DB/DC Debate & Missing Point

Uninvested’ by Bobby Monks despaired of the rise of Defined Contribution (DC) plans in the private sector while an issue paper out of the Manhattan Institute sees DC Plans as cost-effective.  Both provide some interesting information (which I excerpt below) but both miss THE major point as to why Defined Benefit (DB) plans dominate in the public sector:

You can lie about the costs of DB plans since public workers are happy to believe the promises, politicians are happy to accept low-ball contribution amounts, and actuaries are happy to supply those phony numbers – for a fee.  Add to this mix the total lack of informed oversight – from either regulators, the media, or taxpayers – and default becomes inevitable. DC plans are the only alternative for public plans but their inherent transparency makes them anathema to public workers who would not be happy having everyone know the real cost of their benefits, politicians unhappy about having to pay that real cost, and actuaries unhappy about losing all those fees.

Excerpts from  ‘Uninvested’ which includes eerily familiar criticism of the financial-product sales system

8. Zero Accountability. In an industry that’s far less concerned with generating returns than collecting fees, there’s little incentive to enforce accountability internally or externally.

9. Dirty Data. Most Money managers base their investment decisions on unreliable information sources, such as accounting statements and conventional credit ratings that are paid for by the very companies they profess to examine. (pages 14-15)

Then Enron scandal and the crisis in mortgage-backed securities exposed the impotence of conventional accounting, auditing, and credit-rating practices. Other traditional watchdogs such as government agencies and investigative journalists are less equipped than ever to take on a financial sector with superior power, resources, and influence. (pages 17-18)

The US government launched an investigation into the raft of defaults, and in 1967, Senator Jacob Javits introduced legislation to develop stronger rules for governing the pension system. (page 24)

many firms that sell and manage IRAs and 401(k)s steer their customers into an investment designed specifically for people who don’t know what they’re doing – the mutual fund. (page 33)

Another issue is that 401(k) advisers and administrators often double as brokers. In exchange for managing a company’s 401(k) at a reduced cost, or for free, that administrator may be allowed to handpick the investments offered in the plan….IRA plans may also steer consumers into non-optimal investments. Fidelity offers a number of IRA plans that exempt customers from setup, maintenance, and transaction fees – as long as deposited funds are used to buy Fidelity mutual funds. (page 34)

Defined benefit pensions are rarely offered by new companies and startups today. Though the amount of assets held by these plans remains significant, especially in the government sector, the model creeps inevitably toward extinction. The risk and responsibility of saving for retirement has been shifted, perhaps permanently, from employers to employees. (page 35)

Or perhaps they thought that someone – their financial advisers, elected officials, or government regulators – would protect their interests and watch their backs. (page 38)

Dependent on their corporate masters, accounting firms, auditors, and credit-rating agencies have become a dangerous source of misinformation, and investors and their money managers should recognize this when basing investment decisions on their analyses. (page 50)

The truth is that no one is watching while investors sleep. (page 52)

The SEC, a US government agency, regulates RIAs. Brokers are supervised by FINRA, a self-regulating organization funded and managed by financial corporations. (page 61)

Indeed, fund managers make money whether they win or lose. Investors pay fees no matter what. This model has its roots in poorly designed regulations that distort the investor-financial adviser relationship with misguided incentives. Remarkably, one of the most significant laws governing today’s financial industry was passed more than seventy years ago. The Investment Advisers Act of 1940 forbids investment advisers from being compensated “based on a share of capital gains on, or capital appreciation of, the funds of a client.” This statue effectively prohibits investors from rewarding their money managers for investing their capital successfully. The rationale is that paying them based on the returns they generate would encourage irresponsible risk taking in order to maximize pay. Congress has exempted high-net-worth individuals and institutional investors from the Investment Advisers Act’s compensation provisions, however. The “performance fee” restriction leaves a loophole for “persons that the Commission determines do not need the protections” – that is, high-net-worth individuals and institutions -” who are financially experienced and able to bear the risks of performance fee arrangements.” This is why direct access to private equity and hedge funds is generally restricted to wealthy clients. (page 94-5)

hedge funds are directly accessible only to wealthy investors: individuals and organizations such as pension funds, mutual funds, and other hedge funds with a net worth of at least $1 million. (page 107)

The standard arrangement, known colloquially as “two and twenty,” features a management fee of 2 percent, which the fund collects simply for managing the money. There is also often an incentive fee that entitles the fund to pocket 20 percent (or more) of any returns it generates with an investor’s capital above some threshold. (page 107-8)

Hedge funds are extremely opaque and have no obligations to disclose details about fund management, holdings, fees, expenses, or performance. They are not required to maintain any level of liquidity. They are not compelled to make shares easily redeemable. They are not required to protect investors from conflicts of interest or even to price shares “fairly.” (page 109)

Excerpts from ‘Defined-Contribution Pensions Are Cost-Effective’

Governments that have considered switching to DC plans have encountered significant resistance from organized labor, managers of current public-retirement systems, and the cottage industry of consultants that supports public DB plans.

