Yes, Rescuing Pensions Will Destroy Them

On the Brookings website Joshua Gothbaum, former head of the PBGC, argues the opposite believing:

  • Employers in multiemployer plans will not withdraw if they do not have to pay withdrawal liabilities,
  • State and local plans will not be in line for similar bailouts, and
  • Congress will “probably not” let plans get into trouble again.

All debatable points but what is incontrovertible:

A bailout mechanism is now in place and will be activated when enough politicians are bribed to act on behalf of:

  • Multiemployer plans who do not meet the first set of criteria,
  • Single Employer plans where participants have had their benefits cut in distress terminations,
  • Church plans, many of whom are already paygo,
  • Public Pension plans, and of course,
  • Social Security.

41 responses to this post.

  1. Posted by Tough Love on April 5, 2021 at 1:19 pm

    Off topic ……………

    Opinion piece: “Marin Voice: Taxpayers should demand limits to how much we pay for public pensions ”

    Yes, it’s an OPINION piece by Bob Bunnell, a founding member of Citizens for Sustainable Pension Plans. But he is also VERY KNOWLEDGEABLE, being pension manager for a third-party administrator in large private union pension plans across Northern California.

    https://www.marinij.com/2021/04/04/marin-voice-taxpayers-should-demand-limits-to-how-much-we-pay-for-public-pensions/
    —————————–

    I couldn’t have stated it ……… ALL OF IT …….. any better or more accurately.

    —————————-

    You see Stephen ………. some do “get it”.

    Reply

    • Posted by A on April 5, 2021 at 2:03 pm

      There is a cure for “it”.

      Probably.

      Reply

      • Posted by Rex the Wonder Dog!๐Ÿถ๐Ÿถ๐Ÿถ๐Ÿพ๐Ÿพ๐Ÿพ on April 8, 2021 at 12:31 pm

        There is a cure for โ€œitโ€.

        Probably.
        In your case Monkey Boi it is a brain transplant ๐Ÿ’๐Ÿ’๐Ÿ’

        Reply

    • Posted by E on April 5, 2021 at 2:49 pm

      Sounds like a stroll down memory lane for a guy who will benefit from selling his house for much higher than he bought it. ๐Ÿคทโ€โ™‚๏ธ
      He shouldโ€™ve taken the police test when he had the chance. Bet he would sing a different tune if he had gotten on. Lol.

      Reply

    • Posted by A on April 5, 2021 at 5:52 pm

      For an old guy, tired of lawn work, pool maintenance, utility bills, etc. I just calculated that if we sold our home and invest the equity, we could pay rent on a 2 bed, 2 bath unit in a good senior community for at least five years.
      Now to convince the wife.

      Reply

  2. FFS, how will Congress “not allow” MEPs to get into trouble again?

    Of course they will. There’s nothing Congress is passing or is going to pass that will get MEPs fully-funded. They didn’t even shovel enough $$ at the MEPs to fill the current holes.

    Reply

    • Posted by Rex the Wonder Dog!๐Ÿถ๐Ÿถ๐Ÿถ๐Ÿพ๐Ÿพ๐Ÿพ on April 5, 2021 at 3:14 pm

      FFS, how will Congress โ€œnot allowโ€ MEPs to get into trouble again?

      Of course they will. Thereโ€™s nothing Congress is passing or is going to pass that will get MEPs fully-funded. They didnโ€™t even shovel enough $$ at the MEPs to fill the current holes.
      Isn’t this the very definition of “Institutionalized Fraud”?

      Reply

    • Posted by Rex the Wonder Dog!๐Ÿถ๐Ÿถ๐Ÿถ๐Ÿพ๐Ÿพ๐Ÿพ on April 5, 2021 at 3:15 pm

      Hey Mary Pat, me and you are the only Kool Kats ๐Ÿฑ๐Ÿฑ๐Ÿฑhere who have their very own avatar thumb nail ๐Ÿ‘๐Ÿ‘๐Ÿ‘

      Reply

  3. Posted by A on April 5, 2021 at 1:55 pm

    Actually, kind off on topic, isn’t it?

    “We have seen taxpayer-required contributions rise to exorbitant levels, as shown by the following entities of the Marin County Employees Retirement Association (MCERA): 63% of payroll for the City of San Rafael: ; 48% of payroll for the Novato Fire Department and 25% of payroll for the County of Marin.”

