Pension Adjustments

[Tekward]

I remember reading about another California muni where there was stupid decisions made and many people getting way out of proportion pensions...

IIRC, there were 8 making over $200K per year, more then what they were making when working... they increased the multiplier from 2X to 3X per year and also did a secondary plan.... why To keep up with the police who was keeping up with the state troopers....


The article was listing some different cities where the pension cost were over 20% of their budget!!!

This is not like Illinois where they just did not fund the plan, this is just a stupid pension plan from the get go.... you need to be able to fix the stupid plans...

I would characterize the Cali moves as criminal rather then stupid:
"It's Corruption On Steroids" - A Look Inside The El Monte, California Public Employee Pension | Zero Hedge

El Monte, California is a city of roughly 100,000 residents in East Los Angeles, many of whom struggle to make ends meet with a median household income of ~$39,000 and nearly 25% of people living below the poverty line. But while most of the people of El Monte struggle to meet monthly expenses, the city's public employees are living the high life courtesy of one of the most egregious taxpayer funded pension plans in the country.

 

[Texas Proud]

I would characterize the Cali moves as criminal rather then stupid:
"It's Corruption On Steroids" - A Look Inside The El Monte, California Public Employee Pension | Zero Hedge

El Monte, California is a city of roughly 100,000 residents in East Los Angeles, many of whom struggle to make ends meet with a median household income of ~$39,000 and nearly 25% of people living below the poverty line. But while most of the people of El Monte struggle to meet monthly expenses, the city's public employees are living the high life courtesy of one of the most egregious taxpayer funded pension plans in the country.

I use to work at a place where some people said the top execs were criminal.... I said stupid was not against the law... most of what they did met the stupid level but was not criminal.... now, we did have a vice chairman go to jail for doing criminal acts, but the rest did not do anything criminal....


I would put this in the same category.... the people voting on the new pensions did not know what they were doing... they were swayed by whatever consultants told them they needed to do it... heck, even one of the guys getting money from the deal said he did not know he was going to be getting so much....

 

[Fermion]

Criminal is making the current taxpayers pay it.

 

[Spanky]

Criminal is making the current taxpayers pay it.

so sad ...

 

[MrLoco]

401k's with good investment choices put you, not someone(s) else in charge of your retirement & you can see where you're at at all times & you can't blame anyone else.

The problem with this is that in many situations you do not have a choice.
I have a relative who worked for 35 years as a teacher and was required to contribute 9% of her pay for 35 years toward her pension. No choice.
These pensions must be honored.

 

[Texas Proud]

The problem with this is that in many situations you do not have a choice.
I have a relative who worked for 35 years as a teacher and was required to contribute 9% of her pay for 35 years toward her pension. No choice.
These pensions must be honored.

I have zero problem with honoring a pension plan that was set up properly, had contributions from the participants and gave a reasonable pension...

I have zero problem cutting a pension that was set up that was not funded properly, had zero or low contributions from the participants and gives an unreasonable amount and/or give unrealistic COL increases.....

Sounds like your relative is in the first... I know that my mom and two sisters are in there also... not sure about another sister, as she lives in Oregon and I do not know what she is expected to get.... she works for a county up there....

 

[Fermion]

The problem with honoring some of the really bad plans is it is essentially cutting the benefits of everyone else. When you have to pay $$$ extra in property tax to pay for mismanaged pensions, that money comes out of your potential retirement nest egg.

 

[Texas Proud]

The problem with this is that in many situations you do not have a choice.
I have a relative who worked for 35 years as a teacher and was required to contribute 9% of her pay for 35 years toward her pension. No choice.
These pensions must be honored.

Oh.... and BTW, we have no choice in SS and they have changed it a number of times and will likely change it again... and the US gvmt is not going to go BK....

Why should an unreasonable designed pension be untouchable

 

[nun]

I think it's important for us to distinguish between social security insurance programs, defined benefit pensions and defined contribution retirement accounts. All of them should have a place in retirement income generation.

1) Social security insurance is like "minimum wage" for retiree. It should guarantee a certain level of income independent of the investment environment. Given the current state of retirement saving and planning it's vitally necessary. The level of tax and payment is a matter of public policy.

2) Define benefit plans are great when well run and fully funded as they pool risk and should be able to produce higher retirement income than DC plans because of mortality credits. They need to be regulated and insured against failure.

