Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 02-14-2013, 10:11 AM   #21
Thinks s/he gets paid by the post
 
Join Date: Jul 2005
Posts: 3,862
Special guest post at Wade Pfau's blog, Larry Frank on viability of annuity providers:

Retirement Researcher Blog: Larry Frank Guest Post on Viability of Annuity Providers

"At the moment, immediate annuities are such a small percentage of assets that any blow ups can be almost absorbed by the insurance company. However, with the great push by legislatures and the insurance industry to “solve the retirement problem, ”the volume of assets may get so large that it becomes too big to fail. The promised payouts may exceed assets on such a large scale that it overwhelms both insurance companies and State guarantee associations."
__________________

__________________
Animorph is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 02-14-2013, 10:17 AM   #22
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
brewer12345's Avatar
 
Join Date: Mar 2003
Posts: 16,391
Quote:
Originally Posted by ronocnikral View Post
I also recently read, perhaps here, that pension plans are being pinched by the low interest rate environment.
This is right on the money. Funding levels are calculated by comparing asset value to the present value of the future payout liability. Even if nothing else changes, a decline in the interest rates you use to discount the future payouts will reduce reported funding levels. With long termm interest rates way down, this has pressured otherwise solid pension plans. If we continue to see long term rates grind upward, pension plans should report better funding levels in future years.
__________________

__________________
"There are three kinds of men. The one that learns by reading. The few who learn by observation. The rest have to pee on the electric fence for themselves."



- Will Rogers
brewer12345 is offline   Reply With Quote
Old 02-14-2013, 11:56 AM   #23
Full time employment: Posting here.
SumDay's Avatar
 
Join Date: Aug 2012
Posts: 799
Quote:
Is it taken over by Prudential,
Alan, it was taken over by Prudential. No GM or PBGC involvement, liability, etc. It's all on Prudential.
__________________
SumDay is offline   Reply With Quote
Old 02-14-2013, 12:03 PM   #24
Thinks s/he gets paid by the post
kyounge1956's Avatar
 
Join Date: Sep 2008
Posts: 2,171
Quote:
Originally Posted by Tadpole View Post
I'm confused. I thought state and local governments didn't participate in PBGC. I don't think federal government pension plans are backed by it.
AFAIK, this is correct. I specifically asked whether my City pension is covered by the PBGC, and was told that it is not. I don't know about Federal pensions.

edited to add a quote from the article linked by imoldernu in #11
Quote:
Checking State/Local Program Guarantees
In state/local-sponsored DB plans, there is no uniform guarantor like the PBGC standing behind promises to pay benefits. If a town or county goes broke and can't pay pension benefits, participants must look to state statutes for relief. Here, they would find a maze of legalese.

In a few states, the law is clearly favorable for pensioners by stating: "Membership in employee retirement systems of the State or its political subdivisions shall constitute a contractual relationship. Accrued benefits of these systems shall not be diminished or impaired." This language requires the state to use its taxing power to make good any pension benefits, if necessary. On the opposite extreme are states that treat pension rights as gratuities - meaning workers have no contractual right against the state. In between are states that provide no constitutional or statutory protections but do have strong histories of case law protecting public pensions. The NCPERS provides a useful summary of provisions in all 50 states.
__________________
kyounge1956 is offline   Reply With Quote
Old 02-14-2013, 12:07 PM   #25
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Mulligan's Avatar
 
Join Date: May 2009
Posts: 7,376
Quote:
Originally Posted by Tadpole
I'm confused. I thought state and local governments didn't participate in PBGC. I don't think federal government pension plans are backed by it.
My understanding of this matches yours. I have a state pension and it does not have the backstop protection from PBGC. Fortunately it is mostly prefunded in its own trust, and not commingled with other pension funds.
__________________
Mulligan is offline   Reply With Quote
Old 02-14-2013, 12:26 PM   #26
Moderator
Alan's Avatar
 
