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Old 10-22-2011, 11:39 AM   #301
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The way I see it, we have global competition. It is a force to be reckoned with. We can't ignore it. It is going to have an effect
To some extent I agree. But I also think this has been overused and abused by economic elites who were looking for excuses to give the rest of us a worse deal than even global competition would give in a vacuum. The "global economy" is a factor, but I think it is a scapegoat for other factors as well just because it's a convenient card to play compared to "how can we increase earnings per share on the backs of our employees without looking evil? Oh, yeah -- blame it ALL on India and China!" (Never mind that we have economic policies -- and I'm not just talking taxes and regulations -- that all but encourage American businesses to offshore jobs.)
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Old 10-22-2011, 11:52 AM   #302
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As always, those most observant and flexible and willing to adapt will do the best.
Yes --- survival of the fittest, and all that.. As we race to the bottom, it's the nimblest CEO who'll win.. The employees who expected to be treated fairly must just suck it up and understand that it's a cruel world.
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Old 10-22-2011, 12:09 PM   #303
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There is something that concerns me. Back when I was whoring for jobs in the late 70s and early 80s, the economy wasn't all that great but, for whatever reason, I was a hot market item. There was a great deal of pumping of salary and benefits (as well as bad mouthing of other places I was interviewing). Now, suppose I based my choice on the best offer financially and all offers were good. Hasn't the winner violated ethical considerations if the offer was not in good faith and only intended to trick me into the choice? You can argue that the winner didn't know at the time. But if ethics is absent then lieing can become a competitive method leaving the job applicant perpetually in a con system of job offers.

It reminds me of a guy who worked for me in the 90s. He said that shoplifting wasn't stealing if you didn't get caught. Some of the things (not all) I have read in the past few days here and on other threads makes me think that American culture has really changed since my momma taught me right from wrong and my school taught me ethics. Right and wrong are not the same as legal and illegal, for example. But I do think that when ethics slips because there isn't a law or formal contract without a hidden loophole, it doesn't bode well for the future.
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Old 10-22-2011, 12:11 PM   #304
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To some extent I agree. But I also think this has been overused and abused by economic elites who were looking for excuses to give the rest of us a worse deal than even global competition would give in a vacuum. The "global economy" is a factor, but I think it is a scapegoat for other factors as well just because it's a convenient card to play compared to "how can we increase earnings per share on the backs of our employees without looking evil? Oh, yeah -- blame it ALL on India and China!" (Never mind that we have economic policies -- and I'm not just talking taxes and regulations -- that all but encourage American businesses to offshore jobs.)
Perhaps, but if so, I don't know what to do about it.

Yet, when our factory workers were getting $20+ per hour, plus some pretty good benefits, and the overseas factories were more like $5 and/hr w/o much in the way of benefits, it's hard to see how this could not be a very significant factor in holding down wages/benefits here. I don't think it requires any 'conspiracy theory' angle to explain it. But that's not to say a 'clever' CEO won't try to use it to their advantage if they can figure a way to do so.

BTW, I recall that benefits for our line workers were an additional ~ 50% of their pay. This sticks in my mind, as the factory managers were not terribly motivated to hire new workers, versus consistently paying 1.5x/hour overtime for the existing workers. Since benefits were a fixed cost, time-and-a-half was really not a 'hit' to the budget, it all washed out.

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Old 10-22-2011, 12:19 PM   #305
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Really? I obviously don't know the details of every pension plan out there, but I'd bet my MegaCorp was pretty representative of those that offered pensions, and it worked nothing like that.

I'd have to look it up, but you were vested after 5 (10?) years. Then you earned based on years and salary. There wasn't any magic inflection point. I retired with 28 years, and hanging on for 30 would have just been an incremental increase.

If companies were firing people right before vesting, that is something that would get me worked up. But I still feel getting rid of this kind of system is best overall. There will always be abuses where there is opportunity, let's remove the opportunity - give me my money as I earn it!

-ERD50
Having worked in corporate finance and done the math on this in real life, I'll take that bet anyday. Note in my previous post
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In other words, an employee with 20 years had very little vested and accrued pension benefit but the company had contributed much more to the plan.
Could be 15. Graphing two curves, the benefit value curve is "S" shaped with two inflection points while the cost curve tends to closer to a straight line. There is no doubt that in the range around 10-15 years, the actual benefit accrued to the worker is less that the straight line cost booked. The benefit to the employee kicked up in the final years due to the combination of average final salary and years of service.

