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Ponzi Pensions & Reality
Old 10-13-2016, 06:44 AM   #1
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Ponzi Pensions & Reality

Smoke & Mirrors meet reality: For the tiny little town of Loyalton, California, with a population of only 700, a failure of city council members to understand the difference between the calculation a regular everyday pension liability and a "termination liability" has left residents at risk of losing their pensions from Calpers.

http://mobile.nytimes.com/2016/10/10...jjQPHNRKk&_r=0
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Old 10-13-2016, 08:45 AM   #2
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why do you say this is a ponzi pension? total misnomer
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Old 10-13-2016, 09:45 AM   #3
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Probably because within the article someone complaining about the pensions called it similar to that:

"Ms. Whitley disagreed. “It’s just too confusing,” she said. “I looked at what’s been happening with all the other entities, and I saw that eventually it’s got to collapse. It’s almost like a Ponzi scheme.” "
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Old 10-13-2016, 10:01 AM   #4
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Probably because within the article someone complaining about the pensions called it similar to that:

"Ms. Whitley disagreed. “It’s just too confusing,” she said. “I looked at what’s been happening with all the other entities, and I saw that eventually it’s got to collapse. It’s almost like a Ponzi scheme.” "
totally different
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Old 10-13-2016, 12:52 PM   #5
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Someone on that council should have been able to read the estimate for withdrawing and see that they could not afford it. Stupid people!
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Old 10-13-2016, 01:16 PM   #6
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When I saw the "pension/ponzi" heading I figured it would be about Social (in)Security.
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Old 10-13-2016, 01:40 PM   #7
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Someone on that council should have been able to read the estimate for withdrawing and see that they could not afford it. Stupid people!
(IMHO)
Elected folks don't seem to care or bother in general, as it's not "their" money they are spending, and being generous gets them re-elected.
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Old 10-13-2016, 02:05 PM   #8
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why do you say this is a ponzi pension? total misnomer
"but also passes hidden costs into the future, critics say. If a city wants to leave, Calpers calculates a cost that doesn’t rely on any new money" sounds exactly like a Ponzi scheme.
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Old 10-13-2016, 02:12 PM   #9
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"but also passes hidden costs into the future, critics say. If a city wants to leave, Calpers calculates a cost that doesn’t rely on any new money" sounds exactly like a Ponzi scheme.
google "pension withdrawal liability"
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Old 10-13-2016, 02:25 PM   #10
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Yikes:

Quote:
“I worked all those years, and they did this to me,” said Patsy Jardin, 71, who kept the town’s books for 29 years, then retired in 2004 on an annual pension of about $48,000. Now, because of Loyalton’s troubles, Calpers could cut it to about $19,000.
That would be keeping me awake at night.
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Old 10-13-2016, 02:27 PM   #11
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google "pension withdrawal liability"
So I did and I also Googled Ponzi scheme to make sure I wasn't misunderstanding what it is. Loyalton had no remaining workers that were to be covered by Calpers so they were no longer collecting retirement contributions to send on to Calpers. Calpers states they need new continued future payments (new investors) to keep the retirements solvent. Now, if the plan all along was for Calpers to only pay a portion of the full retirement with the difference being made up by the city, then I'd agree with you that that is not a Ponzi scheme.
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Old 10-13-2016, 02:47 PM   #12
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“I worked all those years, and they did this to me,” said Patsy Jardin, 71, who kept the town’s books for 29 years, then retired in 2004 on an annual pension of about $48,000. Now, because of Loyalton’s troubles, Calpers could cut it to about $19,000.
What I find ironic is that they quote the town's comptroller(?). Granted, I don't know what their definition of "keeping the books" entails.....but I wonder what amount of knowledge she had of the pension system? You would think that if anyone would be familiar with the arrangement the town had, she would know and understand something.
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Old 10-13-2016, 02:57 PM   #13
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What I find ironic is that they quote the town's comptroller(?). Granted, I don't know what their definition of "keeping the books" entails.....but I wonder what amount of knowledge she had of the pension system? You would think that if anyone would be familiar with the arrangement the town had, she would know and understand something.
I kind of wondered about that too, but in a town that small it doesn't sound like keeping the books involved a lot of high end financial stuff. More likely she paid the electric bills and such, kept a record of tax receipts, and perhaps knew the town paid into calpers but had little idea of the exact arrangement.
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Old 10-13-2016, 03:07 PM   #14
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There are many places where public employees were promised a Pie in the Sky, and the money is not there to pay.

