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Old 11-12-2008, 11:37 AM   #21
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All Im doing is telling you what has happened over the past 25 years. I have no idea what will happen over the next 25 years. When I say the pension fund has outperformed the "market", Im talking about VTSMX which isnt a true benchmark since the pension fund invests in all asset classes. I have no idea if our manager could outperform VTSMX if he was limited to only US stocks or not. My point was that I cant figure out why all of these pension funds are in such trouble when ours is and has been thriving for many many years. We need approx 0.5% annual returns to make up for the excess in benefits paid out that exceeds contributions. The fund assumes an 8.5% return long term but in actuality has done much better over the 25 + years I was able to look up in the annual reports.

Why are these other pension funds going belly up? They arent contributing enough? Their returns are subpar? Mismanagement and super high expenses?
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Old 11-12-2008, 01:40 PM   #22
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The pension fund managers are not stars. They are conservative by nature. When the whole market is down, what do you expect them to do? If the value is down, there is an obligation for the company to contribute more. They just need some time to recover. It is not a bailout.
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Old 11-13-2008, 09:08 AM   #23
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Now I see why alot of these pension plans are in trouble. They are run by morons. The Dallas Employees Retirement fund (which covers all employees who are not police and fire) just released that they have lost 31.2% in the past 12 months. Thats insane for a pension fund that is suppossed ot be conservatively invested.

Apparently they were close to 100% invested in stocks? How else can they lose that much? Why should we bail out pension funds that are getting killed due to mis-management.

The Dallas Police and Fire pension which is a totally different entity hasnt released the annual report yet and I do expect them to lose money but the worst the have ever done in a year was lose 11% which was during the last grizzly bear market when the VTSMX lost 21%. There is absolutley no reason any pension fund should lose anywhere near 30+% unless the overall market drops something like 75%.
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Old 11-13-2008, 09:39 AM   #24
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Now I see why alot of these pension plans are in trouble. They are run by morons. The Dallas Employees Retirement fund (which covers all employees who are not police and fire) just released that they have lost 31.2% in the past 12 months. Thats insane for a pension fund that is suppossed ot be conservatively invested.

Apparently they were close to 100% invested in stocks? How else can they lose that much? Why should we bail out pension funds that are getting killed due to mis-management.

The Dallas Police and Fire pension which is a totally different entity hasnt released the annual report yet and I do expect them to lose money but the worst the have ever done in a year was lose 11% which was during the last grizzly bear market when the VTSMX lost 21%. There is absolutley no reason any pension fund should lose anywhere near 30+% unless the overall market drops something like 75%.
You obviously don't understand the New World Order. Private citizens should only enjoy the benefits of the Upside Gain. The Downside Risk will be covered by the Federal Government. You can't be held accountable for your own bad decisions- Please, comrade, get with the program.
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Old 11-13-2008, 11:11 AM   #25
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I would not be in favor of propping up companies pension plans. IF the company fails, there are mechanisms to deal with it today (PBGC).

If companies cannot afford to pay for traditional pensions... then the employee will have to fund it. If the company cannot be competitive in attracting employees because of the lack of those benefits... they will have to work it out.
Good post.

Pension plans looked "affordable" to management because they assumed they would be able to earn equity returns over the entire life of the plan. The law supported this idea by allowing the plan to calculate its liabilities by discounting future benefits at assumed returns on stocks. The employees didn't know what the company needed to earn in order to pay their pensions, they simply "knew" the pension was guaranteed.

Nobody allowed for the fact that there are extended periods when equities do poorly. So companies with pension plans that invest in stocks find themselves with a lot more volatility then they had envisioned. Worse yet, sometimes the pension plan stocks go down at about the same time that the company is struggling to be profitable in it's core business.

On a risk-adjusted basis, pension plans are more expensive than companies (and employees) believed.
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Old 11-13-2008, 11:19 AM   #26
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Utrecht's post led me to check out how the Dallas Employees Retirement Fund would spin the losses and found this on their site:

ERF Dallas

So---according to them, employee pensions are safe and will be paid out as usual as was promised by a defined benefits plan. I don't quite understand the math (how they can meet their obligations with less money)?
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Old 11-13-2008, 03:35 PM   #27
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You obviously don't understand the New World Order. Private citizens should only enjoy the benefits of the Upside Gain. The Downside Risk will be covered by the Federal Government. You can't be held accountable for your own bad decisions- Please, comrade, get with the program.
Really? Can my 401K apply for some bailout money, then?
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Old 11-15-2008, 09:41 PM   #28
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I've been wondering about the health of my pension plan for the last few months. Once in a while I hear something secondhand that things are ok but nothing specific.

Today I got a letter with some updated information. Some interesting comments at the end about the 401K plan too.