Join Date: Jul 2005
Location: Eee Bah Gum
Posts: 21,095
Quote:
Originally Posted by SumDay View Post
Alan, it was taken over by Prudential. No GM or PBGC involvement, liability, etc. It's all on Prudential.
Cool, I would be happy with that arrangement.
__________________
Retired in Jan, 2010 at 55, moved to England in May 2016
Now it's adventure before dementia
Alan is online now   Reply With Quote
Old 02-14-2013, 01:09 PM   #27
Thinks s/he gets paid by the post
jollystomper's Avatar
 
Join Date: Apr 2012
Posts: 1,358
Quote:
Originally Posted by pb4uski View Post
While I have the utmost confidence my pension plan and its sponsor (one of my former employers), even if I didn't there probably wouldn't be much that I could do about it other than factor its stability into my planning. I've never been one to fret too much about things that I cannot control or influence.
+1
__________________
jollystomper is offline   Reply With Quote
Old 02-14-2013, 01:43 PM   #28
Moderator
rodi's Avatar
 
Join Date: Apr 2012
Location: San Diego
Posts: 8,807
I have an unusual circumstance. My pension (long frozen, portable pension) is managed by the company that we spun off from. It was underfunded from before the time of the split... I read with dread, each year, as the funding percentage got worse over time. 79%...75%... 70% funding.... Ruh Roh.

While it was underfunded former employees could only roll out 1/2 of the lump sum - the other half remained as an annuity/pension payment. You had no choice if you wanted to pull out money.

The other company pumped in enough money that it's now funded fully. That's what I consider unusual... A success story for a pension. So if I wanted to roll out the lump sum, I could roll out the whole thing. At this point I'm letting it ride since it will provide a (very small) third leg of my 3 legged stool.

It definitely makes you nervous to see funding levels go down... and make you less nervous to see them recover.
__________________
rodi is offline   Reply With Quote
Old 02-14-2013, 02:37 PM   #29
Thinks s/he gets paid by the post
martyb's Avatar
 
Join Date: Nov 2006
Location: Bossier City
Posts: 2,182
I will have 2 pensions, both federal. One, I can begin anytime now, since I just reached age 55 last month, and have nearly 36 years time with my employer, Department of Defense (DoD). That is my federal employee pension. The other one (military reserves), I will begin at age 60, still 4 yrs, 11 months away. Both are (at least for now) COLA'd. There is some serious talk of tinkering with the formulation for the COLA's, so I expect that means a little less of a COLA in the future.

Nonetheless, even with the budget circus going on in DC right now, I suppose my pensions are relatively safe, in terms of at least being there in some form. I don't have SS to look forward to though (except possibly $200 or so), since I don't currently pay into SS, and as a federal employee, I'm affected by the WEP.

Wife has no pension, only 401k, and most likely we'll be using it to pay off a house when she retires in a few yrs. She's covered by survivor benefits of both my pensions, plus her own SS. With no mortgage, survivor's bens & her SS, plus life insurance, she will be ok. We don't lead extravagant lives.
__________________
martyb is offline   Reply With Quote
Old 02-14-2013, 07:16 PM   #30
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 16,424
Quote:
Originally Posted by Alan View Post
Cool, I would be happy with that arrangement.
I wouldn't be happy. I would be ecstatic!
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
pb4uski is offline   Reply With Quote
Old 02-14-2013, 07:32 PM   #31
Thinks s/he gets paid by the post
 
Join Date: Oct 2008
Location: Naples
Posts: 2,161
Alan, thanks for your post on the GM pension "sale" to Prudential. It is a sale because GM purchased annuity for me and no longer has any ties to the pension program. I agree with other posters that I am better off under the Prudential plan than if GM was still funding the plan.
__________________
JOHNNIE36 is offline   Reply With Quote
Old 02-14-2013, 09:07 PM   #32
Moderator
Alan's Avatar
 
