happened is that the Mayor has called for a review of the Pension. He's stated that he favors a DC plan over a DB plan, but has also stated that he wants to honor all promises made to current employees.

As I said, I don't think he has any control over what kind of plan we have, but could call for an election in an attempt to lower the City's contributions which would obviously force the Pension board's hand.

We already have a Plan A and Plan B pension plan. I'm in Plan B which started sometime in the early '80s. I suspect the final result will be a Plan C for new hires.
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Old 11-07-2010, 03:55 PM   #26
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Originally Posted by keegs View Post
My understanding is that Canadian public opinion/ support for the healthcare system and Social Security is very strong.
True, but the Canada Pension Plan is far less generous than US Social Security.

Enhancements to CPP do not come free comparing to USA Social Security - Divestor
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Old 11-07-2010, 04:15 PM   #27
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True, but the Canada Pension Plan is far less generous than US Social Security.

Enhancements to CPP do not come free – comparing to USA Social Security - Divestor
The article, as I understood it, describes the Canadian government's proposal to address the pension shortfalls resulting from the shift in private pensions from DB to DC plans with an increase in the CPP benefit.

I hope this isn't going to impact the returns on my FICDX investment...

Medicare doesn't cover all costs and retirees here must purchase additional (supplimental) health care insurance. Medicare doesn't cover long term healthcare. How does the Canadian system compare?
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Old 11-07-2010, 04:29 PM   #28
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Medicare doesn't cover all costs and retirees here must purchase additional (supplimental) health care insurance. Medicare doesn't cover long term healthcare. How does the Candians system compare?
Canadian medicare covers hospitalization and ambulatory services. Long term care must be paid for. Old age security can be used to pay for some of it.
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Old 11-08-2010, 07:10 AM   #29
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Your benefits are protected by the Texas State Constitution. The City of Dallas may not reduce or impair your benefits if you are retired or vested in the fund. An AG opinion I read indicates this also includes how your future service is credited. The case involved the City of Fort Worth wanting to change how OT was figured for retirement. AG said it was in violation of this amendment. City never contested the opinion in court.

I believe the City of Houston was the only city to hold a vote and opt out of being held accountable under this amendment. And as it states, it does not include the City of San Antonio police and fire funds either. Everyone else is protected Also, since it defines what are not included as benefits by the amendment, EVERYTHING ELSE not listed is a benefit. Examples would include DROP programs, COLA's, etc.


Sec. 66. PROTECTED BENEFITS UNDER CERTAIN PUBLIC RETIREMENT SYSTEMS. (a) This section applies only to a public retirement system that is not a statewide system and that provides service and disability retirement benefits and death benefits to public officers and employees.
(b) This section does not apply to a public retirement system that provides service and disability retirement benefits and death benefits to firefighters and police officers employed by the City of San Antonio.
(c) This section does not apply to benefits that are:
(1) health benefits;
(2) life insurance benefits; or
(3) disability benefits that a retirement system determines are no longer payable under the terms of the retirement system as those terms existed on the date the retirement system began paying the disability benefits.
(d) On or after the effective date of this section, a change in service or disability retirement benefits or death benefits of a retirement system may not reduce or otherwise impair benefits accrued by a person if the person:
(1) could have terminated employment or has terminated employment before the effective date of the change; and
(2) would have been eligible for those benefits, without accumulating additional service under the retirement system, on any date on or after the effective date of the change had the change not occurred.
(e) Benefits granted to a retiree or other annuitant (defined as those who are vested) before the effective date of this section and in effect on that date may not be reduced or otherwise impaired.
(f) The political subdivision or subdivisions and the retirement system that finance benefits under the retirement system are jointly responsible for ensuring that benefits under this section are not reduced or otherwise impaired.
(g) This section does not create a liability or an obligation to a retirement system for a member of the retirement system other than the payment by active members of a required contribution or a future required contribution to the retirement system.
(h) A retirement system described by Subsection (a) and the political subdivision or subdivisions that finance benefits under the retirement system are exempt from the application of this section if:
(1) the political subdivision or subdivisions hold an election on the date in May 2004 that political subdivisions may use for the election of their officers;
(2) the majority of the voters of a political subdivision voting at the election favor exempting the political subdivision and the retirement system from the application of this section; and
(3) the exemption is the only issue relating to the funding and benefits of the retirement system that is presented to the voters at the election.
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Old 11-08-2010, 08:35 AM   #30
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Leonidas, correct me if im wrong but I dont think Houston held a vote to opt out. I think each City had a certain amount of time to opt out of taking the matter before the voters and Bill White who was Houston's Mayor at that time, opted out of letting the voters decide. The City of Dallas held an election and the citizens voted for us to be included in that section that Dan quoted by something like 94%-6%.

