Politically SAFE Pension Reform

As well as Senator Orrin Hatch outlined the public pension crisis in this country in a report last year putting the debt at $4.4 trillion and yesterday on the Senate floor:
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it seems to have completely escaped him that his SAFE solution of allowing insurance companies to annuitize promised benefits is a non-starter once you get outside of an insurance company boardroom.

The stated goals of the act (starting at 3:20 of the clip above) are that public pension plans must:

  1. be affordable for public employers and taxpayers
  2. be structured so that taxpayers in the future have no liability for past years of employee service
  3. provide retirement income security for employees
  4. federal bailout of the states must be avoided at all costs

The actual outcomes were this act* to pass for public pensions:

  1. be absolutely unaffordable for employers and taxpayers when insurance annuity rates are applied to current pension promises
  2. no mechanism to pay off the $4.4 trillion accumulated debt
  3. a state bailout of public pensions through insurance guaranty funds?

And, of course, for politicians:

  1. Massive insurance company campaign contributions

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* BTW, the SAFE act also includes two features related to the private sector: a “starter 401(k) plan” for employers where employees would be able to put in up to $8,000 annually and something about IRA investment advice. There’s your ‘retirement income security’ bone for those who don’t happen to have a government job.

5 responses to this post.

  1. Felix Unger (aka Senator Hatch) is afraid to say anything to aggravated the teachers, firemen, police in his constituency. This is a joke

    Reply

  2. Posted by Tough Love on July 10, 2013 at 4:24 pm

    All of this just shows that Senator Hatch has now reached the stage of incompetent old fool (unable to successfully function in the Finance position he is in) and should be out out to pasture.

    Reply

  3. Posted by Tough Love on July 10, 2013 at 5:26 pm

    Just listened to the entire video. Surprising how someone can bumble through a speech that is supposed to be their own work-product.

    Anyway, the problem isn’t with what he said, it is with what he didn’t say. Specifically he said (as John enumerated above in his #s 1 & 3) that:
    (1) be affordable for public employers and taxpayers, and
    (3) provide retirement income security for employees

    Specifically, while (3) promises only “retirement security” he conveniently fails to mention that to NOT increase Plan costs above the current level (which most agree are already unaffordable) would (via his proposal to fund these plans via immediate annuities), likely require a 50+% reduction in the pensions promised current Public Sector workers. Or alternatively, a 100% increase in cost to keep the current level of promises.

    Materials omission of this nature is NOT leadership. Senator Hatch’s proposal is an embarrassment and he should apologize for his foolish proposal.

    Reply

  4. Posted by Tougher Love on July 16, 2013 at 5:27 pm

    The only solution is a national pension plan, as the states are not true sovereigns, only the Feds who can print a fiat currency.

    Reply

    • Posted by Tough Love on July 17, 2013 at 11:47 pm

      There is one. It’s called Social Security.

      But that’s not good enough for the very greedy Public Sector Unions/Workers.

      Earth to Public Sector workers, you have to materially save out of EVERY pay check …. and you shouldn’t be excused from that obligation. You’re NOT “special”.

      Reply

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