The S&P lived an entire decade off of this and some companies are still playing with the pension numbers, although there is not much left. More than any other financial maneuver, clawing back pension cost is what allowed companies to smooth their quarterly earnings.
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Old 10-22-2011, 12:28 PM   #306
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We are close to 300 posts, and some people still can't understand (or choose not to) the difference between paying/funding what was promised/earned up to that point in time, and the idea that those same benefits must be guaranteed into the future? Cutting pay from $25 to $21 after the fact is NOT what is being discussed here. More like, 'Yes, we were paying $25 last week, you got your $25/hr, and this next week we are offering $21 - deal or no deal? '

In the cases provided, the pension was funded and paid. Isn't that a fact?

It's as if you feel you walked into HR (heh- they called it 'Personnel' in the day) on your first day of work, and they handed you an overview of your benefits, and they said " Now, we are going to sign right here (call in the Public Notary), that these benefits will be as good or better, every single year you work for us, for as long as you choose to work for us ". I've NEVER heard of such a thing, yet you act as if it is the norm. If you think that is how the world should work, I suggest you open a business and run it that way. No one is stopping you.


Indeed.


-ERD50
You have repeatedly stated that everyone always got what they earned up to that point in time and that the pension funding is the companies money.
  1. AFAIK, the IBM case that I previously mentioned involved long standing employees being flash cut to a cash balance plan, and thereby what they had earned up to that point was greatly diminished. Again, this was resolved in favor of the employees in a court of law. Do really think IBM was the only company to play this game?
  2. Now if the money that goes into these employee pension plans is the companies money, I don't see how you aren't equally outraged that in a great many cases this money was comfiscated to pay exhorbitant executive bonuses and deferred comp in lieu of the workers who the plan was designed for. Shouldn't it have gone to the shareholders or reinvested to grow the business? If thats not a heist, I don't know what is. Also, I think one could say, at least from an equity standpoint that the money in these funds was being earned as deferred employee comp vs simply $s for the company to grab for other purposes. Personally, I would be much less outraged if the execs got equal treatment and the $s went to the shareholders, or positioning the business to be more competitive or for delivering more value to the customer. If execs can only be motivated by $s alone, why should the workers be any different.
  3. I fully understand that things change, that we can't live in the past and that everyone must adapt and move on, but that does not translate into change being solely borne by the workers or that anyone (workers, middle management, shareholders) getting the short end of the stick should accept this and move on, while the so called leaders line their pockets simply because the system lets them get away with it.
If you don't get that, I feel sorry for you!
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Old 10-22-2011, 12:39 PM   #307
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Yes --- survival of the fittest, and all that.. As we race to the bottom, it's the nimblest CEO who'll win.. The employees who expected to be treated fairly must just suck it up and understand that it's a cruel world.
You worked in the private sector, right? You should know its all about performance........
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Old 10-22-2011, 01:14 PM   #308
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We are close to 300 posts, and some people still can't understand (or choose not to) the difference between paying/funding what was promised/earned up to that point in time, and the idea that those same benefits must be guaranteed into the future? -ERD50
This will be 308th and I have to stop with this one

It may seem like we don't understand your point. But we do. We do understand the difference between paying up for what was legally earned and guaranteeing the future. I doubt many of us were worked up about companies bailing on DB plans as long as we believed the BS they spun about being forced to do it by the unsustainable nature of the plans. Once we found out the real reasons for their actions (in many, not all cases) we were outraged - because the actions were despicable. And just like you keep saying we do not understand, many of us keep yelling back that you must not understand what the companies were doing because you too would have to be outraged. I have finally come to the conclusion that we are simply on different planets when it comes to evaluating corporate motivations. So be it.




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You have repeatedly stated that everyone always got what they earned up to that point in time and that the pension funding is the companies money.
  1. AFAIK, the IBM case that I previously mentioned involved long standing employees being flash cut to a cash balance plan, and thereby what they had earned up to that point was greatly diminished. Again, this was resolved in favor of the employees in a court of law. Do really think IBM was the only company to play this game?
  2. Now if the money that goes into these employee pension plans is the companies money, I don't see how you aren't equally outraged that in a great many cases this money was comfiscated to pay exhorbitant executive bonuses and deferred comp in lieu of the workers who the plan was designed for.
That would be the corporate motivation I was talking about
Quote:
Also, I think one could say, at least from an equity standpoint that the money in these funds was being earned as deferred employee comp vs simply $s for the company to grab for other purposes. Personally, I would be much less outraged if the execs got equal treatment and the $s went to the shareholders, or positioning the business to be more competitive or for delivering more value to the customer. If execs can only be motivated by $s alone, why should the workers be any different.!
Again, forget about whether the companies technically broke the law. These corporations intentionally threw their employees under the bus just like Goldman Saks et al threw the country under the bus and for about the same reasons.

