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The Suddenly Poor Life: Millions Will Lose Their Pensions

Discussion in 'Coffee Shack (Daily News/Economy)' started by Goldhedge, Mar 4, 2016.



  1. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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  2. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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  3. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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  4. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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  5. Uglytruth

    Uglytruth Gold Member Gold Chaser

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    searcher likes this.
  6. Buck

    Buck Fabian Society Gold Chaser

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    These are just shell games

    One day, there won't be a can left to kick
     
  7. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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  8. latemetal

    latemetal Platinum Bling Platinum Bling

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    Welfare fraud in Lakewood NJ soaked up a ton of money, no wonder they can't pay their bills, not that news covers it.
     
  9. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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    Pensions Timebomb In America – “National Crisis” Cometh


    -- Published: Friday, 30 June 2017

    – America’s underfunded pension system is “not a distant concern but a system already in crisis”…

    – Tax may explode as governments seek to bail out insolvent pension plans

    – Illinois, California, New Jersey, Connecticut, Massachusetts, Kentucky and eight other states vulnerable

    – The simple mathematical mismatch at the heart of the pension crisis…

    – Why the pension crisis really is “America’s silent crisis”…

    – Pensions timebomb confronts Ireland, UK and most EU countries

    [​IMG]


    By Brian Maher, Managing editor, The Daily Reckoning


    “This is going to be a national crisis…

    “This” being America’s woefully underfunded pension liabilities, according to Karen Friedman. She’s the executive vice president of the Pension Rights Center.

    (A place called the Pension Rights Center does in fact exist. We checked.)

    MarketWatch columnist Jeff Reeves howls in confirmation that “collapsing pensions will fuel America’s next financial crisis.”

    “This is not a distant concern,” warns he, “but a system already in crisis.”

    According to data supplied by the Federal Reserve, pensions — public and private combined — were roughly 27% underfunded at the end of last year.

    By some estimates, America’s public pensions alone are sunk in a $6 trillion abyss.

    The issue, approached from any direction, is an impossible knot… a tar pit… a minotaur’s maze of blind alleys and dead ends.

    How has the American pension come to such an estate?

    Most public pension systems were built upon the sunny assumption that their investments will yield a handsome 7.5% annual return.

    But consider…

    The average public pension plan returned just 1.5% last year.

    Last year marked the second consecutive year that plans undershot the 7.5% return rate, according to Governing magazine.

    The same plans worked an average gain of 2–4% in 2015.

    A highly technical term describes the foregoing if it goes on long enough… and we apologize if it sends you to the dictionary:

    Insolvency.

    Briefly turn your attention to the Golden State, for example. California.

    State pensions are only in funds to meet 65% of their promised benefits.

    And California pins its hopes on that golden annual 7.5% return to make the shortage good.

    But it’s in a devil of a fine fix if the average public pension plan only returns 1.5%.

    The math is the math.

    California essentially depends on returns 400% above the norm, according to financial analyst Larry Edelson.

    But California is by no means alone.

    We won’t run the entire roll call of shame.

    But the great state of Illinois, for one, risks sinking into a $130 billion “death spiral” from its unfunded pension liabilities, as Ted Dabrowski of the Illinois Policy Institute described it.

    S&P Global Ratings has even threatened to downgrade the state’s credit score to “junk” status.

    New Jersey, Connecticut, Massachusetts and Kentucky are also among the worst deadbeats.

    But the problems run from ocean to ocean and south to north.

    A report from Moody’s reads thus:

    For many states and municipalities, exposure to unfunded pension liabilities is already at or near all-time highs. Since cost burdens are already expected to further increase, pension fund investment performance is critical for the credit quality of many governments.

    Not even a “best case” cumulative 25% investment return on public pension plans would stanch the blood flow, according to Moody’s.

    They say that best-case 25% would merely reduce pension liabilities a slender 1% through 2019 due to weak contributions and poor past investment returns.

    “But I don’t have a pension,” comes your response. “This doesn’t concern me.”

    Ah, but have another guess — at least if you swear off your taxes in these United States.

    Is it your belief that governments will let their prized public pension plans flop?

    There are votes to consider, after all.

    Jilted pensioners are capable of generating a good deal of hullabaloo, hullabaloo to which the official ear is exquisitely attuned.

    Besides, do you think kind Uncle Samuel will turn the politically strategic states of California and Illinois out on their ears?

    As our resident income specialist Zach Scheidt argues:

    Your tax bill could explode as governments around the country seek to bail out insolvent pension plans. And you know how much politicians like to use your tax money to bail out some constituent. They like to prove their “compassion” with your money!

    “Expect to pay higher state and local taxes for fewer services in the years to come,” adds Larry Edelson, before mentioned.

    And:

    “Don’t be surprised if authorities of all shapes and sizes — from local governments to national agencies — up the ante to get ahold of your assets any way they can.”

    We would have to agree. You shouldn’t be surprised in the least.

    And we can scarcely imagine the holy hell that would follow another financial crisis.

    Illinois Gov. Bruce Rauner warns the state’s pension crisis is driving his beloved Land of Lincoln into “banana republic” territory.

    But we suspect the good governor’s mouth ran away with him here…

    Can you imagine comparing the venerable, eminently worthy banana republic… to Illinois?

    The pension crisis is truly “America’s silent crisis” and indeed the world’s silent crisis.

    From The Daily Reckoning newsletter


    Related Content


    85% of Pension Funds Will Go Bust Within 30 Years

    Pensions Timebomb in “Slow Motion Detonation” In U.S., EU and Internationally

    Investing in Gold In Your Individual Retirement Account (IRA)

    News and Commentary

    Gold steady on easing dollar, stocks amid hawkish central banks (Reuters)

    Technology Shares Lead Stock Rebound; Oil Gains: Markets Wrap (Bloomberg)

    Nikkei dives under 20,000 as Asian markets sharply pull back (Marketwatch)

    Tech Spoils Bank Party as Stocks, Dollar Slide: Markets Wrap (Bloomberg)

    The Yellowstone Supervolcano Has Just Seen 878 Earthquakes in Two Weeks (Science Alert)

    [​IMG]

    Source: Cape Shiller via ZeroHedge

    Robert Shiller: “The Index I Invented Is At Levels Last Seen In 1929 And 2000” (Zerohedge)

    How owning a home in Britain became a luxury (Moneyweek)

    Petrodollar wars – Gold in your custody cannot be hacked, erased, or frozen (Zerohedge)

    Should you own bitcoin or gold? That’s easy (SCH)

    Lessons from ten of the greatest trades of all time (Moneyweek)

    Gold Prices (LBMA AM)

    30 Jun: USD 1,243.25, GBP 957.43 & EUR 1,090.83 per ounce
    29 Jun: USD 1,246.60, GBP 959.88 & EUR 1,093.14 per ounce
    28 Jun: USD 1,251.60, GBP 976.25 & EUR 1,101.91 per ounce
    27 Jun: USD 1,250.40, GBP 980.31 & EUR 1,111.36 per ounce
    26 Jun: USD 1,240.85, GBP 975.56 & EUR 1,109.32 per ounce
    23 Jun: USD 1,256.30, GBP 987.70 & EUR 1,125.27 per ounce
    22 Jun: USD 1,251.40, GBP 988.36 & EUR 1,120.13 per ounce

    Silver Prices (LBMA)

    30 Jun: USD 16.47, GBP 12.69 & EUR 14.44 per ounce
    29 Jun: USD 16.83, GBP 12.98 & EUR 14.76 per ounce
    28 Jun: USD 16.78, GBP 13.08 & EUR 14.78 per ounce
    27 Jun: USD 16.66, GBP 13.07 & EUR 14.79 per ounce
    26 Jun: USD 16.53, GBP 12.98 & EUR 14.79 per ounce
    23 Jun: USD 16.71, GBP 13.12 & EUR 14.97 per ounce
    22 Jun: USD 16.58, GBP 13.09 & EUR 14.85 per ounce

    http://www.goldcore.com/us/

    http://news.goldseek.com/GoldSeek/1498827600.php
     
  10. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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  11. Goldhedge

    Goldhedge Moderator Site Mgr Site Supporter

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    America's Pension Bomb: Illinois Is Just the Start

    We've written quite a bit over the past couple of months about the pending financial crisis in Illinois which will inevitability result in the state's debt being downgraded to "junk" at some point in the near future (here is our latest from just this morning: "From Horrific To Catastrophic": Court Ruling Sends Illinois Into Financial Abyss).

