Cities borrowing from their own pension funds, where is this leading

[TuborgP]

Originally Posted by texdav

No ;if a employee is hired under a certain standard of employment then its almost like a contract. What usually happens and does is that a employers changes the standard on new hires. Like any other obligation under contract the city must be able to discharge that under bankrupsy like private business does or settle with the employees.Not sure cities have bankrupsy protection tho under law. The city could desolve and of course bondholders ;employees could go after assets. Pension payments are usually governed by state law for governamnt employees. Once a city defaults then it might as well dissolve as its bondrating is worthless as far as doing projectsOne reason cities guard their rasting so mcuh;just one drop means huge cost differences in bond cost.

That is why Republicans in the House killed efforts by some of their ranks to pass legislation that would allow states to declare bankruptcy.

[akck]

Originally Posted by texdav

No ;if a employee is hired under a certain standard of employment then its almost like a contract. What usually happens and does is that a employers changes the standard on new hires. Like any other obligation under contract the city must be able to discharge that under bankrupsy like private business does or settle with the employees.Not sure cities have bankrupsy protection tho under law. The city could desolve and of course bondholders ;employees could go after assets. Pension payments are usually governed by state law for governamnt employees. Once a city defaults then it might as well dissolve as its bondrating is worthless as far as doing projectsOne reason cities guard their rasting so mcuh;just one drop means huge cost differences in bond cost.

I was providing a scenario on what would likely happen if a municipality stopped paying its pension obligations from the standpoint of the pension fund. It's highly unlikely that the pension fund would be obligated to payout pensions based on income they have not received pension payments. Granted the municipality would suffer what you've said, likely face employee lawsuits and may be required to make employees whole, but the pension fund has no obligation other than to provide benefits based on what has been paid in.

[texdav]

yes they are as obligated under terms of hire as any contract under law.That includes what they promised in contribution.Most staes regulate how they contribute into the fund durig workers life and the fund is audited.Its the same as workers laid off and the terms of Vesting as to what they are entitled to under pension fund.