Dan, thanks for posting that. Where did you get that quoted section from. I assume its online somewhere? I knew it existed, which is why I cant seem to figure out how the City is planning on changing anything other than attempting to lower their contributions to the system. If they are allowed to do that, who knows what will happen because as I said before, I'm pretty sure that our benefits cant be lowered without a vote of the pension fund members and there's no way we will be voting for any major decreases.
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Old 11-09-2010, 02:19 PM   #31
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I had a long conversation with one of the Pension Fund board members today. He's a friend so it was a frank conversation. Here's what he told me:

This stuff is way more political than I would've thought, but it is what it is. Apparently Governor Rick Perry (who just won re-election and who many people believe will be running for President in 2012) has promised not to sign any legislation that comes across his desk on a state level that would negatively affect Police and Fire Pension benefits.

On a Municipal level, the only thing that has happened so far is that the Mayor has called for a review of ours and the Civilian Employee pensions. He has not yet said he wants anything changed and has stated that he believes promises to current employees should be kept. The Pension board has lined up enough votes on the City Council to block the mayor from making any negative changes to anything related to our pensions if it gets that far. The Pension board also is aware that the Mayor plans to run for Congress in the next election and that he will be seeking the endorsement of the Police Association, which he wont get if he attempts to mess with the pension.

If the Mayor decides to go after the pension anyway and somehow sways enough of the City Council members to vote with him, he can hold a city election in an attempt to change the City Charter, which governs how much the City must contribute to the pension fund, and try to lower the City's contributions to the pension fund. If that election passes, and its not all that likely that it would, the Pension then would quickly become underfunded.

If all of those roadblocks are hurdled by the Mayor, the current vested pension members' benefits still cant be lowered without a vote of the members themselves. New hires would probably have to be entered into a separate pension plan with lower benefits. If that still wasnt enough to compensate for the fund be underfunded, the City would still be liable for aying the benefits to all vested members.

In summary:

So far so good.
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Old 11-09-2010, 10:55 PM   #32
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Well it certainly is going to be an interesting next few years in most cities and states. Citizens are overwhelmingly voting NO on any new type of taxes, property tax revenues are way down because of the poor real estate market, sales tax revenues are way down because of increased saving, and there seems to be little desire to control spending at the city or state level. Maybe they can just sell municipal bonds to pay for the pension underfunding? Then perhaps sell some more bonds to make the interest payments on the first bonds. Hmmm...something doesn't seem to work out quite right here...
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Old 11-09-2010, 11:07 PM   #33
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Well it certainly is going to be an interesting next few years in most cities and states. Citizens are overwhelmingly voting NO on any new type of taxes, property tax revenues are way down because of the poor real estate market, sales tax revenues are way down because of increased saving, and there seems to be little desire to control spending at the city or state level. Maybe they can just sell municipal bonds to pay for the pension underfunding? Then perhaps sell some more bonds to make the interest payments on the first bonds. Hmmm...something doesn't seem to work out quite right here...
That sounds similar to Ireland's current situation, except that expenditures are being drastically reduced. Government bond yields are skyrocketing as the markets fear default.
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Old 11-09-2010, 11:13 PM   #34
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... property tax revenues are way down because of the poor real estate market,...
Are you sure about that? In my area, the total tax for the district gets allocated by your assessed value. I think it works that way in many, if not most places.

Simple arithmetic example:

The district is authorized to collect $1,000,000. All 1,000 homes in the district are assessed @ $200,000. $1M/1,000 equal homes = $1,000 bill each. Later, they are all assessed at $100,000 each, They still split the bill evenly, and each homeowner still pays $1,000.

IOW, if you are expecting a property tax decrease because your home value dropped, check with your taxing authority, it might not be so.

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Old 11-09-2010, 11:18 PM   #35
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In summary:

So far so good.

I am happy for you, but it does sound like the politicians in Texas have made the shocking decision to kick the can down the road a bit. The good news is that Texas being a big state, with relatively well funded pension they still have some road left.

There is only a ~10 years left for many state pensions, but what the heck that is several elections cycle.
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Old 11-10-2010, 12:20 AM   #36
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Are you sure about that? In my area, the total tax for the district gets allocated by your assessed value. I think it works that way in many, if not most places.

Simple arithmetic example:

The district is authorized to collect $1,000,000. All 1,000 homes in the district are assessed @ $200,000. $1M/1,000 equal homes = $1,000 bill each. Later, they are all assessed at $100,000 each, They still split the bill evenly, and each homeowner still pays $1,000.

IOW, if you are expecting a property tax decrease because your home value dropped, check with your taxing authority, it might not be so.

