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View Diary: Orr freezes Detroit pensions, then stays action (47 comments)

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  •  Theoretically that is how it is supposed to work (2+ / 0-)
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    AlexDrew, Sparhawk


    (1)  Sometimes jurisdictions can and do skip "required" pension payments.  This usually tends to be states as opposed to other jurisdictions as state legislatures can generally authorize this.

    (2)  Those actuarially derived amounts are based on a number of assumptions.  And the actuaries making the assumptions are hired, ultimately by elected officials (and in some cases union leaders) who want those amounts to look smaller so there is a strong incentive to choose the assumptions that make the contribution smaller even if those assumptions are not the most realistic and later turn out to be false.

    (3) In some jurisdictions, only the pension fund is liable for pensions.  In those cases, the effect of 1 and 2 is to hurt the pensioners and you are correct anyway.

    In other jurisdictions, the jurisdiction is liable and in those cases the future taxpayers are on the hook.

    •  No offense (1+ / 0-)
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      But there is much past history with Sparhawk on this particular issue.

      I'm well aware of the items you point out, but since there is past discussion between the two of us, my response to him was simplified, just as his "future taxpayers" nonsense is an oversimplification of the exceptions you point out.

      Point being with the oversimplification:  the vast majority of the principle for a pensioner in a properly run and properly funded pension plan will come from payments made by the employer during their working career.

      Sparhawks comments attempt to conflate an exception (a shortage of funding that needs to be made up due to market losses) with the rule (most if not all funds are paid during the employees working career barring any unforeseen or unusual circumstances or losses to the trust fund).

      Again, this isn't the first time he and I have had this go around - hence detail didn't seem to be essential.

      •  The exception is the problem (0+ / 0-)

        If you stick to the "rule" and explicitly outlaw the "exception" I have no problem with pension programs.

        The public must not be put on the hook for future pension obligations. Trust fund shortfalls in all cases should fall on retiree benefits. Such a rule would force public employee organizations to be absolutely honest about rate or return calculations.

        Additionally, under the "rule" things like the Detroit bankruptcy cannot happen. All the bankruptcy might result in is a discontinuance of the pension plan, but benefits will be preserved because all funds are in the pool already.

        (-5.50,-6.67): Left Libertarian
        Leadership doesn't mean taking a straw poll and then just throwing up your hands. -Jyrinx

        by Sparhawk on Sat Jan 11, 2014 at 07:48:39 AM PST

        [ Parent ]

        •  Again Sparhawk (0+ / 0-)

          You are entitled to your opinion, misinformed as it may be.

          In the overall history of pensions as a retirement vehicle in this nation, there are almost as many examples of pensions becoming "overfunded" during the workers careers - leaving a cushion for losses on bad markets - as there are bad markets reducing principle in a way that requires an actuarial change in contribution rates upward.  

          Properly run, funded, and managed pensions aren't generally that problematic.  The problem seen with pensions - public or private - is when they are mismanaged by poor investment managers and/or underfunded.  Practically all "bad" pensions can be traced back to that.  The outlier you keep bringing up goes right back to those issues - underfund it in good times, thinking the markets will make up for monies not put in, or get some jagoff fund manager not properly managing the money - and problems result.

          The reality is that long-term pension employer contributions on a properly run and managed pension plan don't cost much more than a fairly generous 401k match.  Long term average on New Yorks plan - even considering the recession - is slightly northward of 7% of salary.

          Since I already know your opinion, unless you have anything factual and not opinion to add, I think we're done here.

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