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"Financial repression"?? Love the terminology. Sounds like "financial default" to me. The low interest rates over any longer time is going to be the kicker, as they "hope" to recoup after borrowing from the funds.
Yup lots of problems and I am losing my optimism about some of the states as they fail to do the things that could minimize negative consequences. Sorta like the national debt and kicking the can down the road and making it more painful to eventually deal with.
Absurd! Members of the "pension class" worked, paid taxes, in most instances contributed to their retirement funds and I doubt as taxpayers they are going to make war on their own class.
They already are. They're demanding their "pound of flesh."
Quote:
Originally Posted by Curmudgeon
Not so. They can only reduce or do away with pension payments going forward. The cannot touch the benefits earned by the already retired.
What is 70% of 0?
What is 50% of 0?
What is 20% of 0?
There's your answer.
You cannot pay retirees pension benefits if the pension plans no longer exist, and their assets equal $0.
Simply math...
Mircea
Quote:
Originally Posted by mountainrose
I had no idea about the PBGC---is it the same set up as AIG was? And if so, wasn't AIG allowed to not have the adequate funds to cover the insurance payout-funding, so that when things crashed AIG didn't have the equity to pay out---may happen to PBGC if they don't have the funds to cover all these pension programs going under, even at the discounted amount.
Yes, you're right. Technically, PBGC is funded by insurance proceeds, not tax-payer funds, but their exposure is really high, and they are not adequately insured, or at least at one time a few years ago they were not. The way they have it set up it ultimately comes back on the tax-payer to bail them out.
I can't remember if it was the CBO or the CRS who ratted them out to Congress.
You mentioned Discount Rates, uh, I'm not a Big Brain in that area, but I do know they are subject to manipulation when they are looking at Future Value, and all of that comes back to interest rates.
Pension crashing...
Mircea
Quote:
Originally Posted by newenglandgirl
On a serious note, I'm trying to grasp the overall picture for retirees and future generations in terms of my pet peeve, property taxes (the ones that don't just go up slowly over time, but skyrocket). Looks like a burden many will not be able to handle.
Okay, but it isn't just property taxes, it's all taxes.
Quote:
Housing secretary says FHA faces big risks
WASHINGTON (Reuters) - The Federal Housing Administration faces "considerable risks" to its finances and the Obama administration will continue to scale back the agency's presence in the mortgage market, the top U.S. housing official said on Tuesday.
Housing and Urban Development Secretary Shaun Donovan told Congress that efforts to protect the FHA's dwindling capital reserves were not only important in their own right, but that they could open the door to more private mortgage funding.
WASHINGTON (MarketWatch) — U.S. home prices in December fell to their lowest level since the housing crisis, as an uptick in activity isn’t yet being matched by rising values, according to a closely followed index released Tuesday.
The S&P/Case-Shiller 20-city composite fell 1.1% in December, to wrap up 2011 with a 4% downturn. The index hasn’t been this low since February 2003 and has dropped 33.8% from its peak.
The government needs to stop interfering in the housing market and just let the whole thing collapse. Government interference is just dragging this thing out much longer than it needs to be.
Anyway, what I think I hear you saying is that people will fall into a "comfort level" with property taxes, and then once the housing market picks up about 10 years or so from now, their housing values will rapidly increase and run them out.
That is very possible, even likely.
Tax assessing...
Mircea
Quote:
Originally Posted by Robyn55
Chapter 9 (municipal bankruptcy) is a very murky area when it comes to everything - including pensions:
If I had to make an educated guess - in the end - someone who receives a municipal pension wouldn't have an absolute right to 100% - or to be treated better than most other secured creditors in a municipal bankruptcy (and they might be treated worse).
Chapter 9 doesn't currently apply to states - but there is talk of extending it to state bankruptcies. There is some precedent when it comes to municipal bankruptcies - next to zilch when it comes to states.
Yes, Chapter 9s are really fun.
