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Desperate Pension Funds Mull Buyouts
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  • Andrew Allison

    The outcome is going to be very interesting. Unions have consistently demonstrated that they will fight to retain for current retirees benefits which can’t possibly be paid to future retirees. On the other hand, experience tells us that most people given a choice between a lump sum and an “annuity” (what their current payments represent) would choose the lump sum.

    • ljgude

      A bird in the hand is worth two in the bush would seem to apply in this case. The chance to get something out of an underwater pension fund and reinvest it where it might do some good seems to me a no brainer for most workers caught in the underfunded pension trap.

      • Andrew Allison

        I agree completely, but was referring to the Unions, which are receiving dues from current employees but, given that it’s clear these plans are unsustainable, failing to represent their interests.

      • Boritz

        Most workers want every last penny they were ever promised. Watch for quite a few of them to hold out for that. As the article States they were locked into the system by design and want full compensation for time served. That was the deal. “Underwater pension fund” and “reinvest” are other people’s complications to address. They don’t want a fresh start via some buyout at a percentage on the dollar followed by self-directed reinvestment. They expect money deposited to their checking account at 100 cents on the dollar. Their involvement to consist of providing direct deposit routing numbers.

      • http://www.paulfrantizek.com/ Paul Frantizek

        Exactly right. Similar thing went on with the UAW in the early 2000s. The Big Three automakers offered some very attractive buyout packages which the union immediately propagandized against, excoriating workers who accepted the packages as ‘sellouts’. A few years later the companies were in BK and being bailed-out by the gov.

        Now one could look at the companies being bailed-out and say that taking the buy-out was the wrong move (just like one could say that taking a buy-out is wrong here because the gov will always have the $$$). But that overlooks how much worse the situation re; debt is now over 2008 time frame. And it also overlooks the moral issue of turning down an offer that’s more than generous simply because you believe you can lever more from a captive partner (Keep in mind that these are public servants we’re talking about, after all).

        Personally I hate that the courts consistently rule that public service compensation packages are somehow sacrosanct, it seems directly opposite of how the dynamic should work.

        • bandarlogtorpedo

          Where I live the pensions of the judges of the “courts (that) consistently rule that public service compensation packages are somehow sacrosanct” are in those pensions they are voting on to be honored by taxing the private sector to fund their shortfall. Madoff said he never did anything the Government didn’t do all day.

  • Angel Martin

    Any employee with a retirement based on a drastically underfunded pension plan might be temped to take the cash up front. One issue for lump sum vs annuity is that interest rates are at record lows, which increases the dollar value of the lump sump equivalent.

    • Kevin

      Wouldn’t low (real) interest rates reduce the value of an immediate lump sum payout (vs. a high (real) interest rate environment)?

      But you’re right that uncertainty over future pension payments would surely increase the attractiveness of an immediate payout.

      • Angel Martin

        No. The value of the lump sum is typically tied to long bond yields and calculated to generate a specific dollar return per year. So, lower interest rates equals higher lump sum.

        • libertyanyday

          in this case and lump is better than no lump……like SS

  • Harry Callahan

    These issues will only be resolved when our poorly managed economy collapses. Ten years, give or take…..

    • libertyanyday

      2 years

      • Angel Martin

        I say 2 years as well. Residential real estate prices are now falling in the most bubble markets in the UK, USA, Canada, Australia and China.

        The countdown to our own 1929 moment has begun.

  • Sanford Thorson

    Public Sector Unions have busted most government entities. That is why what Governor Scott Walker of Wisconsin was able to do was/IS so important to the lifeblood of America, THE TAX PAYERS.. Liberals forgot FDR words that the Public must never be allowed to unionize. The Democrat Party felt it was more important to BUY the votes of Teachers, bus drivers, sanitation workers etc. than to protect their electorate.

    • jack anderson

      And it has worked very well, look at the California leadership’s makeup.

  • jack anderson

    Stupid article that misses the point that pension liability has to be accounted for in the year incurred. If the actuarial cost for pension is postponed to payout as is commonly the current practice the scheme was designed to die, like Social Security.

  • themaskedblogger

    It’s true enough, but long overdue and nearly impossible. An even better idea would be to outlaw public sector unions.

    • http://www.paulfrantizek.com/ Paul Frantizek

      Agree completely. Allowing public sector employees to unionize was a huge error, and one that will end up costing us dearly.

      • themaskedblogger

        The same will happen to the Public Sector unions, it will just take longer, be more expensive, and much more painful.

        • http://www.paulfrantizek.com/ Paul Frantizek

          In a reasonable world, when employers offer upfront $$$ to opt out, employees should take that as a danger sign and start actively making other plans.

          Of course most of these professional union types hate this sort of reasonable thinking…

          • themaskedblogger

            Aye, so they do. Therefore they will continue to use their political power. Until it no longer exists. Hurry the day,

          • bandarlogtorpedo

            Maybe Obama’s 33 billion dollar and counting “deal” with The Islamic Republic of Iran will get a nuke into Boston, DC, Miami, Huston, LA, Frisco, Seattle and, for good measure Denver and the day will arrive.

          • themaskedblogger

            Perhaps. Just DC would be a big start.

          • bandarlogtorpedo

            Reasonable thinking does not fill any Democrat Party constituent’s rice bowl so eff it and gimee da dough or I busta you face.