    Unfortunately, the state of Illinois doesn't have a monopoly on ignorant politicians...they're everywhere. And, since the end of World War II, those ignorant politicians have been promising American Baby Boomers more and more entitlements while never collecting nearly enough money to cover them all...it's all been a massive state-sponsored scam.

    As we've noted frequently before, some of the largest of the many entitlement 'scams' in this country are America's public pension funds. Up until now, these public pension have been covered by stealing money set aside for future generations to cover current claims...it's a ponzi scheme of epic proportions...$5-$8 trillion to be exact.

    Of course, the problem with ponzi schemes is that eventually you get to the point where the ponzi is so large that you can't possibly steal enough money from new entrants to cover redemptions from those trying to exit...and, with a tidal wave of baby boomers about to pass into their retirement years, we suspect that America's epic ponzi is on the verge of being exposed for the world to see.

    And when the ponzi dominoes start to fall, Bloomberg has provided this helpful map to illustrate who will succumb first...

    [​IMG]

    Of course, if you live in a state like South Dakota, you may take some solace from the fact that your public pension is fully funded...don't.

    Once the dominoes start to fall, and they will, those "ignorant politicians" we mentioned above will think they're doing the right thing when they attempt to "socialize the issue" with federal bailouts and tax hikes. Unfortunately, this is one crisis that will be too large for even American taxpayers to bailout.



     
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  12. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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    This is one of the things that may help bring in a cashless society.
     
  13. Uglytruth

    Uglytruth Gold Member Gold Chaser

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    I think it was a massive state sponsored "SKIMMING" operation.
    Remember it's not just the seen it's the unseen. They took money from people that could have put that money to a better use.
    Paid off house or car faster, started a business, went on vacation and created other jobs........ but it was stolen from them, wasted on wars refugees and illegals, and the never ending govt perks, study's waste etc.....

    Remember this? But what's a few billion here or there.......

    Setting up the central piece of President Obama's healthcare law has cost the administration more than twice as much as originally intended. The Health and Human Services Department (HHS) said in budget documents Wednesday that it expects to spend $4.4 billion by the end of this year on grants to help states set up new insurance exchanges. HHS had estimated last year that the grants would cost $2 billion. The department also is asking Congress for another $1.5 billion to help set up federally run exchanges in states that do not establish their own. The request for extra money comes at a critical time — exchanges are supposed to be up and running in every state by October. But it is also sure to meet hostility in Congress, which just last month denied HHS's last request for additional funds. HHS Assistant Secretary for Financial Resources Ellen Murray punted Wednesday when asked about the consequences if Congress also denies the new request.
     
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  14. xhomerx10

    xhomerx10 Silver Member Silver Miner Site Supporter

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    Interestingly, at around 3:30 the man said, "Here I am on YouTube telling people to get into precious metals and now get into Cryptos as fast as you can."
    Wow. It's going mainstream. I wonder when the pension funds are going into Crypto?
     
  15. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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  16. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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    Might be dead wrong but if the shit really hits the fan it would be a golden opportunity for tptb to bring in a one world monetary system. Wouldn't really matter what it was called. Your pay / government assistance payment might just be digital purchasing units in a digital account. Go along with the program and your purchases will be allowed. Don't go along and you might not be allowed to buy or sell. Who knows.........might be labeled as some sort of trouble maker. If that were the case you may have to pay for your crimes against the NWO with your life.

    Sounds crazy - doesn't it?

    Who knows what the future holds. Let's hope it doesn't happen.
     
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  17. Uglytruth

    Uglytruth Gold Member Gold Chaser

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    searcher likes this.
  18. xhomerx10

    xhomerx10 Silver Member Silver Miner Site Supporter

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    It sounds more nefarious than crazy. Let's hope it remains the stuff of science fiction!
    [​IMG]
     
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  19. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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  20. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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    The face of America's pension crisis


    [​IMG][​IMG]
    The Motley Fool

    Jordan Wathen
    20 hrs ago



    Meet Tony. For years, Tony worked in a plant that manufactured industrial gases. He started working at the plant in 1979, joining the Teamsters after deciding, like many who worked there, that becoming part of the union, and participating in its pension plan, was a smart financial decision.

    The plant, which used processes that were dangerous in retrospect, according to Tony, eventually declined into technological obsolescence. Newer, safer processes became the standard for producing the gases that his plant produced. After a long career, he retired from the plant, and at 58 years old, he and his wife now work at Sam's Club and continue to save diligently for retirement through Walmart's 401(k) program.

    It's a good thing Tony and his wife saved, and continue saving, because the pension he was promised when he started making contributions as a gas plant worker 38 years ago may not be available to him for much longer. In fact, his pension, part of the Central States Pension Fund, is facing a financial crisis of its own.

    He receives reminders of the pension's problems through frequent mailings. The fund most recently wrote him to say that it is in "critical and declining" status, a label ascribed to pension plans that are expected to be insolvent in as little as 10 to 20 years, but Central States could be insolvent in less than eight years, failing by 2025.

    If nothing is done, pension payments to participants could simply stop as the plan's assets slowly bleed out and government-organized pension insurance programs become insolvent under the burden of failed pension plans.

    How the plan fell apart
    The Central States Pension Fund covers workers and retirees from a variety of industries, but most of its retirees are truck drivers who worked for one of the thousands of trucking companies that once dominated American highways.

    Though the trucking industry is as important as it has ever been to the way goods are shipped, its economic fortunes have faded since 1980, when the industry was deregulated. The passage of the Motor Carrier Regulatory Reform and Modernization Act of 1980 removed many of the barriers that restricted competition and buoyed profits.

    The excess profits enjoyed by the trucking industry up until 1980 were more representative of a competition-free bubble than a normal competitive environment. An article written by Thomas Gale Moore, a senior fellow at the Hoover Institution at Stanford University, explained the unique protections afforded to the trucking industry by earlier legislation, which made them exempt from anti-monopoly laws.

    "In 1948 Congress authorized truckers to fix rates in concert with one another when it enacted, over President Truman's veto, the Reed-Bulwinkle Act, which exempted carriers from the antitrust laws."

    Alongside deregulation and decreased profitability, declining union membership also weighed on Central States and other pension funds' participation levels. Whereas as many as 60% of truckers in regulated corners of the industry were union in the 1970s, only 12% were union members in 2006.

    Non-unionized transportation outfits were enabled by deregulation to publish lower rates and compete on price, scoring more business from costlier unionized service providers. After all, trucking is largely a commodity; price is paramount to winning business. And non-unionized shops simply had the better price, which was a big problem for pension plans that rely on union participation.

    Central States feels the brunt
    The decline of the trucking industry's profitability had a pronounced impact on the Central States Pension Fund, which relied on the industry to supply it with cash from working truckers to pay the benefits it promised to those who had retired. By 1984, just four years after trucking was deregulated, the pension was paying out more in benefits than it received in contributions. Investment income made up for the shortfall, but only temporarily.

    Central States is a multi-employer plan, which means that it serves as a pool into which employees of multiple companies pay in. The contributions are commingled, and the payouts are a collective liability. This type of plan is commonly found in fragmented industries with hundreds or thousands of smaller operators. The trucking industry, once made up of thousands of mom and pop shops, was a natural fit.

    [​IMG]
    © Author The actuarial value of Central States' assets adds up to less than half the actuarial value of its liabilities.

    But Central States began to fall victim to an issue that plagues many multi-employer plans: When companies that participate in the plan fail, they cease to make payments into the program, but the payments to retirees, who were promised years of consistent monthly checks after retirement, keep on flowing. In effect, less cash comes in, but the same amount goes out.

    The failure of trucking businesses around the country has left financial scars for Central States. An analysis by Boston College revealed that of the 50 largest employers that participated in the pension plan in 1980, only four were still around in 2014. It wrote in its 2014 analysis that "roughly 50 cents of every benefit dollar goes to pay benefits to 'orphaned' participants, those left behind when employers exit."