Quote:
Retirees Accept Pension Cuts in Rhode Island Town's Bankruptcy
Until now, pension funds looked to be bankruptcy-proof. In another recent municipal bankruptcy filing by Vallejo, California, the town was completely broke but its bankruptcy left employees’ pensions untouched. Instead, Vallejo eliminated city services, public benefits, and payments to bondholders.
At the time, it seemed that pension funds were immune from austerity measures. The proposed deal in the Central Falls bankruptcy, however, threatens to upset the status quo. And if the bankruptcy court recognizes the deal, retirees in other debt-ridden towns across the country could stand to lose a significant amount of money.
The impoverished city, operating under a receiver for a year, has promised $80 million worth of retirement benefits to 214 police officers and firefighters, far more than it can afford. Those workers’ pension fund will probably run out of money in October, giving Central Falls the distinction of becoming the second municipality in the United States to exhaust its pension fund, after Prichard, Ala.
And - best I can tell - the PBGC only covers pension plans in the private sector - not the public sector.
Okay, thanks for that tidbit.
Anyway, you're right it is murky and getting murkier. I'm sure we'll see more and more instances where retirees are either forced to accept reduced benefits or they get nothing at all.
Muddying the waters...
Mircea
Quote:
Originally Posted by TuborgP
A class action suit against a party that has no money? The key word is broke/default and tax revenues that are being paid. Do you pay pensions over bond holders and assure that you won't be able to sell anymore bonds for captial improvements. Keep you eye on Illinois.
Quote:
Originally Posted by Robyn55
A class action suit for what? Robyn
You can't sue a State unless the State agrees to allow to be sued. You can sue individuals of the State, such as the governor, lieutenant government etc.
The only exception I know of is when there are Civil Rights violations, but I don't see how defaulting on a pension plan rises to the level of a Civil Rights violation. I think there are a few tortious acts that allow for States to be sued.
Legally...
Bottom line from the responses in this thread so far (as I see it): Retirees who receive pensions from private sector companies have the most cause to be nervous about the long-term viability of their pension. Those receiving city or county pensions also have reason to be nervous. Those receiving state pensions are well-protected now, but could be in the same boat as municipal retirees if Congress should ever change the law to allow states to file for bankruptcy.
There is a lot of taxpayer rage about what is perceived to be cushy pensions, and this could help fuel a move to allow states to file bankruptcy. In situations where there is little or no government (taxpayer) contribution to those pensions, i.e., where the employee/employer contributions have adequately funded them, most of the rage can be diffused. But in cases where the city/county/state is paying big bucks out of the budget every year to pay pension benefits to under-funded systems, I can understand the outrage, even as I understand the unfairness of cutting pensions to those who have been promised them. The pensions which were being paid in Prichard, Alabama were actually very modest, according to a Los Angeles Times article about it some months ago.
Bottom line from the responses in this thread so far (as I see it): Retirees who receive pensions from private sector companies have the most cause to be nervous about the long-term viability of their pension. Those receiving city or county pensions also have reason to be nervous. Those receiving state pensions are well-protected now, but could be in the same boat as municipal retirees if Congress should ever change the law to allow states to file for bankruptcy.
There is a lot of taxpayer rage about what is perceived to be cushy pensions, and this could help fuel a move to allow states to file bankruptcy. In situations where there is little or no government (taxpayer) contribution to those pensions, i.e., where the employee/employer contributions have adequately funded them, most of the rage can be diffused. But in cases where the city/county/state is paying big bucks out of the budget every year to pay pension benefits to under-funded systems, I can understand the outrage, even as I understand the unfairness of cutting pensions to those who have been promised them. The pensions which were being paid in Prichard, Alabama were actually very modest, according to a Los Angeles Times article about it some months ago.
It would be interesting to see how things would pan-out in CA and perhaps other states with similar retirement systems. Many, if not most, of the cities and counties have their pension funds invested and administered under the state pension fund. How any carve-outs would occur if municipalities defaulted or declared bankruptcy would be quite a show.
