Posted on 02/07/2005 8:57:23 AM PST by NormsRevenge
California has repeatedly given new and improved retirement benefits to public employees.
The question now has become what, if anything, it can take back.
While the state has wide latitude in scaling back pension benefits for new workers, experts say, it faces far stricter limitations when it comes to current employees.
Even some of the measures proposed by Gov. Arnold Schwarzenegger, which stop short of altering the basic pension formula in favor of steps such as encouraging workers to leave the retirement system, could trigger a legal challenge.
California case law makes it clear that any changes to the pension system that undermine its fiscal soundness amount to the state reneging on its promise to provide for public employees' retirement.
"The minute you become employed, you're making a deal with the state," said John Adkisson, a lawyer who represented the California Public Employees' Retirement System in a landmark 1997 case.
Assemblyman Keith Richman, R-Northridge, got the message when the legislative counsel told him a pension bill he had written could be challenged as unconstitutional if it applied to current workers.
Richman's bill would require state and local pensions to be based on a three-year salary average, instead of the one-year formula used by the state and many local agencies - a move that would reduce retirement benefits.
Richman is going ahead nonetheless, reasoning that his bill may become a test case. "Even something as sensible as moving to a three-year averaging is very difficult if not impossible to do," he said.
Schwarzenegger ignited the debate by declaring in his State of the State address last month that revamping pensions would be one of four goals in the coming year.
(Excerpt) Read more at sacbee.com ...
Well, Isn't that special?
Uhhh, if the state goes bankrupt, whp pays their benefits?
With judges running interference for 'special interests' , what's in it for them? Campaign donations, perhaps?
I've made my living as a professional pension actuary (a Fellow of the Society of Actuaries, or "FSA"). This writer seems to have only a partial grasp of the facts. I suspect that the politicians in this case also have a garbled & incomplete grasp of the facts -- that's how these problems become so large in the first place.
Hey, isn't that why politicians hire people (FSAs) like you? To give them a clearer and more complete grasp of the facts?
Most every public plan has been able to meet its actuarial rate (around 8.5%) over the past 10 years. Why are there unfunded liabilities? Because the plan sponsors haven't been making their actuarially determined contributions.
\ OTOH, A State employee works for thirty years, gets a cushy deal for one year that threatens bankruptcy, and then can't be taken back to the old system with an adjustment payment for that one year?
\ OTOH, A State employee works for thirty years, gets a cushy deal for one year that threatens bankruptcy, and then can't be taken back to the old system with an adjustment payment for that one year?
If you are covered under a plan in private industry, you are covered by the PBGC. Public sector workers are not. I'd take the protections given to private sector over the public sector.
Agreed, 4-6% is historically more realistic. Given the nation's trade balance, currency, and debt load, even that may be too rosy.
HUH ?
a. PBGC doesn't cover 100% of a defaulted pension liability.
b. how many govt. pension plans have gone bust in your lifetime ?
In 2004, voters in the city of Houston passed a proposition allowing the city to reneg on benefits already accrued. That would be illegal in private industry.
How about privatizing their jobs and laying them off? Or at least threatening to do so if they don't go along with a scaleback.
Retiring at 50 with at least half pay and full medical coverage for life is very rare or non-exsistant in the private sector. It's a product of years of expanding the state employee payroll and pandering to the unions.
State employees have a vested interest in keeping the Dims in power.
??
Tell that to the Enron pensioners !
Did Enron have a pension? That's news to me. Please provide evidence.
401(k)s are not pensions. They are separate accounts managed by their owner. For the life of me, I don't know why so many Enron employees had Enron stock in their 401(k).
That said, the equivalent to a 401(k) for public employees is the 457. Again, 457s are not pensions and the investments they contain are directed by the employee/owner.
I searched. I couldn't come up with any evidence that Enron had a pension.
Do you know the difference between DB and DC plans?
I work for a plan sponsor with an actuarial rate of 8.5%. We've beaten it over the 3 year period (recent past) and 10 year period (longer recent past). We're going to beat it this year. The underfunded status of most pensions is not that the investments haven't performed, it is that the plan sponsors haven't funded them according to the actuarial requirements. This is particularly true for public plan sponsors.
I'm glad to hear your returns have been good. But I'll stand by my statement -- 8.5% is not a prudent assumption, in my professional opinion, for expected average future returns over the long term (i.e. over a 20-40 year period). That's especially true if the sponsor takes on any more risk than investing in something like an S&P 500 index fund -- for example, if they engage in active stock trading strategies.
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