    Large, healthy, and profitable employers have also bought out of the Central States Pension Fund, exacerbating its financial problems. In 2007, the delivery company United Parcel Service paid $6.1 billion to exit the fund, an amount determined sufficient to pay for the pension payments to UPS retirees who were drawing from the fund. When UPS bought out, Central States was already in poor shape. After the UPS payment, Central States was funded between 70% and 75%, according to a 2008 estimate.

    The UPS exit is representative of the unique issues that multi-employer plans face. UPS' $6.1 billion payment to exit the fund might have covered the liabilities owed to its former employees, but there are still many more employees who were "orphaned" by the failure of their employers and need to be accounted for.

    Compounding the issue of financial weakness, the 2007 exit of UPS from the plan proved untimely. Just months after UPS bought out, partially by transferring holdings of the S&P 500 index to the pension, stock and bond prices plummeted as the Financial Crisis unfolded, and thus the pension had to sell assets near their lows to fund payouts to retired workers.

    A broken backstop
    Anyone who participates in a pension has insurance from a government agency known as the Pension Benefit Guaranty Corporation (PBGC). The agency collects a small premium for each person who participates in a pension, and in turn, it promises to pay benefits to pensioners of failed plans, often at a reduced rate. An illustrative example on its website shows that workers who earned 30 years of service in a multi-employer plan can collect a maximum of $12,870 per year from the PBGC -- far less than many pensions originally promised to pay.

    In effect, the PBGC is to pensions payouts what the FDIC is to bank deposits. It offers limited coverage with promises to pay out a reduced, but non-zero amount, to pensioners who are part of a failed system, just as the FDIC only protects bank deposits up to $250,000 per account.

    For years, the PBGC operated at a surplus, taking in far more than it ever paid out. In fact, up until 2004, it was in the black virtually every single year.

    However, as the baby boomer generation continues to reach retirement age, the PBGC is expected to make good on the liabilities of more pension plans that overpromised and underdelivered. Multi-employer plans like Central States are most likely to experience problems making good on their promises. In its most recent annual report, the PBGC estimated that its multi-employer liabilities tallied more than $60 billion, the bulk of which stems from nearly $59 billion it estimates it will have to pay in "financial assistance to 103 multi-employer pension plans that were probable to receive PBGC assistance in the future."

    Even as stock prices have recovered from their Financial Crisis lows, estimates suggest that the PBGC could become insolvent as soon as 2025. Central States, by far one of the biggest and most troubled multi-employer plans, would put PBGC on fast-track to insolvency. In simple terms, the surpluses earned by the PBGC through 2004 were an illusion, as the agency simply underpriced the risk of pension failures.

    Only recently has the PBGC increased its rates to reflect the increased probability that multi-employer plans run into trouble. Rates more than doubled from $12 per multi-employer plan participant in 2014 to $26 in 2015. In 2017, the rate increased to the current level of $28. At this point, it seems as though the rate increases are simply too little, and far too late.

    Pensions get approval to slash benefits
    In 2014, Congress passed a law that would allow pensions to do the once unthinkable: cut benefits to current recipients in order to stave off a crisis.

    The law opened the possibility of a multi-tiered cut to benefits based on retirees' current age. Those who are 80 or older, or who receive disability-related pension payouts, couldn't have their benefits cut. Those who are aged 75 to 79 would have to tolerate some cuts. For those who are younger than 75, it was open season -- that group would experience the most substantial reductions.

    For what it's worth, Tony, who is 58 years old, was supportive of a plan that would cut his benefits if it meant that payments would be made for longer. "Something is better than nothing," he opined.

    Tony isn't being hyperbolic; for him, getting nothing is a very real possibility if Central States and the PBGC become insolvent. The letters he receives about Central States frequently refer to its financial problems in troubling language. He read aloud to me a recent letter that said his benefits, and the benefits of more than 400,000 people in the plan, could be "ultimately reduced to virtually nothing" if cuts were not made to the benefits of current recipients.

    Tony's favorable view of cuts designed to elongate the life of the plan isn't necessarily a popular one among other participants, who see a cut to their benefits as an impossible solution. When Central States Pension Fund proposed deep cuts to pensions -- some as large as 50% for younger retirees -- Teamster members rallied to fight the reduction. The Department of Treasury ultimately struck down Central States' plan to cut benefits.

    On the Teamster.org website, Teamsters general president Jim Hoffa referred to the Department of Treasury's decision against benefit cuts as a victory:

    On behalf of our union and the more than 400,000 retirees and participants in Central States Pension Fund, I would like to thank Mr. Feinberg and the Department of Treasury for denying these massive cuts that would destroy so many lives. We worked with thousands of retirees to educate Treasury and Congress on the devastating impact of the proposed cuts. However, this is not over and the Teamsters Union will continue to fight to protect pensions.


    The Teamsters Union wants to have its cake and eat it, too. The Teamsters don't want benefit cuts, but they want the payments to continue in perpetuity.

    To make up the shortfall, one Teamster proposal suggested funding troubled multi-employer pension plans with a "$30 billion legacy fund over 10 years, paid for by closing two tax loopholes used almost exclusively by the super-rich to avoid paying taxes."

    UPS also opposed benefit reductions, as its 2007 buyout included a clause that would put it on the hook for billions of dollars of supplemental payments if Central States ever lawfully cut benefits to its retirees who were left in the program. The final language in the bill carved out UPS employees from cuts, putting them last in line for reductions, a win for UPS that came from aggressive lobbying on the issue.

    What can we really do?
    Hundreds of multi-employer pension plans could fail. The designated backstop, the PBGC, is almost certain to fail, too. That leaves taxpayers, through government legislation, as potentially the funding source of last resort for multi-employer pensions on the brink of insolvency.

    Some argue that a "bailout" by the Federal government is justified, given it would provide a safety net to millions of Americans in retirement. To be sure, it isn't fair that millions of workers will receive less than they were promised (or potentially nothing), but there are few "fair" ways to fund insolvent pensions, given that a small minority of Americans participate in them.

    A government bailout, even if it is paid for by closing tax loopholes for the ultra-rich, shifts the benefit to a select group of pension participants. If taxes are raised on the top 0.1%, for example, why should pension participants, not the other 99.9% of taxpayers, enjoy the benefit?

    Perhaps the bigger issue is that a full taxpayer-provided backstop might encourage pension plans to make even greater promises they can't afford, knowing that the taxpayer will make good on its impossibly high promises.

    The issue has stumped lawmakers and participants alike, but one thing is clear: There will be a real impact for millions of Americans who paid into a failed system.

    Over the phone, Tony spoke to me so calmly and clearly about the issue it felt as though he had tossed it around in his head hundreds of times before.

    He summed up the challenges succinctly, stating that "it's disappointing to find out, at this point at my life, that money that had been taken out of my paycheck every week is not going to be available for me when I need it most."

    http://www.msn.com/en-us/money/reti...ension-crisis/ar-BBE8iUG?li=BBnb7Kz&ocid=iehp
     
  21. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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    Gov. Wolf to let unbalanced budget bill become law
    • By MARC LEVY Associated Press
    • 14 hrs ago


    HARRISBURG (AP) — For the second straight year, Democratic Gov. Tom Wolf will let a state budget bill become law despite the fact that it is badly out of balance as he presses Pennsylvania's Republican-controlled Legislature to approve a tax package big enough to avoid a credit downgrade.

    Wolf's office released his decision in a statement Monday, hours before the nearly $32 billion spending bill was to become law without his signature at midnight.

    In a statement, he said he hoped lawmakers could come together in the coming days to produce a responsible solution to balance the budget.

    "Our creditors and the people of Pennsylvania understand a responsible resolution must take real and necessary steps to improve Pennsylvania's fiscal future," Wolf said.

    In the 10 days after lawmakers sent it to his desk, Wolf had the power sign it into law, veto it or strike out some of the spending.

    Still, there were questions about the constitutionality of a budget bill becoming law without a plan in place to pay for it.

    Monday was the 10th day of a budget stalemate between Wolf and the House and Senate Republican majorities.

    There was no sign of an agreement on an approximately $2.2 billion revenue package that lawmakers say is necessary to resolve the state's largest shortfall since the recession and a projected deficit in the fiscal year that began July 1.

    The package will rely primarily on borrowing and involves another big expansion of casino gambling in the nation's No. 2 commercial casino state.

    Looming is the potential for another downgrade to a credit rating already damaged by Pennsylvania's failure to deal with a post-recession deficit.