Perhaps the most vocal critic of DC plans is the National Institute for Retirement Security (NIRS), a Washington, D.C.–based nonprofit started by public DB plan administrators and associated inter- est groups. In 2008 and in 2014, NIRS published reports asserting that DB plans provide benefits at nearly half the cost of those provided by DC plans. Such advantages are inherent in the DB model, NIRS asserts—any plan sponsor who selects a DC plan over a DB plan is thus choosing an inferior benefit at higher cost.

This paper finds that claims that DB plans are more cost-effective are not supported by empirical evidence, are driven by false assumptions, and ignore pension debt as a significant cost driver for DB plans. Both theory and practice suggest that well- designed DC plans can deliver benefits at least as efficiently as DB plans.

The bottom line: most DC plan members now invest in well-designed, diversified, professionally managed in- vestment products—thereby mitigating many advantages that institutional investors formerly enjoyed.

There is also evidence that institutional investors are susceptible to shortcomings of their own. Recent papers have found that state and local pension plans tend to over-invest in in-state equities and alternative investments. Further, there is evidence that ac- counting rules for U.S. public pensions incentivize riskier investment behavior than do those of other countries. Pension-plan investments have become politicized, too: activists have demanded that pension plans invest in or divest from various companies— from producers of green energy to fossil fuels to weapons—for reasons unrelated to shareholder value.

NIRS’s 2014 paper acknowledges that DC plans can achieve investment-return results on par with DB plans but only, it asserts, in the rare case of the “ideal” DC plan. This paper finds that the results embodied in such a plan are far less rare than the NIRS assumes—in fact, for at least a decade, DC plans have delivered investment returns as good as those achieved by DB plans.

In practice, however, the fee estimates used by the NIRS and other DC plan critics generally under- state DB plan costs and/or dramatically overstate DC plan costs. Recent work has shown that DB plan fees, at least in the public sector, have increased significantly over the past decade, with average total cost roughly double the figure used in the NIRS papers. A Pew Charitable Trusts / Laura and John Arnold Foundation paper showed that public-sector DB plan investment practice has changed dramatically during the past 30 years: in 1952, only 4 percent of plan assets were invested in equities or alternatives; by 2012, more than 70 percent were.48
Within this shift toward risky assets, alternatives have recently begun to make up a larger share of public DB plan portfolios—more than doubling during 2006–12, from 11 percent to 23 percent. Public DB plan money-management fees have also grown significantly for statewide public plans— from approximately 28 basis points in 2006 to 37 basis points in 2012.

81 responses to this post.

  1. Posted by Anonymous on August 15, 2015 at 7:39 pm

    Accrued benefit not comparable but potential result on individuals’ retirement security very relevant to; then Bush and now other Republicans’ plan to privatize social security. Where would those retirees’ be today?

    Reply

  2. DC are best, safe, with S&P 500 mutual funds, or similar Wealthy want privatization so not to be at risk for higher taxes, even on ‘gains’.
    SS funds were used so as not to raise taxes on wealthy since about LBJ time.

    Reply

  3. Posted by Tough Love on August 15, 2015 at 8:35 pm

    Quoting …. “DC plans are the only alternative for public plans but their inherent transparency makes them anathema to public workers who would not be happy having everyone know the real cost of their benefits, politicians unhappy about having to pay that real cost, and actuaries unhappy about losing all those fees.”

    It’s much more than “transparency” and “know(ing) the real cost of their benefits” (sometimes so generous that an appropriately-determined Normal Cost is excess of a level annual 50% of pay for safety workers), it’s that Taxpayers would never allow such absurdly generous promises to be made if they knew how expensive they are, TYPICALLY providing retirement income 3x-4x greater in value at retirement than what they get, even for NON-safety Public Sector pensions ….. even if we had the money …. because they would be so eminently unfair to the Taxpayers that pay for almost all of it.

    Reply

    • Posted by Anonymous on August 15, 2015 at 9:34 pm

      Another specious reply, never validated, by TL. Just a paid political shill. Taxpayers allowed these promises through their political representatives using a model that was the norm for corporate America until recently. Both public and private DB pensions were overfunded until corporate America used pension funds for leveraged buyouts and governors cut taxes and stopped pension payments in vain attempts at some chimerical presidential run. Go to the SEC website and get a flavor for the pension benefits that corporate executives get. 3x – 4x is pissing in the wind nonsense. Enough of this. Tell your pimp you’ve worked your side of the street hard enough and give it a well deserved rest.

