When pensions implode?

Here at JS we study economics, the phony science, and that includes studying the irresponsible economic behavior of people who believe in Tinker Bell and the Tooth Fairy–politicians and public employee unions in bed and at the table when new benefits are promised. Funny thing, the taxpayers are never offered a place in the bed or at the table.

Just the bill for the bail out.

When I was a law student I took a seminar course (small group) on Pensions and Benefits and a focus on the Law called ERISA that governed the conduct of pensions.

I thought the rules were pretty plain–you had to provide for proper funding because if you participated, the taxpayer would be on the hook for a bad outcome.

Which brings us to the hundreds of billions in public employee pension liabilities that are unfunded–get the picture.

Zip, nada in the piggy bank–lots of promises made, no money.

The public employee union benefits programs that are defined by the contributions don’t have a way of being irresponsible. What is in the fund defines the benefits.

On the other hand the big problem is defined benefits plans that could cost variable amounts depending on the persons drawing down and the benefits agreed to that are variable.

Here is another essay on the problem.

We have an archive, with a lot of juicy papers by experts on unfunded liabilities.


7 responses to “When pensions implode?

  1. GoneWithTheWind

    I’m not a fan of unions or overpaid public workers. But Our state pension system is in trouble and I can give you the three top reasons:
    1. The legislature requires the employee contribution to be collected and invested in the month it is due but allows the states matching contribution to be deferred for years/decades. Thus the investment doubles every 7-10 years which doubles what the state eventually has to contribute. When that bill comes due the politicians and pundits act as though that extra cost is due to excessive retirements.
    2. The police and firemen get to retire early (8 years early I think) but there is no provision for them to pay more or for the state to pay more to provide this windfall. Instead it comes from the general retirement system and places an unearned burden on that system which again the state must (by law) pay for but not until it hits the fan and becomes a political football once again portrayed and a retirement system that is too generous.
    3. Some workers get to cash in by having been in the system for years but magically spending their last three years at a higher pay grade and thus receiving a higher retirement. In most of these cases these “lucky” individuals are the beneficiaries of a political job greased by a legislator for favors not defined. Again the rest of the retirees must pay the difference and the state as well has to pick up the tab for their share.

    None of those problems are the result of the unions.

    • marritott north it is .

      I took my first recertification exam for emergency medicine at the Marriott north and served as an examiner for the oral exams at he marriott north.

      ok with me.

      John Dale Dunn MD JD Consultant Emergency Services/Peer Review Civilian Faculty, Emergency Medicine Residency Carl R. Darnall Army Med Center Fort Hood, Texas Medical Officer, Sheriff Bobby Grubbs Brown County, Texas 325 784 6697 (h) 642 5073 (c)

    • How is this for a reason that government employee pensions are in trouble: the “bargaining” that takes place between the unions and the politicians is a cruel joke. Laid bare, the politicians grant unrealistic and economically impossible benefits in exchange for campaign contributions from the unions. To think that none of the rules and practices in place are due to union lobbying is naive in the extreme. To say that “the state has to pick up the tab” , implying that we should feel somewhat sorry for the poor state is a typical example of misdirection. Of course it is (always) the taxpayers that pick up the tab and the politicians pay nothing; indeed they profit greatly from the campaign contributions and other favors bestowed upon them by the union lobbyists.

  2. Hey Gone–

    Are your really trying to tell me the unions are innocent? REALLY?

    • GoneWithTheWind

      No. The unions have a lot of responsibility for he overall costs of employees and that includes excessive salaries and benefits.
      The cost of retirement is much more complicated and much of that is out of the control of the unions. typically the employee pays 6% of their wages into the retirement system and the employer matches it. Typically the money is invested and over time grows to about $200,000 for the employee contribution and about $200,000 for the employers contribution. But the actual contribution into the fund my have been only $50,000 by the employee over 35 years or so. So you can see that if the employer did not contribute as it came due that they end up paying in four times what they should have. When this happens no one says the reason the benefits cost so much is because the employer used the money budgeted for retirement for something else. So you are left/led to believe the excessive costs must mean the retirement system is too generous. But most retirees receive a pension based on a simple calculation of what they have in their account (including the full amount the state owes) times what the fund managers think they can earn divided by the retirees life expectancy. The shortfall is 100% the fault of the government, not the retirement system, not the retiree.

  3. When Kennedy allowed unions into gov’t I remember the school teachers striking. The beginning of the end. Just like the car industry. Give them everything they want, the politicians say, and they’ll vote for us. Ergo, 100% pay while the rest of us live on social security. I hate to pay my outrageous school taxes ($4,000 yearly for a $195,000 house) because I know it’s not going to the kids, it’s going to the retirees.

  4. “…economics, the phony science…”

    Really? Still? Knock it off already.

    From Dictionary.com


    1. a branch of knowledge or study dealing with a body of facts or truths systematically arranged and showing the operation of general laws:
    the mathematical sciences.

    2. systematic knowledge of the physical or material world gained through observation and experimentation.

    3. any of the branches of natural or physical science.

    4. systematized knowledge in general.

    5. knowledge, as of facts or principles; knowledge gained by systematic study.

    6. a particular branch of knowledge.

    7. skill, especially reflecting a precise application of facts or principles; proficiency.

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