    Wolf has rejected Republican plans that lean more heavily on one-time cash infusions, and pressed Republicans to support a larger package of tax increases, top lawmakers say. Efforts were still being made to resolve it, Senate Majority Leader Jake Corman, R-Centre, said Monday afternoon.

    "Every hour there's a new plan and hopefully one will come that we can get everyone on board with," Corman told reporters.

    With both the House and Senate in session Monday, Republicans were pressing ahead with other business. It was unclear, however, whether Republicans could even pass a budget-balancing revenue plan without help from Democratic lawmakers, who have backed Wolf.

    Friction revolved around Wolf's insistence that lawmakers produce $700 million to $800 million in reliable revenue, such as tax increases, to help the state avoid another downgrade. Republicans, however, have been unwilling to offer a tax package half that size, Democrats say.

    Top senators said tax increases under discussion involved basic cable service, movie tickets, bank profits, telephone service and electric service. Another element of a proposed budget deal, designed to save money, would give the state the option to shut down unprofitable wine and liquor stores and transfer the stock to a nearby beer distributor to be sold there.

    Wolf has pushed Republicans to agree to a production tax on natural gas drilling in the Marcellus Shale, his third straight year of doing so. Pennsylvania, the nation's No. 2 natural gas state, is the only large natural-gas-producing state that does not tax the product. However, top Republican lawmakers have rejected that.

    Without a signed budget plan in place, the state has lost some of its spending authority, though the Wolf administration has said it anticipated no program or service interruptions, at least through Monday night.

    Last year, the Legislature sent an on-time, bipartisan spending bill to Wolf, but with no plan to pay for parts of it.

    Wolf let the plan become law without his signature when the 10-day signing period expired and lawmakers delivered a $1.3 billion funding package three days later.

    Enjoying our content? Become a Bucks County Courier Times subscriber to support stories like these. Get full access to our signature journalism for just 44 cents a day.

    http://www.buckscountycouriertimes....cle_39a8c632-2fc9-5583-a5dd-225b82563ed6.html
     
  22. the_shootist

    the_shootist The war is here on our doorstep! Midas Member Site Supporter ++

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    Imagine if we all ran our household budgets like the government runs theirs? WOW!
     
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  23. Uglytruth

    Uglytruth Gold Member Gold Chaser

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    These "leaders" are making their states walk the plank. Are we overlooking / missing something here? If all the sates go broke (like it seems they all are) it will revert power back to the fed's correct?
    No need for state lines or boarders...... or capitals..... or representation........
     
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  24. edsl48

    edsl48 Silver Member Silver Miner

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    The possibility of that happening is why many are investing in physical gold and silver... or at least is why I do.
     
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  25. southfork

    southfork Mother Lode Found Mother Lode

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  26. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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  27. Uglytruth

    Uglytruth Gold Member Gold Chaser

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    http://www.cbsnews.com/news/slashed-pensions-another-blow-for-heartland-workers/

    Another blow for heartland workers: Slashed pensions
    February was a bad month for Larry Burruel and thousands of other retired Ohio iron workers. His monthly take-home pension was cut by more than half from $3,700 to $1,600.

    Things have been rough in the Rust Belt, but this was a particularly powerful punch in the pocketbook for Burruel, who started in the trade at 19 and worked 36 years before opting for early retirement to make way for younger workers. Unfortunately, this sagging industry doesn't have enough younger workers to pay for retirees like Burruel, whose pension plan is in what the U.S. Treasury Department calls "critical and declining status."

    Read more at link.
     
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  28. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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    Something Big, Bad And Ugly Is Taking Place In The U.S. Retirement Market


    -- Published: Wednesday, 26 July 2017

    By: Steve St. Angelo

    While the highly inflated value of the U.S. Retirement Market reached a new high this year, something is seriously wrong when we look behind the scenes. Of course, Americans have no idea that the U.S. Retirement Market is only a few steps from falling off the cliff, because their eyes are focused on the shiny spinning roulette wheel called the Wall Street Stock Market.

    Yes, everyone continues to place their bets, hoping and praying that they will win it big, so they can retire in style. Unfortunately, American gamblers at the casino have no idea that the HOUSE is out of money. The only thing remaining in their backroom vaults is a small stash of cash and a bunch of IOU’s and debts.

    According to the ICI – Investment Company Institute, the U.S. Retirement Market hit a new record $26.1 trillion in the first quarter of 2017:

    [​IMG]

    This new record high in U.S. Retirement assets is most certainly a good moral booster for Americans. As their retirement assets continue to increase, this provides them a wonderful incentive to fork over more of their hard-earned monthly income to feed the DARK HOLE I label the U.S. Retirement PAC-MAN Monster.

    Regretably, Americans have no idea that their monthly retirement contributions are not being saved or stored in a nice gold vault, rather they are being used to pay the lucky slobs who retired before them Now, when I say SLOBS or POOR SLOBS, I am not being derogatory. However, I am using the word as a Wall Street Banker would label those they prey upon.

    Regardless, as the U.S. Retirement Market continued higher over the past several years, the amount of net contributions have gone into negative territory. As I have mentioned before, this is a beginning sign of a Ponzi Scheme in its last stages. In my previous article, WARNING: U.S. Ponzi Retirement Market In Big Trouble, Protect With Precious Metals, I posted the following chart:

    [​IMG]

    As we can see in the chart, the Private Defined Contribution (DC) Plans paid out $28.7 billion more than they took in in 2014…. the last year the Investment Company Institute provided data. Simply, Private DC Plans are mostly 401K’s. If we look up at the first chart with the colorful breakdown in the different U.S. Retirement Plans, DC Plans (mostly 401K’s shown in YELLOW) were valued at $7.3 trillion.

    To see U.S. DC plans now paying out more than they receive is certainly bad news… but it isn’t as bad as what is taking place in the U.S. DB – Defined Benefit Plan market. A Defined Benefit Plan is where an employer pays the employee a specific pension payment, based on the employees earning history.

    If we look at the U.S. Private DC Plan chart below, we can plainly see what a serious mess it is in:

    [​IMG]

    The GREEN BARS show how much is paid out to retired employees, the BLUE BARS are what is contributed into the DB Plan, and the RED BARS denote how much more is going out than coming in. It doesn’t take much of a brain surgeon to figure out this is not sustainable.

    To get a better look at how much RED is going on the U.S. Private Sector DB Plan, I presented the figures in the chart below:

    [​IMG]

    As of the last year the Investment Company Institute published the figures (2014), $123.7 billion more was paid out to employees in the Private Sector DB Plan then came in. While larger payouts have been going out than funds coming in for quite some time, they have also reached a new RECORD HIGH. Ain’t records great?

    Okay… let’s bring back the first chart with all the wonderful colors:

    [​IMG]

    The Private Sector DB Plan is shown in the nice GREEN COLOR above at $3 trillion in assets. Again, these are from the Private Sector. If we look at the Government DB Plans in PURPLE, they are valued at $5.5 trillion. Unfortunately, the Government DB Plans (State & Federal) Pension Plans are in much worse shape than the Private Sector DB Plans.

    How much worse? Look at the chart below:

    [​IMG]

    The Private Sector DB Plans are underfunded by $500 billion, while the Federal and State-Local DB Plans are underfunded by $3.8 trllion (adding both columns together). Even more amusing is that the Federal DB Pension Plans hold a larger underfunded liability than their total assets. While we have heard in the news that the State Pension Plans are in big trouble, we can plainly see the Federal Govt Pension Plans are in much worse shape… LOL.

    That being said, the U.S. Retirement Market is filled with assets that are based on highly inflated values. I took a look at the Federal Reserve Board of Governors Q1 2017 Statistical Review and listed the top Private Sector DB Plans assets in the chart below below:

    [​IMG]

    Of the $3 trillion in total Private Sector DB Plan assets, Corporate Equities (stocks) are valued at $1,085 billion ($1.08 trillion), Debt Securities are $884 billion, Misc Assets are $850 billion and Mutual Fund Shares are $444 billion. Here are my comments on the figures above:

    FIRST…. If our eyes are not glued to the TV watching CNBC, we should be able to realize that stocks are highly inflated via their extremely bloated P/E – Price to Earnings ratio. So, that $1.08 trillion of Corporate Equities will most certainly collapse in value in the future. This is bad news for both the poor slobs who have been paying in for decades and those retirees who were counting on that monthly income to pay for their $250,000 RV Motor Coach.