      Reply

      • Posted by Tough Love on August 15, 2015 at 10:45 pm

        Quoting ………. “Taxpayers allowed these promises through their political representatives using a model that was the norm for corporate America until recently.”

        Recently? IBM ended similar DB pension in the early 1990s, and today, VERY few exist.

        And your quoted sentence above is Baloney. The richest Private Sector Plans (granted by some of Americas Largest Corporation) were equivalent to the LEAST rich Public Sector Plans in place today. And today, only 6% of Private Sector workers are currently earning pension accruals in DB Plans of the type almost universal to ALL Public Sector workers …. which are always multiples more generous.

        It’s nothing but a decades-long financial “mugging” of Private Sector Taxpayers by the insatiably greedy Public Sector Unions/workers..

        Reply

        • Posted by Anonymous on August 16, 2015 at 11:23 am

          Recently !! And if the State of New Jersey had gone to the DC model then, workers would have modified behavior accordingly, Nothing you say makes sense. Just paid venom and slight of hand. Go back to whoever pays you. You are revealed !! The public pension was adequately funded to the time of Whitman when she reneged on required pension payments in a Whitman witless presidential bid. John Whitman gave her the model of raiding pension fund accounts like they were doing to finance LBOs. The pension fund beneficiaries got screwed while the corporate raiders got rich. God !! you are inane but worse you are inane, repetitive and persistent. Say something new. The mugging of taxpayers has gone on for centuries by insatiably greedy special interests, most of which operate sub rosa. I’ll reply for you – mug, greedy, insatiably, and to you ignorant, vacuous and without substance. Just shut up, please, whatever anyone believes, YOU have nothing of note to say.
          \

          Reply

          • Posted by Tough Love on August 16, 2015 at 12:56 pm

            Nothing I say makes sense ? ….. re-read MY comments, and then YOUR responses …..

            Your comments are nothing but personal attacks, and then bitching about the lack of full funding all while IGNORING that “funding” is A FUNCTION OF Plan “generosity”, and I have mathematically demonstrated that NJ’s Pension plans are 3 times (5 times for safety workers) more generous than those granted Private Sector workers retiring at the SAME age with the SAME pay, and the SAME years of service.

            While understandingly unpopular with Public Sector workers, Christie is right-on the money when he insists that the pension benefit levels of NJ’s Plans are simply too generous and must be reduced, and for the future service of all CURRENT (NOT just new) workers. This is not just my view, but the view of the NJ Pension Commission.

            Here’s a quote from Christie’s spokesperson (give it some serious thought):

            “The simple fact is this: the average NJEA member contributes $186,000 to their pension and health benefit costs over 30 years and takes out $2.5 million in benefits,” Sizemore said. “The math does not work and all the name calling in the world by NJEA leadership won’t change that fact.”

          • Posted by fouls123 on August 16, 2015 at 1:14 pm

            Amen.

          • Posted by S Moderation Douglas on August 16, 2015 at 1:52 pm

            “The simple fact is this: the average NJEA member contributes $186,000 to their pension and health benefit costs over 30 years and takes out $2.5 million in benefits,” Sizemore said. “The math does not work and all the name calling in the world by NJEA leadership won’t change that fact.”

            Sounds like something Christie would say.

            Apparently, someone does not understand the principle of deferred compensation.

            Still clueless after all these years.

          • “The simple fact is this: the average NJEA member contributes $186,000 to their pension and health benefit costs over 30 years and takes out $2.5 million in benefits,” Sizemore said. “The math does not work and all the name calling in the world by NJEA leadership won’t change that fact.”

            Sounds like Krazy KA…..

          • Posted by Tough Love on August 16, 2015 at 4:36 pm

            S Moderation Douglas,

            The problem isn’t that it’s “deferred compensation”, it’s that that “deferred compensation (their pensions and benefits) is so grossly excessive, that when added to their cash pay, their “Total Compensation” is (in NJ for all workers taken together) 23%-of-pay GREATER than their Private Sector counterparts.

            Unnecessary, unjust unfair (to Taxpayers who pay for almost ALL of it), and unsustainable.

          • Posted by S Moderation Douglas on August 16, 2015 at 6:44 pm

            Deja pooh.

      • Posted by fouls123 on August 16, 2015 at 1:16 pm

        Amen to Anonymous. You are exactly correct.