The letter in part;

Dear ----- Retiree:

In light of the financial market turmoil, we have had several inquires from staff concerned about their retirement plans. I want to let you know that we have conducted reviews of both the Pension Plan and the 401(k) Employees’ Savings Plan. At this time, the assets remain well diversified and we have no plans to make changes to them.
Here are the reviews that we conducted:

Review of the plans’ portfolios for potential threats to assets from distressed financial organizations.

Review of the plans’ investment options to determine the amount of exposure to distressed securities.

Review of the plans’ portfolio holdings, liquidity situations, and providers for stability.

The outcome of these reviews shows that at this time nothing more than continued monitoring and due diligence by ------ are required.
I also would like to take this opportunity to provide a description of each plan:

Pension Plan
For many staff and retirees, the Pension Plan is their primary retirement plan. It pays out benefits based on a formula that includes years of service and final average pay. Benefits from the plans have not been impacted by the financial turmoil. Although plan investments have declined in value, the plans remain well funded. The ------ corporate plan requires no funding at this time and ---- has appropriate funding in its FY09 budget.
Employees’ Savings Plan
The Savings Plan supplements the Pension Plan and provides participants with an opportunity to invest in certain mutual funds and a stable value fund. Individual staff or retiree holdings in the Savings Plan are being directly impacted by the financial markets although the underlying investments remain well diversified.

The uncertainty of the financial markets may cause you to make hasty changes to your Savings Plan elections. Before you make changes:

Know your risk tolerance. Make sure your investments are diversified; when the market does decline, don’t obsess about your losses.

Review your portfolio. Review how your portfolio has grown and changed over time; it helps to put market downturns into perspective.

Think before you make changes. Don’t respond emotionally to an erratic market.
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Old 11-15-2008, 10:29 PM   #29
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Now I see why alot of these pension plans are in trouble. They are run by morons. The Dallas Employees Retirement fund (which covers all employees who are not police and fire) just released that they have lost 31.2% in the past 12 months. Thats insane for a pension fund that is suppossed ot be conservatively invested.

Apparently they were close to 100% invested in stocks? How else can they lose that much? Why should we bail out pension funds that are getting killed due to mis-management.

The Dallas Police and Fire pension which is a totally different entity hasnt released the annual report yet and I do expect them to lose money but the worst the have ever done in a year was lose 11% which was during the last grizzly bear market when the VTSMX lost 21%. There is absolutley no reason any pension fund should lose anywhere near 30+% unless the overall market drops something like 75%.
VTSMX (Vanguard Total Market Index) is down 40% in 1 year, about the same as S&P500. So, Dallas Retirement Fund is marginally better.

I think many pension funds, public or private sectors, have had to take a more equity allocation, in order to have sufficient growth to meet the promised payout. With interests being so low, the fixed income portion does not pay enough to meet obligations.

When you are underfunded, you can't be conservative, and have to take some risks and hope for the best.

They may not be morons, just victims of the systems that overpromise their recipients, who will cry foul.

I am not a participant of any pension fund, private or public, and am just venturing an observation.
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Old 11-15-2008, 10:51 PM   #30
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Really? Can my 401K apply for some bailout money, then?

Pensions are special...
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Old 11-18-2008, 09:31 AM   #31
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Really? Can my 401K apply for some bailout money, then?

Forms will be available after January 20th, 2009. Contact your Congressman for further details.
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Old 11-18-2008, 10:40 AM   #32
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Utrecht's post led me to check out how the Dallas Employees Retirement Fund would spin the losses and found this on their site:

ERF Dallas

So---according to them, employee pensions are safe and will be paid out as usual as was promised by a defined benefits plan. I don't quite understand the math (how they can meet their obligations with less money)?
if the market stays down for decades, they are in trouble. but they don't have to sell everything next week to meet obligations. they have a lot of dividends coming and when the market rebounds the asset values will increase
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Old 11-18-2008, 10:54 AM   #33
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From this morning's FT FT.com / Companies / US & Canada - Top US corporate pensions down by $120bn

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The assets of the 100 biggest US company pension plans fell by an estimated $120bn in October - the biggest monthly loss for at least eight years and a sign that pension losses are likely to sharply push down company earnings in 2009.

John Erhardt, a consulting actuary at Milliman, which produced the estimate of the losses, said: "These are volatile times for pensions, and they will likely result in a $40bn reduction in corporate earnings in 2009."

The 100 biggest plans account for about 70 per cent of defined benefit pension assets at corporations.

The big fall in their value has resulted in strong lobbying by industry groups to ask Congress to waive parts of the Pension Protection Act, which would require companies to make big cash payments to their funds this and next year.

Recent rule changes mean that companies must take pension losses on to their balance sheets. The drop in funded status for defined benefit funds would result in a $154bn charge to shareholders' equity at the end of the 2008 fiscal year, Milliman said.

Companies are responsible for closing any gap between assets and liabilities, which will reduce corporate earnings next year, based on US accounting rules.