    SECOND…. I find it extremely hilarious that “Debt Securities” valued at $884 billion, can be labeled as “Assets.” Yes, I realize that U.S. Treasuries and Foreign Bonds have been assets in the past, but where we are heading… supposed assets will turn into liabilities, quite quickly.

    THIRD…. $844 billion in Misc Assets are not something I would feel comfortable being invested in. Sure, I could see possibly $20-$50 billion in Misc Assets, but $884 billion? This reminds me of Misc chicken parts used to make McDonalds high quality Chicken Nuggets.

    FOURTH…. Mutual Funds are worse than plain ole stocks… if you ask me. Mutual Funds are claims on claims on stocks. So, this segment of the U.S. Private Sector DB Plan is one that will turn to into vapor quicker than most when fan hits the bull excrement.

    While the bloated $3 trillion Private Sector DB Plan Assets are only a small portion of the total U.S. Retirement Market, we can assume the disease has spread throughout the entire $26.1 trillion market.

    Lastly, it took me a while to come to this conclusion, but I now realize why the Fed and Central Banks pushed all that PHAT QE Money into Stocks, Bonds and Real Estate. If we are already seeing many sectors of the U.S. Retirement Market paying out more funds than are coming in… what in the living HELL does the U.S. Retirement Market look like when Stock, Bond and Real Estate values plummet?

    That’s right….. it’s going to be BIG, BAD & UGLY.

    - SRSrocco Report

    http://news.goldseek.com/GoldSeek/1501089389.php
     
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  29. Uglytruth

    Uglytruth Gold Member Gold Chaser

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    Would love to see charts thru 2016. Would love to see charts with a 25%, 50% and 75% long overdue "market correction"........ Would love to see charts without any QE aid.
    Some of us base investments decisions off of reality and while the right choices with fundamentals were made we are still living in a fantasy and the decisions were wrong.
    This baby boomer thing ain't going away unless they kill them off fast.
     
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  30. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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    Pension relief coming for school districts, but it's nearly two decades away

    Basic education funding for 2017-18 is increasing by $100 million statewide. Meanwhile, pension payments for districts are rising by $144 million.

    That imbalance, which ultimately shrinks money for the classroom, wasn't fixed by the pension reform that state officials have described as "historic" and "meaningful."

    It's not until 2034-35 when funds needed for the Public School Employees' Retirement System, expected to approach 40 percent of payroll, "are projected to begin to decline," according to an actuarial note by the Independent Fiscal Office on Act 5 of 2017. The result of Senate Bill 1, which was signed by Gov. Tom Wolf, the legislation shrinks the defined benefit and combines it with a 401(k)-type plan for school employees hired after July 1, 2019.

    "It's controlling every single thing we do," Stephen Pirritano, of the Neshaminy school board, said of growing retirement costs. "The amount of stress that's being put on our district is forcing us to make educational choices. There's no relief from collective bargaining. There's no relief from state mandates.

    "Payroll and benefits are 72 percent of our budget. We continue to squeeze that other 28 percent. I don't know where the relief is going to come from."

    Locally, Pirritano's words have been echoed by school directors from the Bristol Borough to Quakertown Community districts in Bucks and the Upper Moreland to Souderton Area districts in Montgomery County.

    Neshaminy's pension costs have gone from $8 million to more than $25 million in the past five years. Council Rock's scheduled contribution is almost $36 million — an increase of $3.4 million from this year and $23.8 million higher than 2010-11, when the PSERS bill was 5.64 percent of salaries. In 2017-18, it's 32.57 percent.

    In North Penn, pensions have cost taxpayers $150 million in the last five years, growing from $6.1 million in 2010-11 to $39.7 million in 2017-18. North Penn business manager Steve Skrocki has used terms like "mind-boggling" and "unsustainable" to describe the state's pension problem.

    The state pays half of the bill, meaning 39 percent of North Penn's state subsidy is eaten up by pensions, nearly double the 20 percent that goes for basic education. "I think that's a sad commentary," he said.

    "The whole five years spent talking about pension reform was a bait and switch," said Stephen Herzenberg, executive director of the Keystone Research Center. "This does nothing about the unfunded liability."

    Still, advocates of the new law — and there are many — praised it as a game-changer for achieving full funding of the state's pension system, significantly reducing taxpayers' risk and preserving a path to retirement for public workers.

    "Our research indicates that this would be one of the most — if not the most — comprehensive and impactful reforms any state has implemented," The Pew Charitable Trusts, an independent global research and public policy organization, stated in its analysis of Senate Bill 1, the legislation that lessens the retirement guarantee for future employees.

    "It's a significant step to fixing our pension problem," said Elizabeth Stelle, director of policy analysis for the Commonwealth Foundation. "It is truly historic, and goes far beyond savings or the impact on property taxes. It's a significant transfer of risk to teachers and state employees themselves. This is definitely significant. We shouldn't underestimate how much of a stepping stone SB 1 is."

    Steve Robinson, spokesman for the Pennsylvania School Boards Association, called the retirement system for future employees "a long-term solution."

    "I don't think any of us see it as a short-term fix," he said. "That still needs to take place. This is not an easy problem to solve. Probably the biggest thing that might help is a large infusion of money to provide more immediate relief to districts. I'm just happy to see some kind of pension reform passed. But school boards are still looking at difficult budgets today, next year and the year after that."

    Peter Calcara, vice president for government relations for the Pennsylvania Institute of CPAs, called the pension conundrum "a political tug of war."

    "There's not a politically easy way to address the issue in an immediate fashion," he said. "You've got to take whatever successes you get, as minor as they may be in the long-term. You try to take one step forward in this political process."

    The unfunded liability for PSERS and the State Employees Retirement System stands at approximately $60 billion, most of it coming from PSERS, with its nearly 500,000 active and retired members.

    Part of the funding problems began in 2001. PSERS was flush with money when lawmakers hiked the multiplier used to calculate their pensions from 2 percent to 3 percent, for a 50 percent increase, and to 2.5 percent for teachers and state workers, up from 2 percent, for a 25 percent increase. They also sliced in half the number of years needed to qualify for a pension from 10 to five.

    On top of that, the increase was applied retroactively, so a worker with 25 years on the job would have accrued 62.5 percent of his or her salary in retirement as opposed to 50 percent.

    The next year, lawmakers increased benefits for teachers who had already retired and so were left out of the 2001 pension enhancements, and they put off paying for the whole package by reducing a district's pension contribution from 5.64 percent to 1.15 percent and spreading out payments over more years.

    When the stock market was performing well, school districts were allowed to lower their contributions. In 1998, for example, districts paid nothing into the fund. In 2001, the rate was 1.9 percent; the following year, 1.1 percent. School employees, however, continued to contribute 7.5 percent of pay, mandated by the state, into the pension fund. In 2002, districts contributed $539,000 to the fund, while employees paid $662.6 million.

    These days school board members are desperate, many raising taxes and cutting programs to pay for retirees. That 1.1 percent contribution of employee salaries by taxpayers in 2002 is 32.5 percent next year, and scheduled to sit in the mid to upper 30s for more than a decade.

    "Whatever they thought in 2001, hindsight has proven they didn't know what they were doing," said Pirritano, the Neshaminy director.

    In 2010, the Legislature, through Act 120, reformed public pensions for future employees and new lawmakers. All have to pay more money into their plans, while benefits were rolled back 25 percent to pre-2001 levels and the vesting period for both school and state employees increased from five years back to 10 years.

    The deal lessened the impact of a near-term property tax bubble, but cost homeowners more money down the road. It's been described as going from a 15-year to a 30-year mortgage. Your monthly payments are less, but you're paying for a longer period of time.

    Act 5 of 2017 gives future employees three options: The first two include both a pension and 401(k)-like investment. The pension's multiplier is either 1 percent or 1.25 percent. Option three does not include a pension.

    "While they've taken steps, they've nowhere come close to solving the problem," Pirritano said of state lawmakers. "They've taken a few baby steps in a marathon. Nobody should be congratulating themselves. They should be saying sorry it took this long to start the process."

