Only Way to Save Public Pensions

Kill Defined Benefit plans. They do not work when run by governments:
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The main reason being that there are no funding rules so these plans all morph into pay-as-you-go arrangements at a level of benefits that taxpayers cannot possibly afford to pay so the participants suffer.

This handy chart links to websites and papers (all worth a read) from 28 think tanks that basically agree with that assessment.The chart was put together by the National Conference on Public Employee Retirement Systems (NCPERS) “The Voice for Public Pensions” which is supported by corporations and, according to Union Watch, run by unions:

No report on NCPERS would be complete without documenting just how thoroughly it is dominated by public sector and union operatives. Their president “served 3 terms on the Chicago Fire Fighters Union Local 2 executive board, resulting in two decades of union leadership.” Their first vice president, a retired police officer, “served as the first woman president of her union, FOP Queen City Lodge No. 69, from 2005 through 2015.” Their second vice president “is currently the statewide president of AFSCME Council 67, representing well over 30,000 members in 21 separate political jurisdictions.” Their secretary “has more than 30 years of service as a Tulsa public employee.” Their treasurer “served as a firefighter for 41 years. During his career, he held offices on the board of the IAFF Local 58.” Their immediate past president “is the treasurer of the United Federation of Teachers (UFT), Local 2, American Federation of Teachers (AFT).”

That’s everyone. The entire management team of NCPERS. A government union controlled financial juggernaut, marching in lockstep with the most powerful players on Wall Street. The consequences are grim for the rest of us.

NCPERS, in their code of conduct, requires service providers to, among the usual ‘do-what-is-right’ provisions, “fully disclose all contributions made to entities enumerated in Schedule A that advocate for the diminishment of public defined benefit plans.” Schedule A is that chart with the 28 think tanks and NCPERS is looking to damage their funding because they, to varying degrees, put forth the very sensible proposition that Defined Benefit plans sponsored by governments do not work.

I am not on that list, nor do I get any funding, but here is my attempt to make that list:

NCPERS is a propaganda arm of a dysfunctional public union system that takes as gospel that promises of defined benefits at retirement will be kept even if only a fraction of the true cost of those benefits are being set aside.  They should be advocating for Defined Contribution plans where benefits (though not as obviously favoring the older participants who typically populate union hierarchy) will have to be paid in when promised and, outside of investment risk, there would be no ugly defaults.

NCPERS, based on their latest available 990 filing, pays well:

ncpers

They also provide a pension.  In fact, two pensions.  There is a Defined Benefit Plan established in 2007 and a 401(k) Plan established in 2006. As of 12/31/15 there were four participants in the Defined Benefit Plan (three of whom were active) and six participants in the 401(k) Plan (four active). However the bizarre twist here is that an organization that advocates for Defined Benefit plans in the public sector and decries all attempts at even a DB/DC hybrid funds the retirements of their own employees primarily through their 401(k) plan.

Of the total assets in both plans over 70% ($677,144 out of $926,211) was in the 401(k) plan.  The Defined Benefit Plan to which only $20,000 was deposited for 2015 – compared to $42,718 into the 401(k) – is not the main retirement vehicle and is currently 132% funded.  No issues for anyone at NCPERS with getting retirement plan money when the time comes….as there will be for the people NCPERS claims to advocate for.

29 responses to this post.

  1. Posted by Anonymous on December 21, 2016 at 2:19 pm

    Let’s redirect the Trump 5T tax cut, primarily for the top 1-2℅ of Americans?

    Reply

    • Posted by Anonymous on December 21, 2016 at 3:11 pm

      All of NJ is in that 1%….do the math …99% of American homeowners pay under $7,700 a year in property taxes .New Jersey average tax is $8,600 make us in the top 1% by far …

      Reply

      • Posted by Anonymous on December 22, 2016 at 9:05 pm

        Property taxes are in proportion to property value and only one type of tax. NJ has the best public schools in the US.

        Reply

    • Posted by Anonymous on December 22, 2016 at 3:13 pm

      Trumputin’s proposed tax cuts will increase the deficit, picking fights with China will cause an immediate impact of trade and the cost of imports, threatening to dismantle the multinational agreement for Iran will cause strain with our allies and playing footsy with Putin might cause foot lost. I can’t believe the Constitution hugging GOP has more respect for a dictator/thug than Obama. If Obama’s a “socialist” what is Trumputin and the new GOP, aka Gang of Putin. Putin should be charged with war crimes for Aleppo and Crimea. I don”t know who will protect workers, the Cabinet will be starting and putting out fires January 20th. Most of these people are old and weathered looking going in to the West Wing 6 mos in the will look like candidates for “botched”. Interesting.

      Reply

  2. True with respect to DB, but there’s just one teensy problem with shifting everyone onto DC: they also don’t work (but in different ways), and it therefore doesn’t relieve the political pressure for ad-hoc bailouts.

    In the words of Orszag (https://en.wikipedia.org/wiki/Peter_R._Orszag) and Stiglitz (https://en.wikipedia.org/wiki/Joseph_Stiglitz), “The extent of bailout politics in a private, DC system relative to a public, DB one is difficult to assess ex ante. The outcome depends on a complicated political dynamic…To what extent does any increased risk under a DC approach — and the related inability to spread risk across generations — increase the likelihood of a bailout? To what extent does the “privatized” nature of a private DC system insulate the government from pressure for bailouts? These are important questions, and worthy of further study. We submit that the answers are far from clear at this point.”