That took a while. Where are we 309? 310? I quit.
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Old 10-22-2011, 01:15 PM   #309
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You have repeatedly stated that everyone always got what they earned up to that point in time and that the pension funding is the companies money.
[LIST=1][*]AFAIK, the IBM case that I previously mentioned involved long standing employees being flash cut to a cash balance plan, and thereby what they had earned up to that point was greatly diminished. Again, this was resolved in favor of the employees in a court of law.
I gotta run, but I did google this earlier, and as MichaelB mentioned, the issue the courts found IBM guilty of was age discrimination in the formula, not that their pension was 'greatly diminished' based on what was previously earned.

Quote:
[*]Now if the money that goes into these employee pension plans is the companies money, I don't see how you aren't equally outraged that in a great many cases this money was comfiscated to pay exhorbitant executive bonuses and deferred comp in lieu of the workers who the plan was designed for.
How it was used is a separate issue that may or not be a subject of outrage. I still take issue with your characterization - the plan is fully funded, everyone is getting the pension they earned (yes, it seems I have to say it yet again) - the 'excess' was not 'designed' to go to the employee pensions - it was 'excess'. If the company were to try to stop paying those earned pensions, THAT is a problem, not the fact that they used the excess somewhere else.


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Shouldn't it have gone to the shareholders or reinvested to grow the business? If thats not a heist, I don't know what is. Also, I think one could say, at least from an equity standpoint that the money in these funds was being earned as deferred employee comp vs simply $s for the company to grab for other purposes.
How is this any different than my escrow analogy? Let's say I need to put money in escrow for taxes. Tax bill comes due, and I have excess funds in the escrow account. I am legally and ethically entitled to take the excess out of the escrow account, and spend it as I see fit. It doesn't become the tax man's money, just because it was in an account set aside for that purpose. The excess is an excess - my excess.

How is this NOT the case?

Again - what they did with the money is separate from whether the money was 'robbed' from the pensioners. I've never heard of a pension fund paying an excess to the pensioners, they pay what is promised, or fall back on the PBGC if it comes to that. It's not like if they didn't use the excess, the pensioners would have received more than they bargained for.

-Erd50
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Old 10-22-2011, 01:36 PM   #310
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I gotta run, but I did google this earlier, and as MichaelB mentioned, the issue the courts found IBM guilty of was age discrimination in the formula, not that their pension was 'greatly diminished' based on what was previously earned.



-Erd50
Sorry, but what happened wasn't purely age discrimination, it was still based on attempting to reduce what was earned, and it more dramatically affected the long standing employees who were smart enought to recognize the charade that was attempted and banding together in a class action suit against there one time fair company.

You and I obviously have a totally different value system and I see no point in going back and forth with you. Enjoy your weekend.
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Old 10-22-2011, 01:59 PM   #311
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google: occupy wall student debt

I'm fine with eliminating all those subsidies/deductions. What 'over-the-top' corp actions do I have a tin-ear to? I always join in any thread that bemoans the tie in between BOD and CEO, I see it as a big problem, but I don't know what to do about it.

-ERD50
I did google the reference; it still doesn't prove your point about people feeling entitled to better jobs because of student debt. The "occupy crowd" is merely using student debt as a way of galvanizing student support for excess greed on Wall Street much the way an earlier generation used the draft as a way of galvanizing student support against the Vietnam War. Or, the way, the Tea Party used Rick Santelli's rant against the HAMP program (which then suggested modest loan forgiveness for underwater borrowers) as a way of galvanizing support against the socialist tendencies of the Obama administration (and I'm saying this with tongue in cheek). But I must say that having done a lot of work many years ago in the student finance area, I do think the bankers and Sallie Mae (which used to be a GSE and now is a banker after its privitization) used the Federal Government to become entitled to risk-less investments (federal guaranteed student loans) that paid over 300 basis points above T-Bills and then later had the Chuzpah to rail against changes to this "over-the-top" subsidy time after time. The Government later got smart and went to a direct loan program. All of this is beside the point.