    Stelle, the Commonwealth Foundation's director of policy analysis, said the law will "get the politics out of pensions. ... Lawmakers no longer have the ability to dramatically increase or ignore payments to the plan."

    Enjoying our content? Become a Bucks County Courier Times subscriber to support stories like these. Get full access to our signature journalism for just 44 cents a day.

    Gary Weckselblatt: 215-345-3169; email: gweckselblatt@calkins.com; Twitter: @gweckselblatt

    http://www.buckscountycouriertimes....f87-59b8-aea8-c1dbf562d86c.html?hp=mid-justin
     
  31. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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  32. gringott

    gringott Killed then Resurrected Midas Member Site Supporter

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    Perfect storm.
    All the long articles above outline the problems that pensions are having. Except they barely touch or gloss over the problem caused by the FedRes and ZIRP. Low returns on pension investments + mismanagement + boomer retirement uptick = failed pensions.

    Here in Kentucky the problem with education pensions seems to have been caused by the Democrat legislature starting around 2001 when they mismanaged the system and kicked the can down the road. Even now they are fighting against funding the pension system, they want the resources diverted to medicaid and other FSA programs. Almost like they want the pension system to collapse.
     
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  33. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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    I wonder what will happen should that occur?
     
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  34. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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    More on the local scene..........

    School pensions: What does the future hold?

    While future teachers might not receive as lucrative a pension as those guaranteed to today's school employees, experts who make a living providing clients with financial advice contend the plan remains attractive.

    "When somebody walks into my office and has any kind of pension, I shake their hand and I say 'congratulations,'" said Mark Fried, president of TFG Wealth Management of Newtown Township. "The happiest retirees I know have a pension."

    A defined benefit is still part of two of the three options school hires will get to choose from beginning July 1, 2019. Two of the plans include a defined benefit plan combined with a 401(k)-style defined contribution plan. The third option is a solo 401(k)-style plan, similar to retirement offerings in the private sector. Defined contribution plans in the public sector are called 403(b) plans, and are essentially the same as a 401(k).

    The defined benefit, a traditional pension, is calculated according to length of service and salary earned. It is guaranteed and paid to the retiree in a monthly check. The defined contribution, the retirement plan most private companies employ, is not guaranteed. It is determined by how well the employees' investments perform. Unlike in the private sector, employees will not be able to increase or decrease the percentage of their contribution.

    In option one, employees will contribute 8.25 percent of their salary, with 5.5 percent going to the pension and 2.75 percent into the defined contribution, with a 2.25 percent employer match of an employee's salary. The employee will accrue 1.25 percent per year on the pension side, compared to 2.5 percent for most current employees, and 2 percent for those hired after 2010.

    After 40 years, for example, a teacher in the old plan — based on the accrual of 2.5 percent per year — would collect in retirement 100 percent of the average of his or her final three year's pay. Those in the plan since 2010 would get 80 percent. In the future, a teacher would get 50 percent of the average of his or her final five years, plus whatever he or she was able to generate in the 401(k)-type plan.

    In option two, employees accrue 1 percent each year toward their pension, less than option one. But they're contributing less of their salary and have more going into the defined contribution portfolio. Employees will contribute 7.5 percent, with 4.5 percent going to the pension and 3 percent to the defined contribution. The employer will kick in 2 percent of an employees' salary into the defined contribution account.

    Option three does not include a pension. Employees will invest 7.5 percent of their salaries into the defined contribution account with employers matching another 2 percent of salary.

    "It's still very rich," Edward J. Kohlhepp Sr., owner and president of Kohlhepp Investment Advisors of Doylestown, said of the three options. "It's not as rich as before, but compared to the private sector, where there are very few defined benefit plans, it's a pretty good deal."

    The new plans, passed by the General Assembly in June and signed into law by Gov. Tom Wolf in Act 5 of 2017, are part of an effort to deal with the $60 billion unfunded liability of the Public School Employees' Retirement System and the State Employees Retirement System. Most of the shortfall comes from PSERS, with its nearly 500,000 active and retired members.

    While the law won't impact the pension underfunding for close to two decades, state officials maintain that future teachers could benefit from the portability of the defined contribution components.

    "It will provide portability and retirement control for public employees," said Elizabeth Stelle, director of policy analysis at the Commonwealth Foundation. "As they're given more flexibility, you may see more teachers moving around. They won't be as concerned with getting in their 10 years to vest."

    She cited a report by PennCAN, the Pennsylvania Campaign for Achievement Now, that states "PSERS offers a generous and valuable annuity for its retirees. There is only one problem: Only 0.52 percent of PA teachers entering at age 25 are projected to remain in the system for 35 years."

    Peter Calcara, vice president of the Pennsylvania Institute of CPAs, said younger teachers will be more comfortable making their own investment decisions. "We've been beating it into their heads, 'As soon as you get an opportunity to save for retirement, you do at least what the company matches.' It's a never-ending process."

    Stephen Herzenberg, executive director of the Keystone Research Center, which has campaigned against pension cuts, said earlier proposals at reform were more draconian.

    "Retirement security was maintained for future public servants," he said of the new law. "If you can put an issue to bed for a while with workers not taking it too much on the chin, that counts as a victory."

    While the financial experts said teachers can do well with the new options, they do have concerns.

    Fried, the registered investment adviser and financial planner from Lower Makefield, said he doesn't think it's fair that employees have only 90 days to make what Act 5 calls an "irrevocable" decision.

    "If I was consulting with my mom, I would be very worried," he said. "There are so many intricate and complicated factors. Teachers have never been asked to study and take responsibility for this investment. You now have to be an investment professional. Good luck."

    Ultimately, however, he believes a typical teacher three to four decades down the road will be able to have nearly 80 percent of what their current counterparts can attain. "That's pretty good," he said.

    Kohlhepp has several fears, particularly PSERS' expectation of a 7.25 percent annual return from its investments, which he described as "outrageously high." If the expectations aren't met, future employees under Act 5 would be forced to contribute more to their pensions to make up part of that difference, which previously fell on taxpayers.

    He advises clients to expect a 6 percent stock market return in the next decade, with the 10-year Treasury at 3 percent "max." That would mean a 4.5 percent return for a client with a 50-50 stocks and bonds portfolio.

    "There is no way in the world they will average 7.25 percent without taking undue risk," Kohlhepp said. "I think most major firms would agree with me. But if you lower that (expectation), it means you have to increase the funding. That means higher taxes. They should know it's not attainable."

    He also criticized the continued allowance of workers to take out all their contributions at retirement and still receive a pension based on the employer's match and the plan's growth. "It's insane, what other plan in their right mind gives back all their contributions?" he said. "Why is the public sector immune from rational thinking?"

    Kohlhepp has so little confidence that the system can sustain itself over the next 25 to 30 years that he said he'd advise a client to take option three, which doesn't include a pension.

    "We have a patient who needs surgery, and they've applied a Band-Aid," he said. "The patient is going to die from infection."

    Fried isn't as negative on the future of PSERS and said the legislation is "a fair compromise." He would recommend one of the hybrid pension options. "If I have an option to get a pension, I want a pension," he said.

    Herzenberg, of the Keystone Research Center, hopes the next conversation puts the focus on private sector workers without retirement plans. "If a second outcome of this pension compromise were that Pennsylvania joins the growing movement to give private sector workers at least some retirement security, that would be a relative win," he said.

    Enjoying our content? Become a Bucks County Courier Times subscriber to support stories like these. Get full access to our signature journalism for just 44 cents a day.

    Gary Weckselblatt: 215-345-3169; email: gweckselblatt@calkins.com; Twitter: @gweckselblatt

    http://www.buckscountycouriertimes....-94ec-6604b11f6c18.html?hp=mid-moretopstories
     
  35. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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    A 'baby step' to fix pensions
    • 7 hrs ago


    State officials are calling Act 5 of 2017, the latest public pension reform effort, "historic." So, too, is the director of policy analysis for the Commonwealth Foundation, Pennsylvania's self-declared free-market think tank.

    And the Pew Charitable Trusts, an independent global research and public policy organization, said the legislation would be "one of the most — if not the most — comprehensive and impactful reforms any state has implemented."

    Maybe it's true Act 5 will turn out to be "comprehensive and impactful," and someday will be looked upon as "historic." But the unfortunate truth is that the pension changes will do nothing — zero, zilch, nada — to ease the crushing burden on school district budgets this year, or next year, or the next, or the next, or the next.