        Reply

        • Posted by S Moderation Douglas on August 16, 2015 at 2:40 pm

          Which one? Too many anonymous es on the board.
          ………………..
          Posted by Anonymous on August 16, 2015 at 2:29 pm

          Keep up the fight Tough Love—your pension arguments are correct
          …………………
          Or:

          Posted by Anonymous on August 15, 2015 at 10:35 pm

          Still the moronic idiot spewing 1% Tea Party like BS……Awaiting typical and predictable resonse……

          Reply

      • There is no question that a fully funded DB plan is superior to any except the most generously matched DC plan. But it is the funding that is the problem, and not just for public sector plans.

        Major corporations that used to sponsor the famous “non-contributory” DB plans started bailing out right after ERISA was passed in 1974. That’s because that law mandated all sorts of funding, accounting and vesting requirements that CA found unpalatable.

        And that is the same reason ERISA was never applied to Social Security or State pension plans: “pay as you go” plans were no longer allowed by ERISA as qualified plans and we all know that SS is the largest pay as you go (aka “Ponzi”) scheme in the world. Heaven forbid that Congress would require governmental plans to adhere to the same onerous requirements that they forced CA to.

        Reply

    • Posted by Anonymous on August 15, 2015 at 10:35 pm

      Still the moronic idiot spewing 1% Tea Party like BS……Awaiting typical and predictable resonse……

      Reply

      • Posted by Tough Love on August 15, 2015 at 10:47 pm

        Yup, see my above response above …… Typical, predictable, and ACCURATE.

        Reply

        • Posted by Anonymous on August 16, 2015 at 10:37 am

          Still the imbecile and as always spewing half truths!!

          Reply

        • Posted by Anonymous on August 16, 2015 at 2:01 pm

          Apparently PW’s do not understand that taxpayers no longer want to support them in retirement. PW’s should of gotten their money up front—ain’t gonna get it now.

          Reply

          • Posted by Anonymous on August 16, 2015 at 3:41 pm

            Bring it on and take it down, oh gotta bail out multi billion dollar Wall Street – yeah right brightest & best private smucktor:)

          • Posted by Anonymous on August 16, 2015 at 3:53 pm

            Sorry my bad, I meant trillions$$$$$$$$%%%%

          • Posted by Tough Love on August 16, 2015 at 5:00 pm

            True, and D-Day arrives within 5 years when the Pensions Plans run out of assets and hit Pay-Go.

            NO WAY will Taxpayers be ponying up an ADDITIONAL $6-$8 Billion annually to keep up payments to EXISTING retirees (let alone new ones) … and our Elected Officials will VERY quickly see the writing on the way, change sides, and throw the PWs “under the bus”.

          • If they attempted to get the extortionate demands defined by some on this thread as “deferred compensation” up front, they never would have been hired in the first place. Many PS workers are defined by the public at large as overpaid in current compensation let alone adding in the insane pension/deferred compensation (ha!) demands.

          • Posted by Tough Love on August 17, 2015 at 5:23 pm

            Quoting PSDrone ……………. “Many PS workers are defined by the public at large as overpaid in current compensation let alone adding in the insane pension/deferred compensation …”

            INDEED, and with the MOST egregious workers being Police Officers and paid Firefighters, with $125K BASE PAY salaries after just 5 years in NJ, and pensions & benefits which (when PROPERLY valued to fully fund them over their working careers) brings their “Total Annual Compensation” in excess of $200K. Absurd, completely absurd.

            And while non-safety worker Total Compensation is not quite so egregious, for all such workers taken together as a group, it exceeds that of COMPARABLE Private Sector workers in NJ by 23% (34% if the incremental value of the much greater Public Sector job security is included) per the AEI study previously discussed on this blog.

            Dear Private Sector Taxpayers ……. imagine how much better YOUR retirement would be if you had an additional 23% of pay (tax deferred, as are NJ’s grossly excessive Public Sector pensions) EVERY YEAR to save and invest over your entire career. And EXTRA $1 Million, maybe $2 Million ?

            DEMAND change …… it’s necessary, just, fair, and well overdue.

    • Posted by Charles on August 16, 2015 at 5:21 am

      DBs are good for employees and part of an entire package of salary and benefits. Go to DC and you will pay more in salary to employees to hire and keep them. The real culprits here are politicians who took pension holidays to pay for goodies for the taxpayers and now refuse to take responsibility. Quit blaming employees.

      Reply

      • Posted by Tough Love on August 16, 2015 at 1:05 pm

        Same BS as Anonymous (or BH ?, above)….. bitches about the lack of funding while conveniently ignoring that Public Sector DB pensions are always multiples greater in value at retirement than those of similarly situated Private Sector workers.