Join Date: Jul 2005
Location: Eee Bah Gum
Posts: 21,095
Quote:
Originally Posted by JOHNNIE36 View Post
Alan, thanks for your post on the GM pension "sale" to Prudential. It is a sale because GM purchased annuity for me and no longer has any ties to the pension program. I agree with other posters that I am better off under the Prudential plan than if GM was still funding the plan.
You're welcome. I have 4 private pensions, all dependent on my ex-companies to keep them funded. 2 of them are in the UK which has a similar insurance scheme to the PBGC.
__________________
Retired in Jan, 2010 at 55, moved to England in May 2016
Now it's adventure before dementia
Alan is online now   Reply With Quote
Old 02-15-2013, 01:37 AM   #33
Recycles dryer sheets
 
Join Date: Mar 2008
Posts: 404
Having PBGC cover federal pensions would be redundant wouldn't it? As I understand it, PGBC is run by the federal government. The only thing that would result in a loss of federal pensions, would be failure of the government. I imagine PBGC, along with every other government entity would cease to exist at that point. I doubt that the Chinese, or whatever flag we end up under, is going to honor such obligations, PBGC or otherwise.
__________________
ACC USN-(Ret)
BLS53 is offline   Reply With Quote
Old 02-15-2013, 08:13 AM   #34
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Sep 2005
Location: Northern IL
Posts: 18,278
Quote:
Originally Posted by BLS53 View Post
Having PBGC cover federal pensions would be redundant wouldn't it? As I understand it, PGBC is run by the federal government. The only thing that would result in a loss of federal pensions, would be failure of the government. I imagine PBGC, along with every other government entity would cease to exist at that point. I doubt that the Chinese, or whatever flag we end up under, is going to honor such obligations, PBGC or otherwise.
For feds pensions, it would be sort of redundant - but just to be clear ...

Yes, PBGC is run by the govt, but the funding comes from the private pensions themselves. Basically, the companies are paying insurance premiums to PBGC, an annual $ amount per employee in the program, and maybe some other factors (details are on the site). And the laws of economics would tell us that the employees are effectively paying some/all of that from salary they would have received otherwise.

So there has been no 'government bailout' of any PBGC secured pension (to date), the money comes from the sum of the insurance payments. Now, if push came to shove, and the PBGC ran out of funds, there might be a bailout talk in the future, but who knows?

I suppose the Fed could set up a similar plan, but it probably doesn't make much economic sense - it would just be 'compartmentalizing' the money (there might be some mental advantage/transparency to that). But I think it makes a LOT of sense for other municipalities. The PBGC would have forced them to maintain funding, and that would have averted some of the kick-the-can non-antics that places like IL have taken. There would be more transparency if constituents had to fund these at those levels (and, I think that would have led to some push-back against the pensions that offer much more than most private pensions). And the pensioners deserve some backing for the promise that was made.

-ERD50
__________________
ERD50 is offline   Reply With Quote
Old 02-15-2013, 03:15 PM   #35
Moderator
ziggy29's Avatar
 
Join Date: Oct 2005
Location: Texas
Posts: 15,612
Quote:
Originally Posted by BLS53 View Post
Having PBGC cover federal pensions would be redundant wouldn't it? As I understand it, PGBC is run by the federal government. The only thing that would result in a loss of federal pensions, would be failure of the government. I imagine PBGC, along with every other government entity would cease to exist at that point. I doubt that the Chinese, or whatever flag we end up under, is going to honor such obligations, PBGC or otherwise.
Sort of, but it can be a "shell game" like Social Security where the left hand takes from the right hand, so to speak -- you've just shifted where the money is. Still, if we reached the point where entities like PBGC, FDIC and even Social Security can't be backstopped, they would be among the least of our concerns.
__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

RIP to Reemy, my avatar dog (2003 - 9/16/2017)
ziggy29 is offline   Reply With Quote
Old 02-15-2013, 06:20 PM   #36
Recycles dryer sheets
 