I think your posts in this thread do have a tin ear quality to them. You apparently think it's entirely ok to treat the worker as a widget or a commodity that is not deserving of anything more than what the employer is legally entitled to provide him. You should read the implications of your posts. Pension surplus does belong to the employer, but the manipulations and connivances in which mega-corporations preserve surplus is in many cases over the top. I've known of several cases where the mega-corporation is perfectly within its rights to discharge someone within a few months of that person being vested with a defined benefit pension and the discharge is done because it saves money. On the other hand, I've known of several small businesses who treat their employees with a lot of dignity and bend over backwards to do the right thing even when they had the legal right not to do otherwise.
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Old 10-22-2011, 03:36 PM   #312
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OK. Now imagine if I said to you, "Sorry, that may suit your purposes in life but it does not suit mine. I would not have loaned you the money on the new terms your propose. I want you to honor the contract you made with me when I loaned you the money." What would you say to that? Would you honor the agreement you made or would you try to force your new payment system onto me?
I would honor what is written in the contract nothing more nothing less. If I borrow from a bank I can generally pay it back at anytime with no penalty. In rare case their is a prepayment penalty. I bet you can't find any type of agreement which obligates one party to perform for 50 years without some type of escape clause. Even child support only last for 20 years or so.
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Old 10-22-2011, 04:14 PM   #313
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Even child support only last for 20 years or so.
This is my favoritest argument from you yet. Old people should not remain old for any longer than children remain children. It's symmetric!
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Old 10-22-2011, 05:42 PM   #314
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We do have to consider international competition.

As I recall the Chinese EXECUTED the leader of a company that sold adulterated baby formula. Nineteen others were thrown into jail.

http://news.bbc.co.uk/2/hi/8375638.stm

Shall we do the same in the USA and Europe? Or continue the process of giving failing CEO's multi-million dollar severence deals.

We can't expect workers to take it on the chin in the name of international competition while CEO's and other corporate leaders see their compensation climb at record rates.
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Old 10-22-2011, 05:46 PM   #315
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No. There was a difference between the vesting and the funding which most people do not understand. The future liability depended on reaching a full term of employment (30 years) and most of that value was lost if the employment ended prematurely. The funding, however, was based on different accounting rules and assumed the pension costs grew in a more linear manner. In other words, an employee with 20 years had very little vested and accrued pension benefit but the company had contributed much more to the plan.

This difference is what drove companies to end pension plans or fire older workers. They paid out only the vested value to the employees and kept the difference. This was clearly against the intention of pension laws, which considered a pension plan to be a legal entity separate and independent of the business and all contributions to be final. These went to court, some won and others lost. For the most part, companies found ways to legally exploit the pensions.

In other words, the pension promise technically had value only at the end of 30 years and not during that 30 year period, while the plans had been funded evenly during the 30 years. By revoking the promise before the 30th year or by not letting the employee get to the 30th year, business found a new source of income by exploiting that difference. The fact that pension money was technically not returnable to the company did not stop them from doing it. Creative lawyers and accounts found the way.

All that money was taken off the balance sheets and brought back into the income statements. Profits increased, the business execs applauded themselves and humbly accepted (billions) bonuses and stock options for a job well done. Warren Buffet points this out more than once in his shareholder letters and it is easily seen in the balance sheets of most S&P companies.
I'll quibble a bit with your characterization of vesting vs funding.

The fundamental problem is something that public and private pension plans share it is extremely difficult to accurately calculate retirement cost.

You are in charge of managing Megacorp pension plan. Your plan pays 2%*years of salary for workers with a COLA, people are eligible for a full pension at 65. There is a 7 year vesting period.

This year your firm hires 100 new college graduates at average salary of $50,000. How much should you tell the company put aside to pay for their retirement? (I should really make this a poll question.)

For individuals this is complicated, as the zillions of post on the forum prove, it depends on investment returns, inflation, and the longevity of you and your spouse.

For you the pension fund manager to answer the question is is exponentially more complicated. You need all of the above plus make scores of other estimates. How many of the 100 kids will stick around to vest? how many will work 40 years before retiring? How many will work for more than 7 but then leave and go somewhere else? What is their annual pay raises? How many will die before reaching 65, how many of those will die single?

If you assume that 90% of the new college grads quit before reaching 7 years you obviously can contribute much less than if you assume only 1/2 will quit. An average 5% pay raise requires less money than 3%. Small difference in assumptions can make big differences in funding just like the different between assuming your portfolio will make 9% or 6% while accumulating for retirement makes a huge difference in how much you have to save.