    • bandarlogtorpedo

      Fun to watch the puking when President Trump does just that, in the spirit of FDR of course, by Executive Action.

  • J_Stuart_Mill

    So … for all jurisdictions with referendum provisions in place … put a CLAWBACK TAX on the ballot.

    Make any income derived from public sector sources, including pensions, is subject to a surtax — say, 50% of anything over $100,000 a year. Unions love taxes … for everybody else, to pay their bloated salaries and pensions. Time for PAYBACK….

    • bandarlogtorpedo

      implemented by President Trump by pen and telephone, just to add piquance

  • shatzy48

    A long time ago that notorious right wind crank Franklin D. Roosevelt warned about the dangers of public service employees unionizing. Unfortunately, nobody listened to him. Roosevelt clearly saw that the relationship between elected officials and public service unions that helped to elect them was not arms length and would lead to problems like the pension issue. Defined benefit pensions are riddled with assumptions about returns and lifespans and allow too many escape hatches for improper funding.

    • bandarlogtorpedo

      The ones that implemented what he proscribed sure as hell listened to him and most of them saw the wisdom of it and thought, we want the votes and we can get them with other people’s money converted to our use, so eff him, the wheelchair he rode in on and the private sector schmucks who don’t vote for us anyway, and are going to pay for it. It’s a win for us and our unionized public sector employees and a loss for our enemies. Obama doesn’t exist yet but he will love it when he gets here, whoever he is.

  • TB

    More and more people are beginning to realize that Defined Benefit plans like public pensions are not sustainable, including the private sector which has more or less done away with them. Here is my solution to this looming crisis that is only going to get worse without any correction of course:

    https://drive.google.com/file/d/0B90sU3A85q46OE9BZHJFSWEzbGM/view?usp=drivesdk

    Please help spread the word…

  • Tamalpais

    Yes, 403b pension plans should be phased in for civil service new hires. It would take a big effort to get city and perhaps state laws revised to allow it, but employees hired as of a certain date, say, 1/1/2018 would be covered under the 403b plan. Of course, there will be some short term financial pain associated with such a switch, but after about 20 years, much of that will go away, as will the underfunded pension problem.

  • mulp

    But given the shift to 401Ks and IRA for most workers including most government workers, boomers are reaching retirement age with no or very little “wealth” and the only thing they have is the universal government run pension, Social Security. And the prospects for the next generation, Gen x, is much worse, many reaching age 67 still deep in debt.

    Just don’t see any solution is the just embrace more Reaganomics and pay workers next to nothing and provide no benefits to maximize profits to a minority of rich people.

  • fedupMan

    Something has got to give. All these state public pensions WILL bankrupt states. Fix it or go belly up broke.

    • brian_in_arizona

      History shows that public sector unions will not yield until it is far too late for any reasonable solutions to avert a fiscal crisis. How the crisis develops and unfolds only time will tell.

  • rlhailssrpe

    There is no answer.

    It is simple math and the recognition of reality. Politicians have purchased their office for generations by agreeing to public employee retirement plans which did not have to be funded, a liability put on the books. It is the classic Ponzi scheme, something beyond Bernie Madoff’s scam. He, at least, paid off people today, by ripping off people tomorrow. In the private sector, you go to jail for these crooked books. The bill is now due and payable, but there is no money to pay it, either on the federal, state, or local level.

    Every American, new born or ancient one, today, owes somebody else $60,000. That is their share of our national debt. The state and local unfunded liabilities are on top. Yet there is no hope of paying off these oceans of debt in one generation. The historic result is that the government will redefine the purchasing power of the buck. Today, in Caracas Venezuela, the cost of a dozen eggs is $150. When our financial bubble pops, this will happen, typically in several days. In anticipation, some buy gold. Some buy lead.

    The current ad hoc political solution is to divert attention to climate change, or Kenyan birth certificates, or who’s going to win the World Series? Or let’s blame the guy behind the tree.

    It is time for a big hair cut. Some people will get hurt. The only question is who?

  • Jac Wright

    The sheet of paper Donald Trump passed to Mr. Oz is a self typed LIE with a BRIBE telling Oz: “$100K If you say on TV my health is great.” It is a self-typed up LIE starting with the HEIGHT: Trump is 1 inch shorter than the LIE on his self typed sheet. And so is every thig – weight, blood pressure, …. – EVERYTHING is a self typed LIE.

    Trump is waving his arms around and kicking the air to HIDE his LONG HISTORYT of HEART ATTACKS and STAMACH ULCERS! Trump is a OLD, OLD dying man. He is resorting to all sorts of FAKE ANTICS and LIES to HIDE his HISTORY of HEART ATTACKS & ATOMACH ULCERS. This candidatedoth protest too much. This candidate doth do scams & fake antics too much.

    Trump has FAILED the HEALTH REPORT requirement for this job.
    Trump has FAILED the CREDIT REPORT requirement for this job.

    Trump is up to his ears in debt to the RUSSIAN MAFIA, the MUSLIM OIL TYCOONS, and the CHINESE TRIADS. Trump is drowning in debt many times more than his few hundred million $$ assets. The reason he is running for Presidency is to save hiself from his 7th bankruptcy.

    Trump is an ailing, dying, imcompetant, bankrupt business failure.

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