It would be interesting to see how things would pan-out in CA and perhaps other states with similar retirement systems. Many, if not most, of the cities and counties have their pension funds invested and administered under the state pension fund. How any carve-outs would occur if municipalities defaulted or declared bankruptcy would be quite a show.
How odd that just this morning there is a Los Angeles Times article entitled "Stockton weighs plan to forestall insolvency". It explains that a new California law, AB506, requires that cities contemplating bankruptcy go through a sort of arbitration process first, in which all the creditors, bondholders, employee unions, etc. sit down together to craft solutions.
Yup lots of problems and I am losing my optimism about some of the states as they fail to do the things that could minimize negative consequences. Sorta like the national debt and kicking the can down the road and making it more painful to eventually deal with.
Totally agree with this statement. We have a NJ State pension - we lost our COLA increase as of this year. While there is a provision to put it back in if certain conditions are met, it won't be in my lifetime for sure. NJ is one of the pensions that is severely underfunded. The state has with little exception not put its portion of funding into the pension for well over a decade.
Our governor Christie has been highly touted in some circles for how he "revamped" the pension fund by making individuals pay a higher percentage of wages, thus making our fund more secure. However, the state is only planning to make partial payments for the next 7 years. What he fails to mention is that by so severely underpaying, 7 years from now the pension fund will be more in arrears than it is now! On top of that, the State Supreme Court has ruled that there is no penalty if the state does not pay.
We're glad we have sufficient money put away to make up for the lost COLA increases.
Thankfully, we're still getting COLAs from our CA pension. Last year it was 2% for my wife but 1.6% for me. The year before she received 2% and I received 0%. This year as recommended by the fund, she'll again likely get 2% and I'll potentially get 3.6%. It has to do with year of retirement - her in 2002 and me in 2008. Go figure. None of it makes any sense to me but all donations gratefully accepted.
Bottom line from the responses in this thread so far (as I see it): Retirees who receive pensions from private sector companies have the most cause to be nervous about the long-term viability of their pension. Those receiving city or county pensions also have reason to be nervous. Those receiving state pensions are well-protected now, but could be in the same boat as municipal retirees if Congress should ever change the law to allow states to file for bankruptcy.
There is a lot of taxpayer rage about what is perceived to be cushy pensions, and this could help fuel a move to allow states to file bankruptcy. In situations where there is little or no government (taxpayer) contribution to those pensions, i.e., where the employee/employer contributions have adequately funded them, most of the rage can be diffused. But in cases where the city/county/state is paying big bucks out of the budget every year to pay pension benefits to under-funded systems, I can understand the outrage, even as I understand the unfairness of cutting pensions to those who have been promised them. The pensions which were being paid in Prichard, Alabama were actually very modest, according to a Los Angeles Times article about it some months ago.
Dada Bing. Regarding Prichard Alabama remember what I am always saying that SS and pensions are relative to the cost of living and related salaries in a given area. That is why folks can work in high income areas and transplant to low income areas for retirement and pick up buying power. However those folks who always worked there are receiving benefits based on their lower cost of living and that can pale in comparison to elsewhere.
Thankfully, we're still getting COLAs from our CA pension. Last year it was 2% for my wife but 1.6% for me. The year before she received 2% and I received 0%. This year as recommended by the fund, she'll again likely get 2% and I'll potentially get 3.6%. It has to do with year of retirement - her in 2002 and me in 2008. Go figure. None of it makes any sense to me but all donations gratefully accepted.
The big thing for Calif is your investments are well handled and have done better then many other state pension funds. Last time I checked you also had over 200 billion in your trust fund. Truth be told the California pension funds while having issues are much healtheir than the state government and the state of California would be even more of a basket case if the pension fund wasn't lubricating the state economy and buy muni bonds.
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