Now if your and others points, and the book's point, is that corporations made actuarial assumption that were highly favorable to their bottom line when they went to end their pension I am certainly not going to argue. GE hires plenty of financial engineers, including the smartest guys from the IRS, and their jobs is to reduce costs in order to increase profits. If they can cut taxes by having a GE subsidiary in Ireland buy something they do it. It is hard to be shocked that they do they same thing for employee pensions.
It is no different than state and local government making the same favorable actuarial assumptions about their pension plans. By doing so they can reduce their contribution to the government workers pension fund, thus balancing their budgets and make their plans look "fully funded".

I don't know about the rest of you but I expect that people when given complex and ambiguous situations like the law and taxes tend to error on the side which is most favorable for them or their side. I know I do. (e.g. wash sales and substantially identical securities.)

The problem is that the pension have so many moving parts is that it is virtually impossible to figure out if a given actuarial assumption is a reasonable good faith estimate or a retirement heist.

Fights about pension funding have been going on for at least 50 years. It is time to recognize reality. Trying to predict what the financial future for individual, a company, or even a state will be in 50+ years is a fools errand (My dads/mom's pension will probably span 70 years and 4 company changes). We need to develop retirement systems which provide flexibility and spread the risk between individuals, companies, and society. Defined benefit pensions fail to do this.
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Old 10-22-2011, 05:55 PM   #316
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We do have to consider international competition.

As I recall the Chinese EXECUTED the leader of a company that sold adulterated baby formula. Nineteen others were thrown into jail.

BBC News - China executes two over tainted milk powder scandal

Shall we do the same in the USA and Europe? Or continue the process of giving failing CEO's multi-million dollar severence deals.

We can't expect workers to take it on the chin in the name of international competition while CEO's and other corporate leaders see their compensation climb at record rates.
Total compensation for the top 5 executive in the S&P 500 was 11 billion dollars. I believe the CEO got roughly 40% of the total. This works out 4+ million for the 2500 top C-suite guys (and a few gals) and roughly $10 million/CEO. Yes this a lot of money but in a world were we are talking about trillion dollar problems it isn't even 1%.

BTW the number of billionaires doubled in China last year and will probably past the number in the US in the next few years.
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Old 10-22-2011, 10:35 PM   #317
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I'll quibble a bit with your characterization of vesting vs funding.

The fundamental problem is something that public and private pension plans share it is extremely difficult to accurately calculate retirement cost.
Pension costs are pretty easy to calculate. It is difficult to fund because it is expensive.

Quote:
You are in charge of managing Megacorp pension plan. Your plan pays 2%*years of salary for workers with a COLA, people are eligible for a full pension at 65. There is a 7 year vesting period.

This year your firm hires 100 new college graduates at average salary of $50,000. How much should you tell the company put aside to pay for their retirement? (I should really make this a poll question.)

For individuals this is complicated, as the zillions of post on the forum prove, it depends on investment returns, inflation, and the longevity of you and your spouse.
That is why pension funds use actuaries to do the calculations. They know how to deal with the variables.

Quote:
For you the pension fund manager to answer the question is is exponentially more complicated. You need all of the above plus make scores of other estimates. How many of the 100 kids will stick around to vest? how many will work 40 years before retiring? How many will work for more than 7 but then leave and go somewhere else? What is their annual pay raises? How many will die before reaching 65, how many of those will die single?

If you assume that 90% of the new college grads quit before reaching 7 years you obviously can contribute much less than if you assume only 1/2 will quit. An average 5% pay raise requires less money than 3%. Small difference in assumptions can make big differences in funding just like the different between assuming your portfolio will make 9% or 6% while accumulating for retirement makes a huge difference in how much you have to save.

Now if your and others points, and the book's point, is that corporations made actuarial assumption that were highly favorable to their bottom line when they went to end their pension I am certainly not going to argue.
I did not make that point in my posts.

Quote:
GE hires plenty of financial engineers, including the smartest guys from the IRS, and their jobs is to reduce costs in order to increase profits. If they can cut taxes by having a GE subsidiary in Ireland buy something they do it. It is hard to be shocked that they do they same thing for employee pensions.
It is no different than state and local government making the same favorable actuarial assumptions about their pension plans. By doing so they can reduce their contribution to the government workers pension fund, thus balancing their budgets and make their plans look "fully funded".

I don't know about the rest of you but I expect that people when given complex and ambiguous situations like the law and taxes tend to error on the side which is most favorable for them or their side. I know I do. (e.g. wash sales and substantially identical securities.)

The problem is that the pension have so many moving parts is that it is virtually impossible to figure out if a given actuarial assumption is a reasonable good faith estimate or a retirement heist.

