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I don't want to cause any alarms, and don't know how this will play out, but I think it is something that at least needs to be acknowledged:
The financial crisis has blown a hole in the rosy forecasts of pension funds that cover teachers, police officers and other government employees, casting into doubt as never before whether these public systems will be able to keep their promises to future generations of retirees.
Within 15 years, public systems on average will have less than half the money they need to pay pension benefits, according to an analysis by Pricewaterhouse Coopers. Other analysts say funding levels could hit that low within a decade.
Thankfully, and I say that as a retired state employee who's married to another state retiree, our pensions and benefits are covered under contract law. A number of courts, both state and federal, have already ruled that they're virtually untouchable. The only adjustments that can be made are for future employees. Existing obligations that cannot be met by the state retirement systems must be met by the state general fund.
Thankfully, and I say that as a retired state employee who's married to another state retiree, our pensions and benefits are covered under contract law. A number of courts, both state and federal, have already ruled that they're virtually untouchable. The only adjustments that can be made are for future employees. Existing obligations that cannot be met by the state retirement systems must be met by the state general fund.
I hope this is true in my case as well. In fact, the rumors about the possibility of changing the terms for future retirees was one (albeit of many) consideration(s) in my decision to retire this year rather than hang in there for a few more years.
Your pension is safe. However, your subsidized medical insurance could disappear. The pension is owned by you; the subsidized medical insurance is not. It looks like the Maryland "Blue Ribbon Commission to Study Retiree Health Care Funding Options" has until December 31, 2009 to issue its final report. I'm thinking I'd better keep my eye on this one. I was considering temporarily dropping my state retiree health insurance (I only have the minimum subsidy) while temporarily working for the feds; now I'm thinking maybe I should wait for the final report. I know I should be thankful I have choices, but geez. I hate thinking about this stuff.
Last edited by lenora; 10-11-2009 at 07:26 PM..
Reason: spelling errror
It's an informative article, and alarming. And it describes a situation that isn't limited to state and local pensions (although fortunately for my wife and I, and other federal retirees, it doesn't seem to apply to federal pensions*).
"The problem isn't limited to public pension funds; many corporate pension funds have lost so much ground that they are also pursuing riskier investments. And they, too, could end up a taxpayer burden if they cannot meet their obligations and are taken over by the federal Pension Benefit Guarantee Corp."
So this problem has the potential to impact future state and local government pensions, future corporate pensions, and all taxpayers as well.
*Of course, CSRS employees/retirees with money in the Thrift Savings Plan, and all FERS employees/retirees, are directly impacted by any severe drop in the financial sector.
Last edited by GreenGene; 10-11-2009 at 07:27 PM..
Reason: to clarify comment on federal pensions
Thankfully, and I say that as a retired state employee who's married to another state retiree, our pensions and benefits are covered under contract law. A number of courts, both state and federal, have already ruled that they're virtually untouchable. The only adjustments that can be made are for future employees. Existing obligations that cannot be met by the state retirement systems must be met by the state general fund.
There are a number of politicians who want to challenge that in court including one who might run for president. The reality we need to realize is that state and local coffers aren't bottomless and the courts can't mandate tax increases that citizens can't afford to pay. We are not as safe as some of us think we are and the current state of state budgets is not reason to sleep comfortably. http://online.wsj.com/article/SB124813472753066949.html
A filing under Chapter 9 of the Bankruptcy Code, which covers public entities like school districts and municipalities, would allow the district to put major creditors such as textbook publishers, private bus operators and DTE Energy, the local gas-and-electric utility, in line for payment. It also would give Mr. Bobb broad latitude to tear up union contracts without protracted negotiations.
Some experts say the Detroit case could be the first in a string of Chapter 9 bankruptcies among school districts and other public entities battered by the economic crisis, and it could help shape that area of the law. "Given the state of public finance," says Samuel Gerdano, executive director of the American Bankruptcy Institute, "I think the wave is coming."
The above is from the link
Hmmmm one of the questions is could bankruptcy legislation for municipalities be stretched to include states?
I hope this is true in my case as well. In fact, the rumors about the possibility of changing the terms for future retirees was one (albeit of many) consideration(s) in my decision to retire this year rather than hang in there for a few more years.
That was wise. I suspect there are three categories that folks could fall in.
A. Currently retired-most protected
B. Currently hired-probably protected
C. Not yet employed-no protection
Thankfully, and I say that as a retired state employee who's married to another state retiree, our pensions and benefits are covered under contract law. A number of courts, both state and federal, have already ruled that they're virtually untouchable. The only adjustments that can be made are for future employees. Existing obligations that cannot be met by the state retirement systems must be met by the state general fund.
The above is an interesting read from before the meltdown. The state that may first test the constitutionality of mandatory funding may be California as it is in the most dire current budget mess. Again what appears constitutional is the requirement to fund. However there are those who want to test it by actually not funding increases. By that I mean where does the court say the state has to get the money from?
I don't want to cause any alarms, and don't know how this will play out, but I think it is something that at least needs to be acknowledged:
The financial crisis has blown a hole in the rosy forecasts of pension funds that cover teachers, police officers and other government employees, casting into doubt as never before whether these public systems will be able to keep their promises to future generations of retirees.
Within 15 years, public systems on average will have less than half the money they need to pay pension benefits, according to an analysis by Pricewaterhouse Coopers. Other analysts say funding levels could hit that low within a decade.
I read the article online in the Post right after getting up. Found it interesting and a bit broad in what it covered. The following was from before the meltdown and is now a laugher when you consider how much people lost in investments. It does highlight the problem on the local level. Both Michigan and Ohio have serious problems and local districts are having make decisions about building schools or funding pensions.
The following is a link to a site that is not very public pension friendly. It is a good clearinghouse on pension discussions/articles by those who feel a need to make significant changes now. http://www.pensiontsunami.com/
Hmmmm one of the questions is could bankruptcy legislation for municipalities be stretched to include states?
No.
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