    The very knowledgeable expert should know, and not mislead, that those rising costs are not the rising cost of pensions. They are the rising cost of —not— contributing on schedule.

    “My private industry employer offers a 50% employer match on the first 6% that I contribute from my salary. Thus, the maximum annual employer contribution is 3% of payroll. This is a typical private industry employer contribution 401(k) scenario. In addition, many private employers (including mine) suspended the employer match during the pandemic.”

    Even the dog knows, 3% of payroll in a 401(k) is not typical, and actually not relevant. Most private employers don’t contribute anything other than SS.

    Reply

    • Posted by Tough Love on April 5, 2021 at 2:39 pm

      Quoting Stephen ………….

      “The very knowledgeable expert should know, and not mislead, that those rising costs are not the rising cost of pensions. They are the rising cost of โ€”notโ€” contributing on schedule.

      The rising costs are PARTLY partly due to paying less than the ARCs (IF they are shorting them), but they are ALSO (and materially) due to:

      (a) endless plan changes (such as re-categorizing workers into higher-pension categories). The Public Sector Unions ROUTINELY bring up dozens of cost-increasing pension proposals every year ….. many of which ultimately get put in place.

      (b) outright pension-benefit increases in value, either via formula-increase or changes in plan provisions ……… and often RETROACTIVELY applied, creating an immediate and material unfunded liability, the cost of which typically falls 100% on the Taxpayers.

      (c) valuing plan liabilities and performing funding calculations using woefully to high interest rates ….. optimistic/aspirational/risk-ignoring. They do this to make it APPEAR that the promised Public Sector pensions will cost the Taxpayers less than the best estimate of such costs. Over the long term this invariably results in unfunded liabilities and hence increased contribution requirements, TOTALLY un-associated with shorting the ARC.
      ————————–

      Ok ………… so the typical Private Sector Taxpayer DOESN’T even get an annual 3%-of-pay into a retirement Security Plan from his/her employer.

      All the MORE reason the end the THEFT associated with Gov’t Agencies FORCING Taxpayers to so OVER-Compensate Public Sector workers via their granting of ludicrously excessive (and hence ludicrously COSTLY) pension & benefits.

      ————————

      Bob Bunnell described the current structure very accurately and with statements of fact, not the BS, distortions, misinformation, omissions of material facts, and outright lies that is all we hear from you.

      Reply

      • Posted by A on April 5, 2021 at 6:06 pm

        “The rising costs are PARTLY partly due to paying less than the ARCs…”

        PARTLY my arse. In most pension plans in the U.S. , the unfunded liability costs are either more, or much more, than normal costs, even if normal costs were properly, conservatively, calculated.

        And growing! BOB BUNNELL surely knows this.

        Reply

        • Posted by Tough Love on April 8, 2021 at 2:00 pm

          If Public Sector pensions promises were NEVER excessive, every PAST year’s Normal Cost would be lower ….. MUCH lower if Public Sector DB pension Plans were EQUAL in generosity to what Private Sector typically workers get via employer 401K Plan contributions ………….. and Unfunded liabilities would ALSO be MUCH lower …. and possibly ZERO, because Taxpayers in many states & Cities (even NJ) have likely ALREADY contributed enough over the years to FULLY FUND a pension with a generosity level EQUAL TO (but no greater than) what Private Sector workers typically get in retirement security from their employers.

          Remember ……….. just the level annual NORMAL COST of NJ Police pensions are 10+ times greater than the roughly 4%-of-pay that is on the high end of what Private Sector workers typically get in employer 401K Plan contributions. And for NJ’s non-Safety works it’s 5+ times greater.

          Taxpayers are ripped-off BIGTIME !

          Reply

      • Posted by E on April 5, 2021 at 2:53 pm

        If Iโ€™m a world class baseball player, I can expect to make millions. If Iโ€™m a good surgeon, I can also expect to do exceptionally well. If Iโ€™m a fast food worker I can expect to make up to $15 an hour. If Iโ€™m a blowhard finance lady, I can expect to work from home and have a very soft schedule. Allowing me oodles of free time to ogle the pool boy when he comes. And if Iโ€™m a police officer, I can expect a pension. ๐Ÿ˜‰๐Ÿ˜‰ ainโ€™t that right friend?