3) Define contribution plans give direct control of money and investments to the retiree (for good or ill) and from a libertarian perspective are preferable. Regulation should be kept to a minimum.

I'm glad that my retirement income needs are covered by 1) and 2) and 3) can be left to compound.

 

[Chuckanut]

1) Social security insurance is like "minimum wage" for retiree. It should guarantee a certain level of income independent of the investment environment. Given the current state of retirement saving and planning it's vitally necessary. The level of tax and payment is a matter of public policy.

I agree. I think that many of us in this group of LBYM savers and investors sometimes forget how many people either through ignorance, lack of commitment or just plain bad luck, don't arrive at their 'golden years' with an ample amount of investment/pension/IRA/401K income to survive. SS as mentioned earlier forces them to have something to live on.

 

[Which Roger]

I agree. I think that many of us in this group of LBYM savers and investors sometimes forget how many people either through ignorance, lack of commitment or just plain bad luck, don't arrive at their 'golden years' with an ample amount of investment/pension/IRA/401K income to survive. SS as mentioned earlier forces them to have something to live on.

I think that many of us in this group also underestimate how knowledgeable we are regarding saving and investing relative to the general population. I would guess that the average person in the group knows more than about 98% of the general population, and we have quite a few who are more knowledgeable than 99.9%.

 

[Options]

Define benefit pension plan management must be transparent and held to very high fiduciary standards. Unfortunately that is not often the case. Many plans have systemic problems like declining membership, but there's no excuse for poor management. Ideally mortality credits, economies of scale and the buying power of the plan should allow them to pay higher retirement incomes than defined contribution plans. In MA there are a couple of state pension plans that are examples of the good and the bad. The bad is the transit workers plan that is opaque, poorly managed and thought to be severely under funded.

https://www.bostonglobe.com/busines...nks-million/UKOg59TaQgK4CBTtQxo0tK/story.html

Contrast that with the Massachusetts State Employees Retirement fund that is managed my PRIM (Pension Reserves Investment Management) board. They are very open and publish regular audits. The state workers fund is 65% funded with a goal of 100% funding buy 2030 with the legislature making extra contributions to make up for amounts they failed to contribute in the past.

PRIM Board

I just used about 20% of my retirement funds to buy into the MA state pension and because of the openness of PRIM, commitments from the legislature, recent reform legislation and active retiree and state worker unions I feel confident that the MA state pension fund is a good place to be.

"Transparent" and "management" in any business context is an oxymoron. While I worked and someone used the word transparent, I always assumed they were lying or were about to lie about something. On a good day, business management can be translucent at best.

Regarding pensions, California's CALPERS, for all its faults, is another pension that would face/is facing too much political backlash to become another Detroit (at least until California's next fiscal crisis, then we will see).

Frankly, I'm with a poster up thread in that if I had a pension I would take a lump sum as soon as possible.

 

[nun]

"Transparent" and "management" in any business context is an oxymoron. While I worked and someone used the word transparent, I always assumed they were lying or were about to lie about something. On a good day, business management can be translucent at best.

In a business the board is supposed to know what's happening and represent the best interests of the shareholders......reporting and auditing is a requirement for public companies. The commitment to honest reporting is sometimes lacking and that is where regulation must come in. In a DB plan there should be a fiduciary responsibility to the pension members from the management board and a requirement that full contributions are made at all times. Many public pensions are in trouble partly because contributions have been deferred for so long.

I used a one time buy in opportunity to take funds from the DC state plan and buy into the DB plan.....so I did exactly the opposite of what I think you and the poster farther up the thread would have done.

I thought long and hard about taking $280k from my DC plan and using it to buy 10 years of service in the MA state retirement DB plan, but the numbers were hard to ignore and I was comfortable with the 70% funding level of the pension (latest numbers), recent sensible reforms and the commitment of the legislature and state unions to work together to keep the system working.

What I got for my $280k was a $20k annual pension with a 3% COLA on the first $13k starting at age 55. If you do the numbers and I live an average life span then I would need to have an annual return of 7% form a DC plan to match the income of the DB plan. The plan also has a death benefit that declines with age and starts out at the value of my employee contributions.....so if I die tomorrow my heirs still get $200k.