We saw that at the Tennessee Valley Authority. Although they retired and laid off 23,000 people (and subcontracted out their jobs), they're $ billions short of covering their future pension liabilities. The money's not there--and their retirees were simply promised too much on their pensions. And the Federal Government owns TVA.
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Old 10-13-2016, 03:37 PM   #15
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What I find ironic is that they quote the town's comptroller(?). Granted, I don't know what their definition of "keeping the books" entails.....but I wonder what amount of knowledge she had of the pension system? You would think that if anyone would be familiar with the arrangement the town had, she would know and understand something.

She retired many years before the city withdrew from Calpers. It's not clear to me if she is upset with the city or Calpers. I think the city is more at fault. This seems to be an atypical public pension problem. It would cost them about 116k/yr to pay the shortfall so it seems like there should be some way to sort this out.


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Old 10-13-2016, 03:40 PM   #16
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The city should make up the amount they are short every year and pay the 4 retirees.
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Old 10-13-2016, 04:07 PM   #17
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The city should make up the amount they are short every year and pay the 4 retirees.
Print money?
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Old 10-13-2016, 04:22 PM   #18
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Print money?

It's $43/year per resident. Maybe they can hock something.


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Old 10-13-2016, 04:29 PM   #19
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Yikes:

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“I worked all those years, and they did this to me,” said Patsy Jardin, 71, who kept the town’s books for 29 years, then retired in 2004 on an annual pension of about $48,000. Now, because of Loyalton’s troubles, Calpers could cut it to about $19,000.
That would be keeping me awake at night.

Yeah, same here. But at the same time, that sounds like a pension that was too good to be true, and simply not sustainable in the long run. Work for 29 years, retire at age 59, and get $48K per year? I wasn't even making that much yet in 2004, although I'd hit that threshold in 2005. And adjusting for inflation, that would be about $61,000 in current dollars.

I wonder if that pension was locked in at $48K per year until she died, or if there were cost of living/inflation adjustments? Regardless though, getting cut back to $19K per year would be brutal, especially at her age and being out of the workforce for 12 years.
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Old 10-13-2016, 04:35 PM   #20
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I find it interesting that the article mentions this:

Quote:
Across the country, many benefits were granted at the height of the 1990s bull market on the faulty assumption that investments would keep climbing and cover most of the cost. And that flawed premise is now hitting home in places like Loyalton.
...while the actual problem, AFAIK, is not really this but more the simple math of the pool of workers shrinking, and the total accumulating cost of the growing pension pool simply overwhelming budgets (even if the pool of workers isn't shrinking).

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Originally Posted by jazz4cash View Post
She retired many years before the city withdrew from Calpers. It's not clear to me if she is upset with the city or Calpers. I think the city is more at fault. This seems to be an atypical public pension problem. It would cost them about 116k/yr to pay the shortfall so it seems like there should be some way to sort this out.
The article mentions
Quote:
Its lifeblood, a sawmill, closed in 2001, wiping out jobs, paychecks and just about any reason an outsider might have had for giving Loyalton a second glance.
I'm curious what the town's bookkeeper, in her last 3 years at work, knew or wondered, as the town was becoming a ghost town.

Also, she worked for 29 years, and is drawing a $48k annual pension. Another article (CalPERS poised to cut retiree pensions in tiny Sierra town | The Sacramento Bee) mentions she, at times, was the town's only public employee. I don't know what their retirement benefit was, but even at 2.5%/year of service (which is extremely generous), a $48k annual pension would be from a $66k/year in salary. Perhaps she spiked her salary with accumulated sick days or vacation when she retired, but for someone who had what appeared to be a decent salary, I'm surprised she didn't have more knowledge or offer more history/input on this matter. Especially as being, "at some times the town's only public employee."

And the article mentions the annual CALPERS payment was $30k? They chose to withdraw from CALPERS to save $30k, out of an annual Loyalton city budget of $1.2MM? While it was significant, that fee didn't seem too onerous. Did they think that they owed no money to CALPERS for the future benefits of the retirees?

Also, according to CALPERS,
Quote:
since 2011, Calpers had been giving its member municipalities a “hypothetical termination liability” in their annual actuarial reports, so there was little excuse for not knowing.
So whoever is in charge must be more than completely clueless.
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