        If we eliminated (i.e., FROZE) these DB pensions and replaced them with DC Plans financially equal to those granted Private Sector workers, Cash Pay would likely go up for some jobs (PHDs and “Professionals” per the AEI study) and down for many others.

        But the net change in cash pay (in total for ALL jobs) would be minor ….. to reach equal Public/Private Sector “Total Compensation” ….. meaning that there would indeed be a HUGE financial benefit to Taxpayers from ending the current grossly excessive, unnecessary, unjust, and unfair (to Taxpayers) DB pension Plans.

        Reply

        • Posted by S Moderation Douglas on August 16, 2015 at 1:56 pm

          “Qu’ils mangent de la brioche”

          Reply

        • Posted by Anonymous on August 16, 2015 at 2:29 pm

          Keep up the fight Tough Love—your pension arguments are correct

          Reply

          • Posted by Anonymous on August 16, 2015 at 3:44 pm

            Yup STOP ALL corporate welfare NOW – just to be fair. Govt shouldn’t subsidize the cost of goods and services with tax breaks. Federal legislation should control and stop the State she’ll game.

          • Posted by Tough Love on August 16, 2015 at 6:25 pm

            Anon, I SUPPORT the goals you call for (“Corporate Welfare”) ….. as I do a FREEZE to ALL of the grossly excessive Public Sector pensions & benefits in place today.

            Lets get rid of ALL the special interests and self-dealing …. YOURs included …. and the USA would be FAR better off.

        • Posted by Anonymous on August 16, 2015 at 4:25 pm

          Looks like the truth the Tough Love speaks has really gotten under the skin of the public takers.

          Reply

          • Posted by Tough Love on August 16, 2015 at 5:07 pm

            Yup ….. giving up their HUGE compensation advantage the PWs have enjoyed for DECADES is a tough thing to accept, even though necessary, just, and “FAIR”.

  4. Posted by Javagold on August 15, 2015 at 11:28 pm

    DC is BS. The sooner it collapses the better.

    Reply

  5. Posted by Javagold on August 15, 2015 at 11:31 pm

    DB just hides the real costs….the public takers are just taking from their younger takers….the end of the ponzi pyramid is just about here.

    Reply

  6. Posted by Ted Leber on August 16, 2015 at 2:28 am

    Unless people really, really understand the costs to them over their working life–say 40 years–they just don’t get it. And supervisors that don’t get smart about costs aren’t doing their job for both their employers and their employees. This goes especially for those investing in 403bs where the costs are about 225 basis points. And the costs can go to 300 basis points (3%) when one considers the impact of all the hidden costs.

    Just compare 3% vs .20% or .10% and the lifetime loss will be close to 50%. Who can tolerate that kind of loss over a lifetime of investing?

    See http://www.401Kfee.com/how-much-are-high-fees-costing-you/
    Sincerely, Ted Leber tmleber1@comcast.net

    Reply

  7. Sad DB has come to this, from greed, politics. Was fine thru Florio, as Trenton ‘understood arithmetic’. Then, no fault of Mrs Whitman, just her ‘crew’ who saw power and enrichment…..along with all Trenton afterwards. Particularly disappointed by Don DiFrancesco, etc !
    Can be made much less expensive if all those who had their service time/pay monkeyed with would be dropped to level of common NJ State worker average ceiling (or less).
    If not, DC is only answer, as regular families here will not mortgage/sell their kitchens/baths,etc just to pay the high rollers.

    Reply

    • P.S. Let all NJ retirees use Medicare when of age, at own expense as rest of us. Under age can do ObamaCare, then hope for a one payer system improvement.

      Reply

      • Posted by Tough Love on August 16, 2015 at 5:10 pm

        Not to worry ….. when the Sh** hits the fan in just a few years as Pension Plan assets near ZERO, the rich retiree healthcare promises will be the first to be jettisoned.

        Reply

  8. Posted by Anonymous on August 16, 2015 at 3:48 pm

    Big talk behind the shroud of anonymity because so many of these private takers rely on government related contracts and public workers business. If you believe in your position come out of the closet, that’s about all anyone can give Trump credit.

    Reply

    • Posted by Tough Love on August 16, 2015 at 5:11 pm

      Amusing, a PUBLIC Sector worker ….. the ultimate in “takers” …. calling Private Sector workers such.

      Reply

  9. The Pew paper is put out by people who want to end DB plans. DC plans cost more and have no real investment strategies, this leaves people on their own.. When anyone peddles DC as superior to DB plans they are snake oil peddlers.