Fights about pension funding have been going on for at least 50 years. It is time to recognize reality. Trying to predict what the financial future for individual, a company, or even a state will be in 50+ years is a fools errand (My dads/mom's pension will probably span 70 years and 4 company changes). We need to develop retirement systems which provide flexibility and spread the risk between individuals, companies, and society. Defined benefit pensions fail to do this.
I do not agree with this. FWIW, to you and everyone else reading this, I think defined benefit plans are absolutely the way to go - but they should not be owned by the employer but the employees. Lets leave that for another day and another thread.
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Old 10-22-2011, 11:13 PM   #318
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That is why pension funds use actuaries to do the calculations. They know how to deal with the variables.
I don't know that they do know how.. After reading about a local disagreement here in Hawaii about the state pension fund, I decided that actuaries are not to be entirely trusted about this.. I gave the argument above, in this thread: The Retirement Heist.

The controversy, earlier this year, was between George Berish, an actuary, who has studied and written about the Hawaii pension fund, and Colbert Matsumoto, chairman of the pension fund board of trustees.. The fund is in some trouble, having 9 billion or so in unfunded liability.. Matsumoto says the problem came in the 90s, when the Hawaii state legislature decided to take money out of the fund and spend it for other purposes, but Berish says that can't be right, because in 2000, after the money had been removed, the pension system was still fully funded.

I'm on Matsumoto's side, here, because the pension fund portfolio was heavy in volatile securities, and the apparent excess in value in the 90s should have remained in the portfolio, to help weather the subsequent dips in the market, which led to the current underfunding.. Berish's actuary's view is a series of snapshot evaluations, done every June 30, but this is not a realistic view to take of an investment portfolio, whose value can be expected to fluctuate.

There may be a corresponding problem with the "excess value" in the pension funds that was removed by private companies.
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Old 10-23-2011, 09:02 AM   #319
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I don't know that they do know how.. After reading about a local disagreement here in Hawaii about the state pension fund, I decided that actuaries are not to be entirely trusted about this.. I gave the argument above, in this thread: The Retirement Heist.

The controversy, earlier this year, was between George Berish, an actuary, who has studied and written about the Hawaii pension fund, and Colbert Matsumoto, chairman of the pension fund board of trustees.. The fund is in some trouble, having 9 billion or so in unfunded liability.. Matsumoto says the problem came in the 90s, when the Hawaii state legislature decided to take money out of the fund and spend it for other purposes, but Berish says that can't be right, because in 2000, after the money had been removed, the pension system was still fully funded.

I'm on Matsumoto's side, here, because the pension fund portfolio was heavy in volatile securities, and the apparent excess in value in the 90s should have remained in the portfolio, to help weather the subsequent dips in the market, which led to the current underfunding.. Berish's actuary's view is a series of snapshot evaluations, done every June 30, but this is not a realistic view to take of an investment portfolio, whose value can be expected to fluctuate.

There may be a corresponding problem with the "excess value" in the pension funds that was removed by private companies.
Blame the actuary. Thatís a new approach I hadnít heard before. Like blaming the doctor for not saving the life of someone driving off a 1000 foot cliff and crashing into the rocks below. It might be the case.Without knowing the details I would assume the driver was at fault.

Whether a pension fund is adequately funded is a pretty straightforward analysis. If Hawaii assumed 8% return annualized and only achieved 3%, over a decade that adds up to a pretty big shortfall.
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Old 10-23-2011, 11:20 AM   #320
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Whether a pension fund is adequately funded is a pretty straightforward analysis. If Hawaii assumed 8% return annualized and only achieved 3%, over a decade that adds up to a pretty big shortfall.
A decade is the period chosen by people who want to blame the market or the fund administrators.. But:
Quote:
Over the 43 years since 1967, the ERS investment portfolio has generated an average annual rate of return of 8.17%, exceeding the planís investment return assumption.. Admittedly, performance during the most recent 10 year period ending December 31, 2010 deteriorated to 4.9%.. But that measurement period includes the dot.com crash in 2001 and the financial markets crash in 2008... Nevertheless, that average annual rate of return compares favorably against the S&P 500 Index which returned only 1.4% during that same period. It also exceeded our benchmark and peer group returns.
Honolulu Civil Beat - Chairman of ERS Board Responds to Civil Beat Series on Public Pensions - Post
So maybe it's not quite so straightforward as you say. The market goes up, the fund is overfunded, the excess is removed, the market goes down, and strangely enough, it's now underfunded.
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