More State Pension Problems

[Tekward]

How would you like to receive 30.9% of your state pension (NJ funding levels)?

The news continues to worsen for America’s public pensions and for the people who depend on them. The median funding ratio—the percentage of assets states have available for future payments to retirees—declined to 71.1 percent in 2016, from 74.5 percent in 2015 and 75.6 percent in 2014.

https://www.bloomberg.com/graphics/2017-state-pension-funding-ratios/

 

[Texas Proud]

WOW... two worse than Illinois!!!!



I wonder what happened to Minnesota.... that is a huge drop for one year...

 

[Senator]

Funding levels are different than payout levels. There is always room to create a bond issue or raise taxes to cover the gaps. And there are plenty of reasons why the above funding levels happen.

In the end, cutting pension levels is not any worse than states raising taxes on retirees. Raising property taxes, sales taxes, income taxes, etc. all add up to a lower spendable amount.

 

[bingybear]

In the end, cutting pension levels is not any worse than states raising taxes on retirees. Raising property taxes, sales taxes, income taxes, etc. all add up to a lower spendable amount.

If a state increases taxes, not only will state pensioners will be taxed, but everyone else too. That is assuming the state does not create a tax only on state pensions. So there is a difference between cutting pensions and raising taxes everyone... at least to the pensioners.

 

[gerntz]

If a state increases taxes, not only will state pensioners will be taxed, but everyone else too. That is assuming the state does not create a tax only on state pensions.

I doubt everyone else will be. I think some will say enough & move elsewhere.

 

[pb4uski]

Keep in mind that few pensions are 100% funded....the average funding of the 100 largest corporate defined benefit pension plans is 83.7% according to Milliman.

Pension Funding Index - Milliman - United States

The funded status of the 100 largest corporate defined benefit pension plans increased by $4 billion during July as measured by the Milliman 100 Pension Funding Index (PFI). The funded status deficit declined to $282 billion from $286 billion at the end of June due to strong July investment gains. The funded status improvement came as the benchmark corporate bond interest rates used to value pension liabilities continue a decline that began in April. As of July 31, the funded ratio rose to 83.7%, up from 83.5% at the end of June. The funded ratio has been teetering between 83% and 84% over the first seven months of the year.

 

[euro]

Keep in mind that few pensions are 100% funded....the average funding of the 100 largest corporate defined benefit pension plans is 83.7% according to Milliman.

Pension Funding Index - Milliman - United States

Yeah, but 30.9%? That doesn't sound good.

 

[pb4uski]

Agreed, definitely a slacker.

 

[Chuckanut]

Since 2008 the stock market has gone up, Up, and UP!

What in the world are these states doing that they can't fund at least 75% of their pension obligations at such times? Maybe they need to fire the money managers and put it all into the Psssst....Wellesly fund?

 

[Senator]

If a state increases taxes, not only will state pensioners will be taxed, but everyone else too. That is assuming the state does not create a tax only on state pensions. So there is a difference between cutting pensions and raising taxes everyone... at least to the pensioners.

At least when your pension is cut in half, your income taxes will be less... That is the risk and benefit of working for an employer. You are dependent on them.

 

[97guns]

The old saying "trust no one" applies to everything including your retirement, I don't trust anyone that's why my retirement fund is in my own hands. Nobody making a bad move and nobody with sticky fingers, I make my own decisions and transactions, nobody to blame but myself

 

[Al18]

Speaking of NJ pensions - old news. They've only been 35% funded for the past 9 years. Governor Christie removed the COL increases in 2009 until the pension fund is healthier - I don't expect that to happen in my lifetime. New change this year was to divert lottery proceeds to fund the pension plan. Wall street says this isn't a significant change - bond ratings still in the dumps. Plan for the worst, hope for the best

 

[OldShooter]

If I had a public pension or a pension from a multiemployer plan and had to rely on it to cover a substantial portion of my expenses, I would be somewhere between worried and terrified, depending on the specifics of the plan.

There is a Eugene Fama video here that I keep going back to due to the huge breadth of his comments: https://www.top1000funds.com/featured-homepage-posts/2015/12/11/investors-from-the-moon-fama/ His discussion of public pensions begin about 9:10 and run to about 11:30. Among the things he says is "Illinois will crash. Chicago will crash."

 

[Blue Collar Guy]

Yeah, but 30.9%? That doesn't sound good.

Hahahah, When I retired my pension was allegedly 100 % funded. I was told by the actuary, That my employer next year will put in 2.4 million dollars into the pension fund. The assumption was 7.5 % returns. They have since lowered the expected returns to 7 %. I might be off on the numbers it was 10 years ago, but that was the substance of the conversation. My brother in law took a scalping(not a haircut) on his pension it went from thousands to hundreds. He entered his retirement years having to move to North Carolina and now has a full time jib. Till he gets to social security age. Then Im sure he will be greeted by the 23 % soc sec haircut.

 

[Blue Collar Guy]

Since 2008 the stock market has gone up, Up, and UP!

What in the world are these states doing that they can't fund at least 75% of their pension obligations at such times? Maybe they need to fire the money managers and put it all into the Psssst....Wellesly fund?