    Reply

    • Posted by Tough Love on August 16, 2015 at 5:28 pm

      There are some DB Plan advantages (primarily being the mortality cost sharing via life annuities), but even that is now becomming less material as 401K plans have begun to introduce annuitization options.

      DB vs DC cost (i.e., fees) differences are decreasing even faster, as 401K fees are now MUCH more transparent and with Plan sponsors insist on cheaper investment options (form investment providers) so as to avoid being sued by Plan participants.

      The one OVERRIDING DB/DC difference which simply CANNOT be overcome, and which (in the PUBLIC Sector arena) makes DC Plans FAR superior is that they COMPLETELY take away the ability of all the stakeholders (the Unions, the workers, the Plan administration, the actuaries, etc.) to game the system (screwing the Taxpayers) by vastly underestimating the TRUE expected cost of the promised pensions and handing the Taxpayers the bill ….. as is ROUTINE everywhere today.

      Reply

      • Perfect reasoning TL.
        DC ” COMPLETELY take away the ability of all the stakeholders (the Unions, the workers, the Plan administration, the actuaries, etc.) to game the system (screwing the Taxpayers) by vastly underestimating the TRUE expected cost of the promised pensions and handing the Taxpayers the bill “….Regards

        Reply

  10. Posted by S Moderation Douglas on August 16, 2015 at 5:12 pm

    “You can lie about the costs of DB plans since public workers are happy to believe the promises, politicians are happy to accept low-ball contribution amounts, and actuaries are happy to supply those phony numbers – for a fee.”

    Of course there is a huge argument about the “real” cost today to properly fund future pension payouts, mainly because of the discount rate disagreement.

    por ejemplo:  “know(ing) the real cost of their benefits” (sometimes so generous that an appropriately-determined Normal Cost is excess of a level annual 50% of pay for safety workers), ….”

    But there should not be a huge argument about what the true costs have been historically. Has anyone gone back over several decades, or several business cycles of “normal” recessions and recoveries to compute the actual contributions compared to the actual benefits paid out?

    Nowhere near 50%, I’m guessing.

    Of course:

    “Past performance is not an indicator of future returns.”

    but is a significant factor for projections.

    Reply

    • Posted by Tough Love on August 16, 2015 at 5:41 pm

      Quoting …. ” “know(ing) the real cost of their benefits” (sometimes so generous that an appropriately-determined Normal Cost is excess of a level annual 50% of pay for safety workers), ….”

      That above quote from me was referring to CA’s Safety workers pensions of 3% @50, and actually, it’s GREATER than a level annual 50% of pay to fully fund that pension over the careers of the workers using procedures and assumptions that the US Gov’t REQUIRES of Private Sector pension Plans … and also quite similar to the procedure than Moody’s now uses to determine Gov’t entity creditworthiness.

      Your argument to look back historically is wrong-thinking, because it’s a “heads” the PWs win, and “tails”, the Taxpayers lose.

      To avoid that …… at best Public Sector DB Plan liabilities should be discounted with CONSERVATIVE interest rates (e.g, no more than 4% today) and with benefits levels affordable with the attendant far greater contribution requirements (per $1 of benefits promised), and then, if and only if greater long-term returns emerge, the surplus generated form such higher investment returns should be share between the Taxpayers and the pension Plan participants.

      That’s called FAIR and Equal …. but greed not fair and equal drive 99% of PWs.

      Reply

      • Posted by Tough Love on August 16, 2015 at 6:07 pm

        By the way, what I described above is exactly how Life Insurance Company POLICYHOLDER dividends work. The Insurance policy is priced conservatively (to protect the financial well-being of the Ins. Co. should experience turn out to be below expectations ….. just as TAXPAYERS should be protected from pension Plan investment or mortality experience worse than assumed) and with an “illustrated” scale of expected (priced-for) Policy holder dividends. ACTUAL annual Policyholder dividends are than adjusted upward or downward to reflect actual invest & mortality experience as it is realized over time.

        Reply

    • Posted by Anonymous on August 17, 2015 at 9:05 am

      Public workers it’s your responsibility to know who in the “private sector” is with you or against you. Locally and if necessary nationally organize a boycott of ALL businesses, regardless of size, that support the destruction of your career and your family’s financial future. It’s simple, it’s us against them, there’s no middle ground!

      While the mantra here is even D’s won’t raise taxes, etc. they and we know what the D’s will propose a much more palatable solution than the R’s. Yeah that’s right, palatable from the public worker’s perspective.

      Oh is that a for sale sign I see going up? Like the spirit entities say on those paranormal shows, “get out, get out now”!