    According to an actuarial note by the Independent Fiscal Office (IFO) on Act 5, not until 2034-35 are funds needed for the Public School Employees' Retirement System (PSERS) projected to decline. By then, the IFO predicts, payments to PSERS are expected to approach 40 percent of payroll. So, for at least the next 17 years or so, school districts are looking at annual growth in the amount they (that is, taxpayers) must allocate toward pension obligations.

    Consider a couple of examples. In the North Penn School District, pension costs have grown from $6.1 million in 2010-11 to $39.7 million for 2017-18. In Neshaminy, the jump has been from $8 million to over $25 million in just five years. And in Council Rock, where in 2010-11 its PSERS bill was 5.64 percent of salary, for 2017-18 the district will pay 32.57 percent of payroll — almost $36 million.

    And there's no relief in sight for nearly two decades.

    What Act 5 does is shrink the traditional defined benefit pension and combine it with a 401(k)-type plan people in the private sector are most familiar with. But it only takes effect for school employees hired after July 1, 2019. And it ignores the monstrous $60 billion combined unfunded liability in PSERS and SERS (the State Employees' Retirement System).

    So while the legislation is something and certainly welcome after so many years of legislative foot-dragging, it falls far short of solving the problem and still leaves school districts, in particular, hung out to dry.

    Thus, we'll withhold the "historic" tag from Act 5. What was truly historic was the self-interest (call it greed if you want) of lawmakers who in 2001 chose to fatten their own pensions, plus their total lack of foresight in allowing school districts to lower their pension contributions for a time to nothing or just 1 or 2 percent.

    Eventually, Act 5 will perhaps ease the pension crisis. But a big question is whether the schools and their taxpayers can hold out that long without further legislative intervention. Act 5 is correctly summed up as a baby step and nothing more.

    Enjoying our content? Become a Bucks County Courier Times subscriber to support stories like these. Get full access to our signature journalism for just 44 cents a day.

    http://www.buckscountycouriertimes....cle_62ad84cc-96fd-5011-88a6-52a54e81443e.html
     
  36. gringott

    gringott Killed then Resurrected Midas Member Site Supporter

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    I don't know, but I guess two parties will be screwed, blued and tattooed - The Taxpayer and the Government Worker.

    Things are worse than they seemed last year, the report is that the Board of Trustees were using "alternative numbers" aka FAKE accounting under Democrat leadership. It seems they told on themselves since we got a Republican governor.

    Passions run high as Kentucky Retirement Systems’ pension hole grows
    By Brad Bowman
    5-6 minutes
    There was plenty of blame to go around Monday for the state’s ailing pension systems, but little in the way of common ground for addressing $38.7 billion in unfunded liabilities.

    After listening to an in-depth comparative report on the state’s employee, teacher and judicial pension fund systems, some Republican lawmakers at the Public Pension Oversight Board meeting in the Capitol Annex used heated words like “criminal malfeasance” and “jail” for the prior Kentucky Retirement Systems board of trustees, which was abolished by Gov. Matt Bevin. Some members of the prior board serve on the governor’s reorganized board of directors.

    Since 2002, only twice have the ailing pension systems been given the annually required contributions. The state employee nonhazardous fund is only 16 percent funded. Bevin has said he will call a special session this year to address both the pension systems and tax reform, saying they are linked.

    According to fiscal year 2016 actuarial numbers, the state is on the hook for $38.7 billion in unfunded liabilities, but Bevin, during his recent State of the Commonwealth address, said the liability is actually $82 billion.

    During Monday’s meeting, Brad Gross, staff member of the Legislative Research Commission, clarified the numbers that had left many wondering about the governor’s $82 billion estimate. State Budget Director John Chilton, in a prior meeting, used a 4.5 percent assumption of the state’s borrowing rate or a 2.7 percent assumption, based on the 30-year treasury rate, to show how Kentucky’s unfunded liabilities would grow from $32.8 billion to the $82 billion using different assumption numbers.

    According to Gross, Chilton wasn’t saying it was an appropriate assumed rate, but other assumptions like payroll growth brought the ire of Sen. Chris McDaniel, R-Taylor Mill. He asserted it was the prior board’s fault for accepting an estimated payroll growth from actuarial assumptions — a number that has remained stagnate for quite sometime when it comes to state employees.

    “It’s very unfortunate that the previous board lacked the backbone to say that it was bad,” McDaniel said, lamenting “the gross malfeasance of the previous retirement system board and, in my belief, the breached fiduciary duty that they owe to commonwealth’s employees by at some point saying, ‘No, these assumptions are wrong.’ Full funding doesn’t work if your data point on the front point is wrong. This is — in my opinion — certainly civil malfeasance and borders on criminal.”

    McDaniel pointed out that the nonhazardous plan is more sensitive to payroll growth assumptions, whereas the better funded plans are more sensitive to investment return assumptions.

    Rep. Jerry Miller. R-Louisville, added that if the board was part of a private company, the board members would be in jail.

    Sen. Joe Bowen, R-Owensboro, who has sponsored a revamped pension transparency bill that was approved by the Senate Monday, pointed out the board had irresponsibly accepted the assumptions made by the actuarial firm Cavanaugh Macdonald Group on behalf of KRS.

    “Nobody asked questions at that level. This pyramid is a three-stage pyramid. You have the actuary, the board and then you have the legislature,” Bowen said. “The legislature has to take the information they are spoon-fed from the KRS board. The KRS, it appears, has taken the information the actuary has spoon-fed them, and there’s been no questions along the way. I think there’s been some irresponsibility on previous legislatures, to be quite frankly with you.”

    Bowen said the General Assembly is “now just getting all the facts. This all has gotta change.”

    Rep. James Kay, D-Versailles, who represents part of Franklin County, was one of only two Democrats who spoke out during the meeting, saying it’s worse that the legislature “has a bad ARC (annually required contribution) to pay and then the legislature doesn’t even pay the bad ARC, and that’s why we are here.”

    Rep. Arnold Simpson, D-Covington, pointed out that the required contribution request first goes to the governor during a budget year and then is finally approved by the General Assembly.

    One of three current board of directors who also served on the abolished board, David Rich spoke during the public-comment segment of the meeting. Rich took issue with the criticism.

    “Personally, I take great offense to spending my last four years on this board of trustees trying to do the best I can and being told I have no backbone and that I should be in jail,” Rich said. “I’ve worked a lot of pro bono hours with the board and I’ve stood up to the board in the past. So, you might want to quit shooting arrows at members of the board because there are some people that have been in the trenches and have worked really hard to make sure that our system stays viable and the members’ benefits are held as they should be.”

    Rich said the oversight board and KRS board should work together so each would know what the other is doing.

    PUT THEM IN JAIL. < My comment. Next story, lol

    Kentucky's pension system might need billions more than assumed
    By John Chevesjcheves@herald-leader.com
    9-12 minutes
    Kentucky Retirement Systems, the state pension agency that officially faces an $18.1 billion unfunded liability, might be in far worse financial shape than previously thought. That means taxpayers could be on the hook for much more money to honor pension commitments to about 365,000 public employees.

    KRS made serious math errors in recent years by relying on overly optimistic assumptions about its investment returns, the growth of state and local government payrolls, and the inflation rate, KRS board chairman John Farris told his fellow trustees Thursday at a board meeting.

    For example, KRS assumed that it would earn an average of 6.75 percent to 7.5 percent on money it invested, but it earned an average of 4.75 percent, Farris said. KRS assumed that public payroll would grow by 4 percent a year through pay raises or more government hiring — a larger payroll means larger pension contributions by employees — but public payroll has dropped overall because of repeated budget cuts, he said.

    By giving inaccurate numbers to its actuarial advisers, KRS got back inaccurate numbers concerning its liabilities and how much the state and local governments needed to contribute, Farris said. He called for a new analysis of KRS’ financial health so the next state budget, covering fiscal years 2019 and 2020, reflects the pensions’ true needs.

    “It doesn’t make any sense,” said Farris, a Lexington economist whom Gov. Matt Bevin appointed to the KRS board last year. “We wonder why the plans are underfunded. It’s not all the legislature’s fault. It’s the board’s responsibility to give the correct numbers.”