My pension is a 50/50 fund, ill double check but thats what their AA was. After the 2000 crash everyone got panicky and I think they went 25/75.

 

[Just_Steve]

New York 94.5% funded.

I sleep well every night, keep those pension checks coming.

 

[Blue Collar Guy]

If I had a public pension or a pension from a multiemployer plan and had to rely on it to cover a substantial portion of my expenses, I would be somewhere between worried and terrified, depending on the specifics of the plan.

."

Thanks shooter, my scream therapy will be from this post ,hahah. This is why I have a nest egg. Pension goes sour, I got to nest egg, nest egg goes sour, I live on pension, they both go sour, Im 6'6" and have a black suit, Ill either be a greeter at Walmart, or a bouncer at a night club. My city will have soon $15 Fast food minimum wage, let me practice. "hello Sir would you like fries with that order?" Yeah Ill survive, It not on my top 10 list of how to spend my retirement years, but neither was staying home will millions and sitting on the couch tending to my mother.

 

[Blue Collar Guy]

New York 94.5% funded.

I sleep well every night, keep those pension checks coming.

Yeah, we did something good. Let me order one of those "my Pillows" to enhance the dreams.

 

[OldShooter]

New York 94.5% funded. ...

Yup. Looks good.

The common situation is that the bold print (% funded) giveth and the fine print (assumed % yield) taketh away.

I saw this story last week. It appears that the fine print for MN and several other states was making the bold print look far too good. https://www.bloomberg.com/news/arti...nnesota-s-pensions-the-biggest-hit-in-the-u-s

 

[youbet]

What in the world are these states doing that they can't fund at least 75% of their pension obligations at such times?

In Illinois:

1. No contributions made to the funds other than the employees' portion.

2. Bad deals with investment firms and corruption resulting in some state officials resigning and running (but, of course, no prosecutions).

3. State borrowing from the funds which can not now be accurately accounted for.

It's really sad. It's likely most retirees will not collect pensions that even reflect their own contributions when this all blows up. That is, they will have purchased the most expensive annuities ever. They would have been so much better off being on SS where the Feds would have insisted that Illinois pay their half every year. Left unsupervised, Illinois just didn't kick in and, in fact, took out.

A bargain for Illinois tax payers I guess. They have not had to pay into SS for their employees and now it's being shown they never really paid into the state fund or provided any 403b/401k matching. The amount that's in the funds is easily accounted for by just considering the employees' 9.5% contribution.

 

[Blue Collar Guy]

In Illinois:

1. No contributions made to the funds other than the employees' portion.

2. Bad deals with investment firms and corruption resulting in some state officials resigning and running (but, of course, no prosecutions).

3. State borrowing from the funds which can not now be accurately accounted for.

It's really sad. It's likely most retirees will not collect pensions that even reflect their own contributions when this all blows up. They would have been so much better off being on SS where the Feds would have insisted that Illinois pay their half every year. Left unsupervised, Illinois just didn't kick in and, in fact, took out.

A bargain for Illinois tax payers I guess. They have not had to pay into SS for their employees and now it's being shown they never really paid into the state fund. The amount that's there is easily accounted for by just considering the employees' 9.5% contribution.

Wow, I can believe anyone would join that work force knowing this is happening.

 

[dixonge]

Our pension - TCDRS - 30-year return = 8.01%

https://www.tcdrs.org/OurInvestments/Pages/OurResults.aspx

 

[youbet]

Wow, I can believe anyone would join that work force knowing this is happening.

It's even more interesting today....... Several years ago, Illinois switched teachers to a new pension plan called Tier II. New hires pay 9.5% (mandatory) and the benefits are more or less equivalent to SS*. That is, they have future benefits approximately equal to SS but pay about half again more for them.

Yet, Chicago and the five collar counties have little trouble recruiting because they pay relatively high salaries. Downstate (everything below I80 or so and where salaries are lower) is having recruitment and retention problems.


* It's a tough comparison because features and benefits are a bit "apples to oranges," but apparently they're close enough that the teacher's union is assembling litigation. States are only allowed to get out of SS for employees if they provide a pension equivalent or better than SS. Tier II is borderline. Of course the school districts will fight having to contribute to SS.

 

[Blue Collar Guy]

I doubt everyone else will be. I think some will say enough & move elsewhere.

Im saying goodbye now, and my pension is already state tax free.

 

[Blue Collar Guy]

OK update NYC police pension fund in 2013 this was the mic The policy mix targeted for the Fund in fiscal year 2013 included securities from
the following categories: U.S. Equities 39.8%, U.S. Fixed Income (core) 17.1%, International
Equities 9.9%, Emerging Markets 5.9%, Enhanced yield (Fixed Income) 4.8%, Private Real
Estate 3.3%, Private Equities 6.7%, U.S. Treasury Inflation Protected Securities 2.9%, cash
1.0%, Hedge Funds 3.2%, Convertible Bonds .6%, REITS 0.5%, Opportunistic Fixed 1.7%,
Bank Loans 1.7% & ETI .9%.. NYC has 4 or 5 pension plans the biggest are : the police , the fire, the teachers, and everyone else.