-ERD50
Well, in our county it is a % of the value of the property. My property value was adjusted down by $50,000 in 2009 and I saw my property tax go down accordingly. Maybe other counties do it the way you say though...I had just assumed they were all like mine.
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Old 11-10-2010, 06:54 AM   #37
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I am happy for you, but it does sound like the politicians in Texas have made the shocking decision to kick the can down the road a bit. The good news is that Texas being a big state, with relatively well funded pension they still have some road left.

There is only a ~10 years left for many state pensions, but what the heck that is several elections cycle.
I don't understand this argument that I keep hearing. I understand that a lot of pensions are underfunded and are in trouble and its only only a matter of time before they need to raise taxes to cover the shortfalls and that they can only raise taxes so much.....BUT....this particular pension is not underfunded, its not in any trouble whatsoever. Everything is just fine if they would just leave it alone. The problem is that politicians just cant seem to leave things that are working alone. Since it IS working and is NOT in trouble, at least one person (the Mayor) sees it as a potential of new money. If he can lower the City's contributions to the fund, the City will have save a lot of money and someone else will have to worry about the problem down the road.

Apparently all these other states that are in bad pension shape now, had something similar to this years ago. I assume those pensions were fine at some point and someone decided to underfund those to save money.

I'd like to have a little extra money right now also, but I cant start paying only 75% of my mortgage payment to save money, because obviously after a while, they are going to come around demanding the rest of the money. How come that is so obvious to me, but not to politicians?
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Old 11-10-2010, 07:03 AM   #38
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I'd like to have a little extra money right now also, but I cant start paying only 75% of my mortgage payment to save money, because obviously after a while, they are going to come around demanding the rest of the money. How come that is so obvious to me, but not to politicians?
Because the politician making the decision knows he/she won't be in office when the demand for the money finally shows up. Someone else will and they (and our children) will have to find the money to pay the bill.

BTW, I believe this particular character trait is a requirement to be elected to public office.
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Old 11-10-2010, 07:04 AM   #39
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Well, in our county it is a % of the value of the property. My property value was adjusted down by $50,000 in 2009 and I saw my property tax go down accordingly. Maybe other counties do it the way you say though...I had just assumed they were all like mine.
It's the same where I live (mid-Atlantic). Values of homes go down, millage is increased, and taxes remain the same (or go up).

Assuming you have the same amount of homes in an area and you have public services (schools, fire, police, trash, etc.) somebody still has to pay for those services.

The only way around it is if you cut services (lay off folks). I don't think anybody wants fewer services than are currently being given, so regardless of any home value, the same amount of real estate tax has to be paid.

Values of homes in our area could be reduced to an assessed value of $1; however the same amount of taxes will be collected.

In your case, if there was a city/county wide reassessment of all homes and yours dropped in value (as related to all other properties), then I could see where you would experience a drop in taxes. Where I live, reassessments are only done every generation (20 years) so book value is little changed. Even when houses are sold (either at a profit or loss), the original assessment is carried forward.

Is it fair? Don't know; that's just the way it is. There is always talk of having reassessments done on a more frequent basis, but the cost is quite a bit so that's also looked at as an additional expense that taxes would have to cover every few years. It's just not plugging into a regional database (such as Zillo), since each home is checked (generally drive by) to match the existing records and see if anything has been added (that can be seen from the outside; if there is a question, then it requires a home inspection).
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Old 11-10-2010, 07:35 AM   #40
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Somewhat OT - propery tax rates:

Quote:
Originally Posted by 79protons View Post
Well, in our county it is a % of the value of the property. My property value was adjusted down by $50,000 in 2009 and I saw my property tax go down accordingly. Maybe other counties do it the way you say though...I had just assumed they were all like mine.
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[COLOR=black][FONT=Verdana]It's the same where I live (mid-Atlantic). Values of homes go down, millage is increased, and taxes remain the same (or go up). .... you have public services (schools, fire, police, trash, etc.) somebody still has to pay for those services. ...
Thanks for the replies. I assume most places are allocated, for the reasons rescueme states - the cost of services don't vary with real estate values year-to-year so it provides more level funding. It's a good thing IMO, or at least a necessary evil depending on your view.

But I don't have any stats and wouldn't know how to get them, so I don't know if this system is as prevalent as I assume or not.

Another possibility - I think in Chicago/Cook County, property taxes are allocated, but assessments are only done on 1/3 of the properties in any given year, so you get assessed every third year. So in a volatile market, you can be have lucky/unlucky timing, but it averages out over the long run. Maybe this happened in 79proton's case.

More OT: 79protons, are you a 'gold bug' (my chemistry is weak, I had to google it )?

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