      Reply

      • Posted by Tough Love on August 17, 2015 at 9:15 am

        In some States/Cities with “moderate” Pension/Benefit Plan shortfalls, 20+ years to go before Plan assets are “expected” to run out, and growing economic bases, that (organizing a boycott …) may work for a while, but not in NJ with a stagnant economy, major companies leaving the States (and none moving in), and 5 … some say 10 … years to go before we hit pay-go.

        In NJ there are NO solutions that do not include VERY material reductions in pensions & benefits for the future service of all CURRENT workers. In NJ it’s 10% a political problem and 90% a MATH problem.

        Reply

      • Posted by Tough Love on August 17, 2015 at 9:48 am

        Lets be honest ……. in your mind, rightfully reducing FUTURE Service Public Sector “Total Compensation” (pay + pensions + benefits) to a level EQUAL to that of your Private Sector counterparts is ………….

        “destruction of your career and your family’s financial future”

        I call it greed great disdain for Private Sector Taxpayers.

        Reply

      • Posted by Anonymous on August 17, 2015 at 6:05 pm

        Give me a break—you have been promised too much and now it will be reduced. You aren’t special–get over yourself

        Reply

  11. Posted by Anonymous on August 17, 2015 at 11:25 am

    Step it up, put you and your business names to a P&B reform petition or crawl back under your million dollar rocks! Put you and yours livelihood on the line then we can sit down and have an honest discussion!

    Reply

    • Posted by Tough Love on August 17, 2015 at 1:21 pm

      There is no such thing as an “honest/productive” discussion with PW Unions that includes the CLEARLY needed and VERY material pension benefit level and retiree healthcare REDUCTIONS for the future service of all CURRENT workers. Eventually it will be forced upon PWs.

      I’m quite sure your Union-BOUGHT Democratic Legislators will lie and appease you with more false “promises” (simply to keep them in office a while longer), when it reality your promised grossly excessive pensions & benefits are on an unstoppable path to crash and burn.

      It’s a MATH problem.

      Reply

      • Posted by Anonymous on August 17, 2015 at 7:31 pm

        Are you talking about the math, according to you and yours, NJ’s grossly over compensated teachers teach – I guess that’s why the math doesn’t work!

        Reply

    • Posted by Tough Love on August 17, 2015 at 1:48 pm

      NJ’s GROSSLY EXCESSIVE Public Sector pension & benefit “promises” are the “Million Dollar Rocks” around the necks of Private Sector Taxpayers.

      Reply

      • Posted by Anonymous on August 17, 2015 at 7:54 pm

        Mugging, greedy excessive and so you drone on and on with your vacuous drivel occasionally revealing your true bent for its not all politicians that capture your ire but only the union bought Democratic ones. While the current governor gallivants around the nation, ignores local problems, subsidizes failed ventures in Atlantic City and brings a legacy of ratings downgrades for all his “claimed
        financial fixins”. Hug me a Democratic president, fly me to a Cowboy game and hire the lackey TLs of the world to close bridges and constantly post nonsense on blogs. For the integrity of our State and political system, of course !!

        Reply

        • Posted by Tough Love on August 17, 2015 at 8:46 pm

          A suggestion, if you’re counting on a NJ Public Sector pension and retiree healthcare benefits ………….

          Work up a Plan “B” for your retirement.

          Reply

          • Posted by Anonymous on August 17, 2015 at 9:57 pm

            Plan A & B in place for me, worthless ruminations in place for you. To be fair and equal.

  12. Posted by Anonymous on August 17, 2015 at 6:45 pm

    More Rebuplican BS, just like the anti public worker bloggers here;

    http://mobile.nytimes.com/2015/08/17/opinion/republicans-against-retirement.html?_r=0&referrer=

    Reply

    • Posted by Anonymous on August 17, 2015 at 8:36 pm

      You should pay close attention as you might learn something from republican BS

      Reply

    • Posted by Tough Love on August 17, 2015 at 8:50 pm

      “Anti public worker” means “FAIR and EQUAL” to anyone with a clear head and functioning brain.

      Reply

      • TL, let’s agree that while the NJ State Police pension scheme is outrageous, the most egregiously overpaid and over benefited PS drones in NJ are the “professional” firefighters of NJ. In most cases they lift weights, cook, watch football and work other “real” jobs to supplement their already overpaid selves since they only have real fires to fight about 2% of the time. If it was not for ambulance chasing 75% of them would be laid off. I know that BH would agree with all of this.