Join Date: Mar 2008
Posts: 404
Quote:
Originally Posted by ziggy29 View Post
Sort of, but it can be a "shell game" like Social Security where the left hand takes from the right hand, so to speak -- you've just shifted where the money is. Still, if we reached the point where entities like PBGC, FDIC and even Social Security can't be backstopped, they would be among the least of our concerns.
Yeah, that's the point that the anti-entitlement crowd doesn't seem to understand. If it gets to the point checks can't be mailed out, there isn't going to much of the nation left anyway. It's a lot more complicated than an airline finding a friendly bankruptcy judge to void their pension obligations.
__________________
ACC USN-(Ret)
BLS53 is offline   Reply With Quote
Old 02-15-2013, 06:24 PM   #37
Thinks s/he gets paid by the post
 
Join Date: Aug 2004
Location: Laurel, MD
Posts: 2,948
Quote:
Originally Posted by SumDay View Post
Alan, it was taken over by Prudential. No GM or PBGC involvement, liability, etc. It's all on Prudential.
http://www.pionline.com/article/20120822/REG/120819895

GM transferred $29B to Prudential to cover $26B in obligations. Basically they purchased an annuity from Pru to cover thier obligation! The transfer to Prudential was done to clean up GM's books post BK. Having such a large variable liability on the books was bad for the new GM stock. I have a friend that is a GM retiree and they got an option to take a lump sum if they were uncomfortable with the change to Prudential. I think the lump sum would be more attractive if GM was going to carry the obligation.
__________________
...with no reasonable expectation for ER, I'm just here auditing the AP class.Retired 8/1/15.
jazz4cash is offline   Reply With Quote
Old 02-15-2013, 06:29 PM   #38
Moderator
Alan's Avatar
 
Join Date: Jul 2005
Location: Eee Bah Gum
Posts: 21,095
Jazz4, SumDay - thanks for the info on GM and Prudential
__________________
Retired in Jan, 2010 at 55, moved to England in May 2016
Now it's adventure before dementia
Alan is online now   Reply With Quote
Old 02-15-2013, 08:41 PM   #39
Thinks s/he gets paid by the post
 
Join Date: Oct 2008
Location: Naples
Posts: 2,161
Quote:
Originally Posted by jazz4cash View Post
http://www.pionline.com/article/20120822/REG/120819895

GM transferred $29B to Prudential to cover $26B in obligations. Basically they purchased an annuity from Pru to cover thier obligation! The transfer to Prudential was done to clean up GM's books post BK. Having such a large variable liability on the books was bad for the new GM stock. I have a friend that is a GM retiree and they got an option to take a lump sum if they were uncomfortable with the change to Prudential. I think the lump sum would be more attractive if GM was going to carry the obligation.
The lump sum distributions were only available depending on your retirement date. I was not eligible because I retired in 1988 and I think you had to retire after to 2000 in order to be offered the lump sum. Don't remember the details.
__________________
JOHNNIE36 is offline   Reply With Quote
Old 02-16-2013, 09:54 AM   #40
Thinks s/he gets paid by the post
 
Join Date: Aug 2004
Location: Laurel, MD
Posts: 2,948
Quote:
Originally Posted by JOHNNIE36 View Post
The lump sum distributions were only available depending on your retirement date. I was not eligible because I retired in 1988 and I think you had to retire after to 2000 in order to be offered the lump sum. Don't remember the details.
Sounds about right.....I do know some GM retirees that did not get the option.

Reviewing the link on the GM / Prudential deal, it was widely viewed as a way for large pension plans to get out from under the burden of maintaining a DB plan. Probably not the first time it's been done that way but I think maybe it was one of the larger deals. Newer retirees would presumably have a longer benefit period making them better candidates to be annuitized. I can't think of any downside to an annuity if someone else is buying it for me.
__________________

__________________
...with no reasonable expectation for ER, I'm just here auditing the AP class.Retired 8/1/15.
jazz4cash is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


 

 
All times are GMT -6. The time now is 02:48 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.