    [​IMG]
    Some of the other KRS trustees protested that they had thought that the assumed numbers were correct because the agency’s actuarial adviser, Cavanaugh Macdonald Consulting, did not balk when it received them.

    “I rely on the actuaries to, on some level, verify our assumptions,” trustee Joseph Hardesty said. “I’ve never heard our actuaries say that our assumptions were unrealistic.”

    “Payroll growth was negative and you assumed 4 percent (growth)?” Farris asked. “Were any of you paying attention?”

    Bevin’s personnel secretary, Thomas Stephens, who sits on the KRS board, said the optimistic numbers were approved by then-Gov. Steve Beshear’s personnel secretary, Tim Longmeyer, who previously sat on the board. Longmeyer knew perfectly well that the state workforce was shrinking and that most state workers had not received raises in years, yet he went along with the assumed 4 percent payroll growth rate, Stephens said.

    In coming weeks, KRS will select a company to perform a more accurate assessment of its financial health so the board can decide by December what contribution rates to recommend to the state and local governments. The next two-year state budget is scheduled to be adopted next spring.

    The state and local governments paid $950 million to KRS last year for their contributions as employers; public employees matched that with $307 million from their paychecks. Those contributions will need to grow if KRS acknowledges that it used overly optimistic assumptions, KRS executive director David Eager told the board.

    “It’s going to be an immediate impact on costs,” Eager said. “A big one. And the board shouldn’t shy away from this, in my opinion.”

    In a statement Thursday, Bevin praised the KRS board for discarding the “alternative data” it previously used. Bevin rebuilt the board last year by removing its chairman, Louisville banker Thomas Elliott, and adding four more gubernatorial appointees. Several of the agency’s top employees since have been replaced.

    “Today’s unsettling revelations reaffirm that our state pension system is indeed in much worse shape than many stakeholders realize,” Bevin said.

    “I commend chairman Farris and the new board for making transparency a priority and for exposing the truth about our pension crisis by using real data. As I have said repeatedly, our failing pensions are the most significant financial challenge facing Kentucky, and we cannot adequately address this challenge until we accurately understand its full scope,” Bevin said.

    Last year, KRS paid $1.9 billion in pension benefits, up from $1.8 billion in 2015. There were 102,725 public retirees collecting pensions and 261,985 more people who would be owed pensions by KRS when they retire.

    In his State of the Commonwealth Address last week, Bevin warned that Kentucky needs to raise more revenue to address its unfunded pension liabilities. Bevin said the state owes $82 billion to KRS and its other major pension agency, Kentucky Teachers’ Retirement System, which covers educators, not the $33 billion that is officially owed to the two systems using their own assumptions.

    KRS reports that its primary state pension fund has only 16 percent of the money it’s expected to need to honor its future commitments.

    “That’s not a pension system,” Bevin said. “That’s a checking account, and it’s about to go bankrupt.”

    To get the $82 billion estimate, Bevin assumed that KRS and KTRS will earn investment returns of about 3 percent, which is about what “risk-free” 30-year treasury bonds are paying, Farris said. That’s a realistic assumption, he said. KRS is so badly funded that it no longer has enough assets available for long-term investments that pay generous returns, he said.

    My assessment:
    The previous administration lied to kick the can down the road. They needed the money for the FSA. This is a hole so deep we won't see daylight for 50 years.
     
    searcher, Uglytruth and Hystckndle like this.
  37. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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    Gambling gambit: losing your way to fiscal health
    • By Joseph J. Horton
    • Aug 8, 2017 Updated 10 hrs ago

    While Illinois, Connecticut and New Jersey have been making national headlines for their respective budget fiascoes, Pennsylvania has been under the radar with its own problems. The Legislature has passed a budget. A key sticking point is that the budget is estimated to be about $2 billion short of what will be collected in taxes. The Pennsylvania Constitution requires a balanced budget, so new revenue needs to be found.

    One of the most talked about revenue solutions is to expand gambling. Gambling revenue can appeal to politicians on both sides of the aisle. In the eyes of some, this potentially perfect solution allows politicians to increase spending while claiming they have not raised taxes. Thus, gambling may soon be coming to Pennsylvania airports and bars. We may even have state-sanctioned online gambling.

    Why should government live within its means when we can spend the money our citizens lose from gambling?

    Pennsylvania is already a highly taxed state. The Tax Foundation ranks Pennsylvania with the 15th highest state and local tax burden at 10.2 percent. For comparison, New York is ranked with the highest tax burden of 12.7 percent; Alaska, 50th with 6.5 percent. Perhaps we in Pennsylvania have a spending problem rather than a revenue problem.

    While not part of the general fund, the Pennsylvania Lottery is also having a revenue problem. The number of senior citizens is growing, and people are living longer. Thus, there is a longer list of people who desire services funded by the lottery, and the number of people is expected to keep growing.

    The original plan for the Pennsylvania Lottery in 1971 was comparatively modest: to use lottery proceeds to reduce property taxes for senior citizens. Since that time, the Pennsylvania Lottery has introduced additional opportunities for residents to gamble and expanded the benefits for senior citizens that are paid for by the lottery fund. Among these expanded benefits are home care, transportation and rent rebates. The programs are paid for not by people creating wealth, but by people losing wealth.

    With demographic changes in mind, Pennsylvania Lottery officials are considering new ways to entice people to play the lottery. One possibility is that soon people will be able to pay double-digit interest rates on lottery tickets purchased with credit cards. Because there are some people who really want to buy lottery tickets but find the walk from the gas pump to the store too long, the state has experimented with allowing people to buy lottery tickets from gas pumps when filling up.

    State lotteries are particularly bad investments, even when compared with other forms of gambling. The Pennsylvania Lottery pays out 64 percent of the proceeds to gamblers, 27 percent to senior programs, 7 percent to retailers, and 2 percent for operating expenses. All lottery advertisements have the disclaimer to “Please play responsibly.”

    How can getting a long-run average return of losing 36 percent of one’s investment ever be truly responsible?

    It is well-known that the poor spend a higher percentage of their income on gambling than does the middle class. Thus, while promoting gambling, and the lottery in particular, the state is enticing people with little financial literacy to make bad financial choices, all while claiming to help the least among us with government programs. How many of today’s economically disadvantaged seniors would be better off if the state — instead of creating illusory visions of wealth from playing the lottery — promoted financial literacy in the schools.

    I have little argument with adults who choose to gamble occasionally for entertainment. People who go to a casino for a vacation come home with less money than they left with; so do people who go skiing. Most people spend money rather than earn it while on vacation.

    I do object to the government's encouraging the least among us to lose what little they have in pursuit of a false dream of riches. I do object to a government that seeks fiscal health not by promoting wealth creation, but by creating losers.

    Make no mistake about it: If Pennsylvania’s politicians decide to fill a huge fiscal hole by expanding gambling, they are counting on Pennsylvanians losing vast sums of money. Such politicians want and need for us to be losers. That is a game I am not playing.

    Enjoying our content? Become a Bucks County Courier Times subscriber to support stories like these. Get full access to our signature journalism for just 44 cents a day.

    Dr. Joseph J. Horton is professor of psychology at Grove City College and the working group coordinator for Marriage and Family with The Center for Vision & Values. He is also a researcher on positive youth development.

    http://www.buckscountycouriertimes....cle_4dbce94c-4848-5157-bf0b-20640bb84a31.html
     
  38. southfork

    southfork Mother Lode Found Mother Lode

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    ((Pennsylvania is already a highly taxed state. The Tax Foundation ranks Pennsylvania with the 15th highest state and local tax burden at 10.2 percent. For comparison, New York is ranked with the highest tax burden of 12.7 percent; Alaska, 50th with 6.5 percent. Perhaps we in Pennsylvania have a spending problem rather than a revenue problem)) These rates are much to low, Im sure they dont include state income tax, property tax, sales tax, phone, TV service just for a few. More like over 20%
     
  39. Joe King

    Joe King Gold Member Gold Chaser

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    Why is adjusting the budget never an option?
    ...and if the law states that the budget must be balanced, does that mean the State Legislature needs to all be arrested for have broken the law?


    Edited to add:...but hey, it's only the Constitution so who really gives a f'lyin' f' about it, is the prevailing attitude, right? lol
     
    Last edited: Aug 8, 2017
  40. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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