        Reply

        • Posted by Tough Love on August 17, 2015 at 11:34 pm

          With VERY few exceptions we need Volunteer Fire Dep’ts and a combination of volunteer and “some” paid EMTs (at 1/3 the current compensation of our grossly overpaid firefighters).

          Reply

          • Posted by Anonymous on August 18, 2015 at 6:54 am

            I’m laughing at you….. Not with you!!! Lol
            Volunteer firefighters didn’t last simply because they cannot keep pace with thousands of runs per year…. Jeesh!!! Sometimes you sound just dumb!!!
            Volunteers!!! Lol. Great people. But how can they respond to the average 22 calls per day?? That’s a career fire dept call volume!

          • Posted by Tough Love on August 18, 2015 at 11:20 am

            Bull ……. Sure there are a few Cities like Newark, Patterson and Jersey City that need paid FDs, but in 95+% of NJ there are less than 1 or 2 actual “fires” a month with the rest of the calls being “medical” issues and needing EMTS.

            And “Volunteer firefighters didn’t last” ? Sounds like you’re not even from NJ, as almost all of NJ is manned by “volunteer” Fire Departments.

          • Posted by BH on August 18, 2015 at 8:18 pm

            FYI…..like 85% of the nation is a volunteer fire service!!
            The reason some are not is simply because of the call volume. An average career dept does 5000-7000 runs per year…. How could a volunteer organization accomplish that?? This is why some fire departments, while once volunteer become career depts. But regardless what I say on the topic, it’s got nothing to do with the gibberish you and your 3 minions spew, nor will it make any difference on this anti union, and apparently, anti fire and police blog.
            So while the 3 or 4 of you do a virtual high five because you think you know what you’re talking about, the rest of the world goes out and does it!!!
            So go back to your crusade against labor and keep trying to lower the bar bringing everyone down to what you few think is fair and reasonable. I’m bored with it all already.

          • Posted by BH on August 18, 2015 at 8:25 pm

            And to add….. Volunteers, especially in NJ are on the decline. And when that happens, guess who picks up the slack?? That’s right… The career depts. because I certainly know the likes of you aren’t gonna do it. You’re a keyboard hero. Nothing but a jealous person hell bent on leveling the “competitive” playing field because you couldn’t do it. Everyone gets a trophy right??. Wish I can see the look on your face during the end game, as you tell public workers to prepare for plan b. Oh the karma will be wonderful.

          • Posted by Tough Love on August 18, 2015 at 8:38 pm

            BH,

            I seriously doubt that the average runs of all “career” Fire Departments is anywhere even remotely near 5000-7000 per year …. SOURCE please.

            When the Taxpayers ultimately get to vote on it, I’m quite certain that they will agree with ME that Public Sector pensions & benefits EQUAL TO (but not better) than what THEY typically get is indeed FAIR and REASONABLE…… and what unquestionably unreasonable is pensions & benefits 5 times greater in value at retirement as safety pensions routinely are today..

          • At least half of the fire departments in the state could be closed and no one would notice. Better to collect what would otherwise be spent on over equipped and over staffed fire houses and use the saved money to create an insurance fund to reimburse those who actually suffer property losses from fires.

            The current set up is no different than when construction was mostly of wood, there were few or no building codes and fire suppression/fire safety equipment did not exist.

            Between EMT’s and better trained LEO (paid more for double duty) most fire “type” emergencies can be handled. Since most fires involving houses are fully consumed before the fire department can even get there, we probably can do with only a large county fire force to address major fire emergencies.

            This whole thing needs 21st century thinking to address how things are now, not how they were in 1900.

        • Posted by Anonymous on August 18, 2015 at 6:55 am

          Why don’t you go do the job then if it’s so lucrative and easy??

          Reply

          • Posted by Tough Love on August 18, 2015 at 11:23 am

            Exercising one’s mind is more important for some, and can be more lucrative than any Gov’t job.

          • Posted by BH on August 18, 2015 at 8:21 pm

            “”More lucrative than a government job””??? Oh really??!!!
            Perhaps they should now attack you since theirs is not equal to yours?? Sound about right??? You continue to show your hand at every chance. Oh TL, how can anyone continue to take you serious??

          • Posted by Tough Love on August 18, 2015 at 8:47 pm

            The Taxpayers don’t pay ANY of my compensation ….. a free market determines that …. unlike in the Public Sector, where pensions & benefits greater that necessary, just, reasonable, fair (to Taxpayers), and sustainable are obtained by the Public Sector Unions’ BUYING the favorable votes of our self-serving Elected Officials with campaign contributions and election support.

          • Posted by S Moderation Douglas on August 18, 2015 at 9:03 pm

            Paranoia strikes deep. (For what it’s worth)

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