        Reply

        • Posted by Tough Love on April 5, 2021 at 3:18 pm

          If I’m a northern NJ bedroom community Police Officer, I can expect to get:

          (a) VERY VERY high wages (your BASE PAY reach $155K yet ?), WAY more than Private Sector workers in jobs that require reasonably comparable experience, education, skills, and knowledge (even if in a different field),

          (b) get paid overtime for EVERY hour over scheduled time, while Private Sector workers (by LAW) don’t get overtime and when in managerial positions ROUTINELY work well more than 40 hour weeks w/o ANY additional pay

          (c) get do-nothing constructions site gigs where they’re paid $120-$125/hr (with a 4-hour minimum !) for RARELY doing anything but sit in your cruiser, distract those (mostly Utility workers) actually trying to accomplish something, or stare at your cell phone

          (d) get “Platinum+” healthcare while Active that for Family coverage has a total cost in excess of $35K /yr, with Taxpayers contributing about 2/3 of that amount

          (e) get “Platinum+” Retiree Healthcare coverage FREE (to YOU) but with a TRUE cost WELL ABOVE the $35K cost for Actives (because you’re now in the old-foggy group with greater healthcare needs)

          (f) get a DB pension SO LUDICROUSLY GENEROUS that if valued properly, to fully cover just the Plan’s NORMAL COST over your working career, requires a level annual TAXPAYER-Share of the total cost contribution of 40%-of-pay ……….. more than 10 TIMES (yes, 10 TIMES) the retirement security contributions that is all Private Sector workers often get from their employers into a 401K Plan.
          —————————————-
          —————————————-

          How do you spell ……….. MOOCHERS

          Reply

          • Posted by E on April 5, 2021 at 6:37 pm

            Old foggy group???

            And yes. Iโ€™m at $160k plus OT. And pending a promo hopefully in sept. Worst case dec.
            when is the pool boy cmon to open the pool? About a month from now? ๐Ÿ˜‰๐Ÿ˜‰

            And we may stare at our phones, but we never distract the utility workers. Lol.

            Reply

        • Posted by Rex the Wonder Dog!๐Ÿถ๐Ÿถ๐Ÿถ๐Ÿพ๐Ÿพ๐Ÿพ on April 5, 2021 at 3:20 pm

          If Iโ€™m a blowhard finance lady, I can expect to work from home and have a very soft schedule. Allowing me oodles of free time to ogle the pool boy when he comes.

          LOL@ “ogle the pool boy” ๐Ÿค๐Ÿค๐Ÿค

          Reply

        • Posted by A on April 5, 2021 at 3:47 pm

          Hell’s bells!

          I DON’T EVEN HAVE A POOL BOY!

          This time of year, with trees shedding, I have to actually watch my pool vacuum so it doesn’t clog up. I watch while I am mowing and edging, because I CAN’T AFFORD LAWN CARE EITHER!

          Do you have a problem with EQUAL?

          Reply

          • Posted by Tough Love on April 5, 2021 at 3:55 pm

            Tell E that I have neither a pool or a pool-boy. Not even a hot tub.

            But I do have someone cut my grass.

            Reply

          • Posted by E on April 5, 2021 at 6:39 pm

            Awww shucks. I like the thought of you lounging poolside relaxing, but then getting uptight thinking about my pension. ๐Ÿ˜Ž

            Reply

          • Posted by Tough Love on April 5, 2021 at 7:09 pm

            I like the thought of you forgetting, and bringing that AR-15 with the 30 round clips into NJ (Oooophs) ๐Ÿ™‚ ๐Ÿ™‚ ๐Ÿ™‚

            Reply

          • Posted by E on April 5, 2021 at 10:21 pm

            Lol. I left them in PA. (I wouldnโ€™t put in writing if I did in fact bring them back to NJ) but they are out there where they belong. I like the comeback tho. ๐Ÿ˜‰
            Isnโ€™t it nice being friends๐Ÿ™‚
            Sorry Rex, the bromance is back on.

            Reply

          • Posted by NJ2AZ on April 5, 2021 at 10:32 pm

            E: don’t you get a carveout for those things anyway? I thought they always exempted the police from every cockamamie gun law so they can get them on board

            Reply

          • Posted by Tough Love on April 5, 2021 at 11:12 pm

            E,

            Heard you’re lakeside in PA ……….. that Ar-15 and 30 round clips will come in handy when the zombie apocalypse begins (or the Lochness monster appears).