Separately, the PPA requires companies to make big cash payments to the funds to close any funding gap. In 2008, the cash needed to close the gap will be an estimated $32bn, which will rise to about $93bn in 2009, said Mr Erhardt.
...
S&P companies have been using pension funds much like households were using home equity - as giant ATM machines. Even if they are successful in extending the time allowed to make up the shortfalls, this is a problem for longer term profitability.

Michael
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Old 11-21-2008, 07:19 AM   #34
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It is a huge house of cards that is in the midst of collapsing....
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Old 11-21-2008, 10:24 AM   #35
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Think of the pension funds like your own portfolio. Now if your portfolio is down by 30%, the legislation would demand that you top it up back to 100%. So you would need to sell your house and cars and other assets to top it up. Companies are in the same jam. If they are forced to get the pension portfolio compliant during this down period, they will have to sell corporate assets to do so. This is not good for their ongoing businesses and all they are asking for is more time to get compliant.

This is really not how pension funds are maintained. Each year every company with a pension fund must get an actuarial study for the estimated present value of the obligations the company has encountered. If the funded amount is less than the present value the company, under present rules, must make contributions over years to return the company to a fully funded status, not in one year. However a portion of the unfunded status is also reclassed from the companies equity under other comprehensive income to show a claim on the company itself. This is a non-cash transaction that debits company equity and credits the long term pension liability. It is a reflection of the obligation of the company that many would prefer not to show.

The law is already plenty liberal under it's minimum funding rules for unfunded pension obligations. The one positive the market has done with the massive decline is to stop the flow of companies ending pensions and claiming overages of valuation into income, which was a legal technique from the funded status, which is what many companies were doing when the market was at it's high.

In the past year companies have already gotten the law changed to reduce the calculated amount for cash payouts, more breaks for companies are not needed, meeting obligations entered into should be maintained.
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Old 11-23-2008, 03:27 PM   #36
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This is really not how pension funds are maintained. Each year every company with a pension fund must get an actuarial study for the estimated present value of the obligations the company has encountered. If the funded amount is less than the present value the company, under present rules, must make contributions over years to return the company to a fully funded status, not in one year. However a portion of the unfunded status is also reclassed from the companies equity under other comprehensive income to show a claim on the company itself. This is a non-cash transaction that debits company equity and credits the long term pension liability. It is a reflection of the obligation of the company that many would prefer not to show.

The law is already plenty liberal under it's minimum funding rules for unfunded pension obligations. The one positive the market has done with the massive decline is to stop the flow of companies ending pensions and claiming overages of valuation into income, which was a legal technique from the funded status, which is what many companies were doing when the market was at it's high.

In the past year companies have already gotten the law changed to reduce the calculated amount for cash payouts, more breaks for companies are not needed, meeting obligations entered into should be maintained.
If it is a non-cash transaction, why would they care? They show the liability on the balance sheet. But when people actually retire, it gets crystalllized into a contribution to the pension trust.
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Old 11-23-2008, 05:29 PM   #37
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Well, not having a Pension plan nor even a IRA? I can't see why we just can't take the bail out money and Put it into the SS system, Privatize it and increase everyone's SS by Double! and if some $40-50k yr in SS isn't enough for the Common Worker? Tough Beans!

Same goes for Medicare! Add $500 Billion! elimnate the Donut Hole program..
And why does the UAW peoples Health Care have to be bailed out? Why can't they just use medicare like everyone else has too?

And why even consider Giving Any $ to Chrysler? They've been on the loosing end for Decades.. even Mercedes couldn't save them...And If I had to chose btwn Ford and GM? Go with FORD... most cars are all the same anyway now..

And I'm supposed to pay more taxes to Help Some HS drop out keep making his $50-$70 hr? and Pay him 80% of his Reg. Income even when he/she Doesn't work?
I don't think so.. They Killed the Goose, laying the Golden eggs.. My plumber and Carptenders Deserve that kind of Money , but not no Factory worker that a machine moves part A to Part B ad all they have to do is Screw in the Bolts.. They should have been Letting all those 10 million Illegals take those jobs at 20% of the Pay and be in great shape! Send the former Workers to School or set them Up with a Dealership to sell their cars at a reasonable Price like $15,000... and the rest be the Mechanics to fix them under a lifetime warraty..!
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Old 11-23-2008, 06:32 PM   #38
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The fund assumes an 8.5% return long term but in actuality has done much better over the 25 + years I was able to look up in the annual reports.
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There is absolutley no reason any pension fund should lose anywhere near 30+% unless the overall market drops something like 75%
By those numbers, a pension fund shouldn't have more than 40% equities. That might be a good %age, but returns will be low. I sure wouldn't expect to get anything like 8.5% return without having more than 40% in equities. And, if we're talking about 8.5% real return--it's almost impossible without a fair dose of risky equities (or something even riskier).
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