    Source: http://www.ssc.wisc.edu/~scholz/Teaching_742/Orszag-Stiglitz.pdf

    Reply

  3. Posted by nixit on December 21, 2016 at 3:44 pm

    There are a number of public sector unions that offer their own employees 401k’s, including the NEA and some of its affiliates.

    Reply

  4. Posted by Anonymous on December 21, 2016 at 7:43 pm

    Not to worry it’ll come back to bite most of the Trump supporters b/c they’re not all 1-2 ℅. Eventually the GOP steamroller policy will flatten them too! Obamacare for seniors, SS reform, tax cuts for the wealthy – you know how the story goes…..

    Reply

  5. Posted by friendofTR on December 21, 2016 at 9:45 pm

    OT: John: On the County Watchers site, re: position controls … Derek Armstead (Mayor of Linden) shows he is out or in? Armstead is listed on List 1. The reason I ask is that I heard Armstead was FIRED Runnells for deceptive time sheets. And it was my understanding that he worked for the County and then transferred to Runnels,

    Bottom line: Is Armstead hired by the County or his position was eliminated?

    Reply

  6. ponzi schemes allowed to exist because of public corruption.

    end defined benefits

    Reply

  7. Posted by Richard on December 22, 2016 at 11:41 am

    Everybody blames the unions or the politicians or public employees at large for this mess but few of them really understand the ins and outs of how pension systems work. IMO, a significant amount of blame accrues to the staff of pension systems. The indictment in NY was good but mostly the problem is more subtle than that.

    Reply

    • The unions/politicians/public-employees each understand their own narrow interests very clearly and believe in the ‘someone-else-will-pay’ principle, so they quite reasonably don’t see the need to bother themselves with the ins-and-outs of pensions theory. Too much oh-so-complicated math, with no reason to waste their time on it.

      And the pension-systems-staff: they also understand their interests, as in the immediate benefits to them of getting to keep their job by not playing canary-in-coal-mine, versus the sometime-far-far-away costs, to be borne by others, when the system goes kaput…John B’s analysis of the cabal-of-actuaries is spot-on

      Reply

      • Posted by Anonymous on December 22, 2016 at 3:16 pm

        That’s bs union workers simple want decent wages, workplace safety and their pensions protected.

        Reply

        • Posted by Anonymous on December 22, 2016 at 7:37 pm

          The “average” state worker is not thinking like an actuary, or even a politician. They (we) do not glorify or otherwise understate our benefits or obligations. Instead, in good faith, we negotiate and compromise a “deal” with the powers that be. We call that a “contract”. We did what we agreed upon, and now you should (must) do the same! Can’t afford it? F*U! You said you could at the time. (the same time i mortgaged my house to pay for my kid’s college tuition because you “promised me” a pension I could count (on). This is all B*Sh*T! The legislature always “binds” the citizens to pay taxes by passing legislation. This is not new territory here. PAY UP!!! I did my time under OUR agreement, now it’s time for you to do yours’!!

          Reply

        • @Anonymous: “…simply want decent wages, safety, pensions…”

          That’s exactly my point: Of course they want what’s in their interests. Everybody does.

          But this is no longer a rounding error in the state budget. Now there’s a real tension between retirees expecting to live the high life on promises made by long-ago politicians, and imposing real economic damage on people who never had a say (because many weren’t even born at the time).

          It’s a genuinely difficult problem.

          Reply

          • Posted by Anonymous on December 23, 2016 at 8:11 am

            https://www.google.com/amp/s/amp.businessinsider.com/us-government-7-trillion-pension-shortfall-2016-4?client=ms-android-huawei

            @NY the buck doesn’t stop with the States and so it goes…… I know but not the military, besides the Feds can just print money. IF printing money for Fed pension deficit then why not the States? Buy in is States give up benefit designation and it’s determined by or mirrored after the Fed’s system. States don’t want to comply then they’re on their own.

          • Posted by dentss dunnigan on December 23, 2016 at 9:10 am

            Yes the states can print their own money …..It’s called an IOU’s….to be in pensioners mailboxes shortly ….Oh they want money for that they can sell the IOU’s on the open market for whatever they can get

          • Posted by Anonymous on December 23, 2016 at 9:17 am

            Don’t be stingy DD after all it’s the season for giving…..IOU’s for all bondholders, vendors, etc.
            I like to share.

          • Posted by dentss dunnigan on December 23, 2016 at 11:35 am

            Debt holders will be left out in the cold ,just like every class of GM bondholders were ….where as pensions are supposidly iou’s that were promised so therefor can’t be discharged ….until they can be

        • Posted by PS Drone on December 26, 2016 at 5:57 pm

          And to retire at age 55 after a whole 30 years of service and begin collecting immediately for a 30 to 40 year “retirement”. Guess what: it DOESN’T WORK.

          Reply

  8. Posted by Anonymous on December 23, 2016 at 7:04 am

    Santa Claus scheduled to visit NJ’s pension funds, will they be on the naughty or nice list?

    Reply

  9. Posted by Anonymous on December 23, 2016 at 7:25 am

    He’s making a budget
    He’s checking it twice
    He’s gonna find your approp to cut
    Christie Claus just LIV’d the pensions

    TBC

    Reply

  10. […] doing the blog on the hypocrisy of the National Conference on Public Employee Retirement Systems (NCPERS) […]

    Reply

  11. […] has a similar agenda and funding source to NPPC and the report mentioned includes this explanation of their […]

    Reply

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