Posted on 11/15/2005 2:13:25 PM PST by Brilliant
If they've got the money to bail out private pensions, then there's no reason they can't find the money to, say, fence off Mexico and deport 10 million illegals.
Note to Freepers everywhere - this is not perfectly analogous to the S&L Crisis. In that situation people laced money on deposit with organizations which could offer the federal government backing prospectively. It was a contractual obligation through federal deposit insurance. Now that was a debacle - but the PGBC is not federally guaranteed. It will take an act of Congress to take federal taxpayer money and siphon it to the pension beneficiaries of these dead and dying corporations. It will be one incredible political mess - but it is no foregone conclusion that Congress would do such a thing. Right now the Delta pilots are trying to obliterate the airline - there is no way that the general revenue taxpayer should pick up the tab for that.
Corrected:
Note to Freepers everywhere - this is not perfectly analogous to the S&L Crisis. In that situation people placed money on deposit with organizations which could offer the federal government backing prospectively. It was a contractual obligation through federal deposit insurance. Now that was a debacle - but the PBGC is not federally guaranteed. It will take an act of Congress to take federal taxpayer money and siphon it to the pension beneficiaries of these dead and dying corporations. It will be one incredible political mess - but it is no foregone conclusion that Congress would do such a thing. Right now the Delta pilots are trying to obliterate the airline - there is no way that the general revenue taxpayer should pick up the tab for that.
Oh, I think the Government will find a way to pay for it. They will just end up sacrificing little things like Defense, Homeland Security, and Law Enforcement. That and raising taxes on anyone who actually bothered to save for retirement. In other words, legimate government functions will be gutted to pay old people benefits. Who cares if we haven't had a new fighter aircraft for the last 40 years--as long as Grampa gets his prescription drugs (for free). This is really what the Dems have been after for decades and soon it will come to fruition. Lets just hope they don't add reparations and social security for illegal aliens on top of that.
Have the people put anything into these pension funds? - other than years on the job, I mean. I thought these pension plans were simply funded by the company, and not some sort of 401K plan people bought into.
If the retirees did put their own money in, don't they have a right to remove their own money from the fund and control it? That's the way a company 401K works.
$22.8 Billion just for this year. Like social security and medicare, the deficit goes up from there.
Yep, the "rich" are just exploiting the poor workers.
I would agree that in general Public pensions are more secure than private ones, but they are not immune. At any level beneath the State your taking your chances. For instance the LA Unifed School District has huge underfunded pension liability and no obvious way to pay for them. The city of San Diego is likely to go bankrupt, and in the process will discharge some of it's pension liability.
It seems unlikely that a State would go bankrupt, but it has been discussed in Oregon where the huge bloated state run pension system is THE driving factor. Taxes are at the limit, and there are structural laws that prevent easy new taxes from being created. It's unlikely but not impossible that Oregon will go bankrupt, and if they do so the explicit purpose will be to discharge pensions. (Voter initatives designed to address the absurd PERS system were thrown out by the Supreme Court, the justices are of course all PERS recipiants, but I'm sure this had nothing to do with it.)
Federal pensions from organizations like the US Army and Post Office are as good as it gets. One assumes the only default likely here is due to inflation. But the amounts will be paid, or if not only canned tuna fish, ammo and gold will have any value and we'll all have a lot bigger problems to deal with .
If the retirees did put their own money in, don't they have a right to remove their own money from the fund and control it? That's the way a company 401K works.
No. These pensions are "defined benefit". In a defined benefit plan you earn the benefit based on length of service, and perhaps job classification or pay grade. Let say you work for Big Airline Inc. Big Airline, as part of their benefits when you join at 25 says: Ms. Stewardess for each year you work Big Airline will give you a pension of $200 a month when you retire. So you work 30 years, and you have a defined benefit of 30x$200 / month, which works out to $6,000 a month or $72,000 a year.
Supposedly the company was supposed to be building a fund to pay this off. But in the real world perhaps they misinvested it in Enron in the 1990s (the idea being to show more profit for the company by putting less money into the pension fund and using super aggressive investments to meet the funding requirements). Or perhaps their actuarial assessments were wrong, expecting most retirees to die by 69 and they are now living to 72. Or perhaps there business just went to crap and they had no way to put any money into the system for 4 years. Net / net is you have no individual account, only a promise.
What companies like Delphi are doing is going to chapter 11 and saying: we can't stay in business and pay all these benefits. So the pensions are sent to the Pension Guarantee Board, along with some cash, maybe some stock in the company, maybe some future profit sharing plan. Oh, yeah, the benificiaries have their benefits reduced in this process. So Ms. Stewardess will be told something like: the maximum the PGBC pays is $4,000 a month, not $6,000. That is your new pension.
There is an expectation that taxpayers will now bailout the PGBC. This is just another bogus intergenerational transfer of wealth. While one feels for those who are not getting their promised pensions, it certainly is odd to say that todays workers, who are on the job and not being promised (in general) ANY guaranteed benefit (and are already paying more to oldsters for Social Security than they will ever recieve from THAT system) have to keep the promises that they were not involved in making. On the other hand seniors vote, and most have shown no disinclination to vote like liberals, that is take money they have not earned from whoever they can take it from.
These unions and businesses had signed the contracts. Are contracts to oblige the workers but not the employers? Is it what "free" market is about?
It's not legal (yet) to make you share with other people directly. A little bit of inflation will have you sharing indirectly, though.
This protection of your pension account is why OJ was able to keep his pension, btw.
Congress and the administration are hard at work to raise the PBGC insurance premiums that employers pay each year. Why have the voting taxpayer pay for Congress' mess when evil corporations can bear the brunt?
Once defined benefit plans are dead, they'll pick on the defined contribution plans.
Unions?
My wife and I are enrolled in the New Jersey Pension Fund . I just went to the web site and the fund has invested assets in the neighborhood of 72,000,000,000 (billion ) dollars . That is a ton of money.
The fund also made up all its losses in the dot com bust . The state is also sited in a lawsuit for nor repaying a loan for a few billion and not contributing to the fund 100% during the "gay guy" McGreevey years .
Companies frequently want to fund their employees' benefits. A couple of factors sometimes prevent this from happening.
First, a company may run into the "full funding limitation." If the market is flying high, there may be so much money in the trust that a company is not allowed to deduct additional contributions and may be subject to an excise tax, as well. When the market then comes back to earth, the plan may be underfunded.
Second, a company is not generally allowed to take contributions out of the trust. Therefore, many companies will not contribute any more than is required. If a company could take money out, there would be less disincentive to put money in.
The 22.8 billion is a cumulative shortfall, not an annual one.
There are few limits to what one can promise in a contract, but I have zero sympathy for idiots who agree to a contract where a party promises things that they cannot reasonably deliver. Any damn fool who goes along with that deserves to get stiffed as an object lesson to the other fools in society thinking about doing the same thing because someone promised them the moon.
Any employee who agrees to a contract without doing due diligence on the terms deserves whatever they get. The unions got greedy and did not look too closely or think too hard about what they were agreeing to.
Putting aside the question if an average worker can predict the future or be an expert on economy, are you suggesting that the employers KNOWINGLY made false promises?
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