From a free market perspective, pensions nothing more than deferred compensation. An employee agrees to contract with an employer for labor at a price which includes current compensation (wages, medical insurance, etc) and deferred compensation (future pension benefits). If the employee in good faith provides the labor, the current and future compensation is owed by the employer today and in the future.
Cutting pensions of employees who have provided the labor they were contracted to provide is nothing more breach of contract and outright theft. Whether or not the employer (public or private) overpaid for the services of the employee is not an issue. The labor was provided and the compensation is owed.
Employers (municipalities, states, and private corporations) have successfully lobbied Congress for decades to loosen up pension funding rules on the books as well as block legislation which would require employers to fully fund pension plans. To blame greedy employees (government or private) for unfunded pension plans is disingenuous. It is employers, aided and abetted by Congressmen owned by K Street, who have deliberately underfunded private and public pensions in this country for decades.
In 2012 Congress buried in a highway bill a provision allowing corporations to reduce payments into private pension plans. In 2014 Congress passed a bill for the first time allowing pension plans to cut earned benefits. Essentially Congress approved the theft of labor. Instead of loosening funding requirements, Congress should have passed legislation protecting pensions by requiring all employers, public and private, to fully fund pension obligations within five years and to maintain full funding thereafter.
A person who truly believes in free market principles should stand with the employees on the issue of pensions. To allow any employer to walk away from pension obligations is to condone outright theft. Reducing pension benefits is no different than the state allowing a person to walk into a store, take an item to the cash register, hand the cashier partial payment, and walking out the door with no fear of prosecution. Whether or not the price charged by the store was fair or not, to render only partial payment is theft.
It is very possible some public or private pensions are overly generous. One could also argue a firm in bankruptcy paying its CEO a large bonus or severance payment is also excessive. It matters not. If are to be a nation built on respect for rule of law, we must enforce fulfillment of contracts no matter if the contracts are perceive to be good or bad. When we either condone theft or we don’t.
The big dividing line is that while private employer and/or private business union pensions may have a portion of the actuarial liability Un-funded (under invested), there are public pension benefits that have no underlying investments to fund the pensions at all — they are simply funded from future public revenues.
In this case, the employee often votes for office holders that will increase benefits regardless of the burden on the public. It is a symbiotic theft ring. In that case, the employee that helped keep a corrupt practice in play does deserve a good portion of the risk should the pension benefit be disavowed in part.
I would agree with this on almost any other issue, but not when it comes to pensions. The problem with a modern pension system is that it gets fouled up for reasons that are completely out of the employer's control. Demographics, life expectancy and medical advances, for example, have been a much bigger factor in the insolvency of pension plans than reduced employer contributions. Simply put, we have reached the point where it has become commonplace for people collect pensions for a longer period of time than they were actually employed. No employer can stay in business for very long under this scenario.
We must end public pensions. Make all benefits payable now. Fund employee 401Ks or 403Bs, as generously as current funds may allow, leaving future taxpayers off the hook.
Cutting pensions of employees who have provided the labor they were contracted to provide is nothing more breach of contract and outright theft.
Is it theft when a private corporation goes bankrupt and can no longer pay a pension?
A person who truly believes in free market principles should stand with the employees on the issue of pensions.
I think these pensions should be converted into 401Ks.
Reducing pension benefits is no different than the state allowing a person to walk into a store, take an item to the cash register, hand the cashier partial payment, and walking out the door with no fear of prosecution.
And when the pensions have bankrupted the store?
These are government pensions.. not corporate that are being discussed.
As for the promise... anything too good to be true usually is. These pensions with retirement at 50 ish and up are not sustainable. The only way to support them is taxation.
Most of us out in the real world are self-funding for our pensions. Most are underfunded because too many don’t understand that the only way to be partially successful is to save AT LEAST 25% of your GROSS pay at at least 6% for at least 35 to 40 years.
Employers are being held to their pensions. Governments will hold us to their pension obligations by brutal taxation even if we can’t ever afford to retire.
Some things are just not possible no matter what the contract says. You had better keep that in mind when you sign up for something that is too good to be true... it usually isn’t either true or possible. You can wish all you want but you can’t get blood out of a turnip.
Your argument is both interesting and correct. As you said so well, to arbitrarily cut pensions just because they are a "burden" flies in the face of the rule of law.
Orderly Bankruptcy courts are the solution here. And that's something many municipalities will have to consider.
IMHO, courts should look at the payment per retiree. Here's what I mean. You have retired folks at the bottom (janitors, etc.) collecting maybe $12,000 per year. And then you have folks at the top collecting maybe $100,000 per year.
If a haircut must be given, it should go more towards those folks at the top. Those folks put in more when they were working, sure, but a, say, 20% cut across the board would devastate the janitor. The top exec, not so much.
I know that's 'progressive" talk (ugh), but it makes sense to me.
It's not so, now. Most retired public employees are living pretty high.
Dude, there isn’t enough money. Period.
I’m sorry these public sector leeches believed the promises of politicians. I’m sorry they were so fricking stupid. But it’s not my fault. The math doesn’t work. The math never worked. It’s never going to work.
Stupid is supposed to hurt.
L
Right. I did little to no necessary work and now I deserve 75% of my ‘working’ salary for the rest of my life (retired at 49 with 30 years in). Thanks sucker.
Imagine a contract you have to pay that was negotiated by the store and it’s employees. Say your plumber comes to fix that leak, charges you $100, but then says, “once I retire you’ll have to pay me $75/year for the rest of my life.” Is that a deal you’d make? Thought not. Representation must mean something to be true representation.