Public pensions as constituted in most states are unsustainable for a variety of reasons previously laid out in this blog and a very few other places. The combination of generous benefits, willful underfunding, and the failure of the actuarial profession to tell the truth will bring bankruptcy to these plans (though they apparently will call it ‘restructuring’) and public pension participants may one day get a letter that begins:.
To Our Valued Fund Members:
Today marks an important moment for the future of the _______________ Retirement Fund. It’s a day that brings hope and encouragement for all those involved, as we have decided to take an important and necessary step to ensure the future of the Fund and its ability to continue to provide you and other Fund members with a sustainable level of benefits for the remainder of your lives.
Historically, the Fund has lacked the financial stability and consistent contributions necessary to continue providing sustainable benefits at the levels promised by the government. Through the struggles, what has always been consistent and remained a priority is the Fund’s commitment to the Defined Benefit Plan members and their survivors. these valued members are former and current employees of the _____________ government who faithfully contributed and/or continue to contribute to the Fund with the intention of receiving the benefit payments they are owed. Rest assured our commitment has not wavered.
Today, we announced that we have entered into a federal court proceeding under Chapter 11 of the U.S. Bankruptcy Code to restructure the financial obligations of the fund. Simply put, we filed for Chapter 11 protection to address our underfunding crisis. It is important to know that our restructuring is not like other bankruptcies you may have heard about. We are not “liquidating” or closing the Fund; we are just restructuring the Fund’s obligations to align them with the Fund’s current assets and revenues. Without such steps, there is a significant risk the Fund would be unable to continue operations beyond the middle of 2014.
The blanks could easily be filled with “New Jersey”, “Philadelphia”, “Illinois” or any number of states and localities though this week another group of public pension participants got the letter along with a handy FAQ sheet assuring retirees that they will receive “their full benefits for at least the next two months.” But, now that we have the template, what about next week?