            Reply

    • Posted by A on April 5, 2021 at 3:37 pm

      “(a) endless plan changes ”
      “(b) outright pension-benefit increases in value, ”
      ” the cost of which typically falls 100% on the Taxpayers.”

      You are stuck in the past, Jack. That was then, this is now. The trend for at least the last ten years has been to reduce pension formulas and increase employee contributions. Not enough? Don’t worry, the pendulum swings both ways. It may get worse before it gets better.
      MPC cited a report: “Out of Balance? Comparing Public and Private Sector Compensation over 20 Years
      John Heywood Keith Bender”. As I recall, when I cited the same report, you did not approve. “Too old”. (2010)

      Too bad, โ€œThose who cannot remember the past… etc.”

      The “advantage” ebbs and flows, and reverses itself, due to who knows what external or internal forces.

      Quoting TL…
      “While Iโ€™m unconvinced that Final Average salary DB Plans can work (AT ALL) in the State and Local Public Sector setting…”
      ( Tough Love on April 5, 2021 )

      A lot of people agree with you on that. And the claim that Public pensions/pay are excessive. Many others do not agree. Put your best case forward. So far, You are not very convincing, IMHO.

      Reply

  4. Posted by Tough Love on April 5, 2021 at 3:53 pm

    Quoting Stephen Douglas …………..

    “The trend for at least the last ten years has been to reduce pension formulas and increase employee contributions. Not enough? ”

    No Stephen those changes are WOEFULLY inadequate both in amount (to even remotely get close to achieving the appropriate goal of EQUAL Private/Public Sector total compensation) AND that VERY few changes apply to to future service of those already working …….. leaving FUTURE accruals (for over 25 years for some) to remain on the overly-generous and unaffordabe basis.

    Reply

  5. Posted by A on April 5, 2021 at 3:59 pm

    On topic…

    For the record, not that anyone cares, I do not agree with the present bailout either.

    As with Biggs’ “Prelude to a State Pension Bailout”…

    Dang, WSJ paywall again. From memory, “If you can’t do it (DB pension) right, don’t do it at all.”

    Any bailout at all should be contingent on mandatory proper future governance. And it is perfectly acceptable to reduce pensions in the most dire cases (New Jersey, Illinois, or MEP) including reductions for current retirees*

    * Except for those over 80. One must draw the line. (Don’t ask me how old I am. That would be rude.)

    Reply

  6. Posted by MJF on April 5, 2021 at 4:42 pm

    “Proper governance” Were you the Joker in a Batman film? So how old are you? Just asking,,,hehe.

    Reply

  7. Posted by A on April 5, 2021 at 4:59 pm

    Governance is a word I learned recently, probably right here on Burypensions.

    For most of the suggested possible public sector pension reductions, “they” usually say not to reduce pensions under $50,000 a year.* For private sector, I believe reductions for those over 80 are prohibited. Either way, I am (almost) untouchable.

    *Actually not logical, in my opinion. Could be much lower, depending on circumstances.

    Reply

    • Posted by Tough Love on April 5, 2021 at 7:06 pm

      In the Private Sector, if a Single employer Plan gets turned over to the PBGC as part of a bankruptcy (or other reasons) the BPGC has a maximum annual payout based on one’s age at the time the PBGC makes it first payment to you.

      In 2021, if that age is 65, the maximum MONTHLY payout (for a single life annuity) is $6,034.09. It goes up to $18,343.63 at age 75. I’m not aware of ANY limitation in cuts based upon age, but their certainly aren’t many 75 years olds in the Private Sector with qualified DB pensions with monthly payouts of over $18,343.63/mo (as “qualified” pensions are limited in amount).

      Reply

      • Posted by Rex the Wonder Dog!๐Ÿถ๐Ÿถ๐Ÿถ๐Ÿพ๐Ÿพ๐Ÿพ on April 9, 2021 at 4:22 pm

        In 2021, if that age is 65, the maximum MONTHLY payout (for a single life annuity) is $6,034.09
        If it IS this high, it is TOO high, this is $72K/year.

        Reply

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