Posted on 05/01/2010 6:32:51 PM PDT by Libloather
Will government pensions be next to go bust?
Generous benefits and faltering investments have depleted government funds.
By PAT DOYLE, Star Tribune
Last update: April 28, 2010 - 10:43 PM
A financial time bomb is ticking away -- mostly unheard by taxpayers, government workers and retirees.
Years of off-the-mark investment assumptions, inadequate contributions and generous benefits have left government pension funds in a perilous situation: unable to meet long-term commitments to current and future retirees without major changes.
"It's a serious problem," said Sen. Don Betzold, DFL-Fridley, who is working on a plan to shore up the funds.
Minnesota's retirement funds and other investment accounts lost $10 billion over the past two years, leaving about $53 billion under state management at the end of 2009. The pension funds have been slightly above or below minimum balances recommended by the federal government.
Only 76 percent of the pension obligations for 636,000 teachers, state and local government employees and retirees were fully funded at the end of last June, leaving their pensions short $12 billion. One smaller local fund could go broke in as few as five years, meaning pension checks wouldn't be cut, Betzold said.
To deal with the pension problem, legislators are proposing an unusual package of increased government payments, greater contributions from employees and reduced benefits for retirees. Bills in the House and Senate are expected to be acted on this session.
(Excerpt) Read more at startribune.com ...
(ahem) Just to make it clear: the pensions that are in trouble are state and local government pensions, NOT federal employees’ pensions. The latter are not in any financial jeopardy and are fully funded.
We now return you to your regularly scheduled state/local fiscal crisis...
If you have signed contracts for retired employees and it goes to court on challenges to changes, you will have judges who are also under contracts deciding the outcome. Which way will they lean... just wondering.
Just like Sosha Security?
If something can’t go on, it won’t.
I have read that New Jersey state employees receive free health care for life. Is this true?
Local government employees can sue their employer, which is why cities, counties, fire districts, etc. will have to go the bankruptcy route. Judges may be sympathetic to the claims of pensioners, but cannot make local entities sh*t money that does not exist. Several cities are in the bankrupcy process today because of pension woes.
States cannot go bankrupt, because they don’t need to. When states like NJ, CA, IL, and several others stop paying pensions or reduce pension payments and are sued by pensioners, they’ll just assert sovereign immunity.
The Fed has the convenient option of printing money. The only option states and localities have is to raise taxes.
I've read that they pay in $125 grand and get back $2.3 million PLUS $500 grand in health coverage starting at the typical retirement age of 49.
Try ---> this. Wow.
Anyone watching Greece? That’s what socialists do when they run out of other peoples’ money. Just be forwarned - and forearmed - when the socialists start rioting here.
“The Fed has the convenient option of printing money. The only option states and localities have is to raise taxes.”
Exactly right. Which is why federal employees’ pensions are in a completely different (i.e., protected) class from state and local employees’ pensions.
“The Fed has the convenient option of printing money. The only option states and localities have is to raise taxes.”
Exactly right. Which is why federal employees’ pensions are in a completely different (i.e., protected) class from state and local employees’ pensions.
This is not going to end well. No way. No how.
I doubt very seriously that the federal pension funds are properly funded when you have 525 crooks in Washington year round.
Arthur Andersen could audit the pension funds, and say whatever they are paid to say.
Likely the same for virtually any other audit function, private or government.
Let’s have the bond rating agencies get involed. Insurance executives. Lawyers. Securities brokers.
Untrustworthy from bottom to top.
Go read the NJ article: http://www.app.com/article/20100415/NEWS03/100415007/0/NEWS05&source=rss
The federal retirement system was changed to FERS in 1986. Unlike the previous system (CSRS) that was very generous, FERS is built on benefits from three sources: Social Security, Basic Benefit Plan, and Thrift Savings Plan.
http://www.opm.gov/RETIRE/PRE/FERS/INDEX.ASP
Social Security is the same what everyone else pays. Federal employees are not exempt from SS deductions from their pay.
The Basic Benefit Plan pays 1% of your high-3 salary average per year of service. In other words, if you serve 30 years, you get 30% of your high-3 salary average.
TSP is similar to a 401K plan. The employee makes contributions with a certain percentage matched by the federal government. TSP is the largest component of federal retirement, and it is almost entirely dependent on the employee to save for their own pension.
Health care, by the way, is government subsidized, but it’s not free. Federal employees, including retirees, pay a portion of their own health insurance. Blue Cross Blue Shield, Standard Family Plan: government pays $814.75 and employee pays $400.97 per month.
http://www.opm.gov/insure/health/index.asp
The federal retirement system isn’t nearly the free ride that some folks think, but it’s definitely not a bum deal for employees either.
All government programs, federal, state, and local, need to be reassessed. Priorities MUST be set, and all of us are going to have to sacrifice something to set things right. If people refuse to accept reductions in benefits, smaller government, and higher taxes (ALL three), then I guess we’ll just have to lose it all, eventually, in financial ruin.
It definately needs to be exposed and corrected.
Now when Obama was faced with the same situation with the car companies and the UAW what did he do?
We really can’t afford to buy out every state though.. can we? Will we?
Yes it is true. NJ state workers must work 25 years and then they get free medical. A prescription plan, that has a copay of $15.00 for three month supply. If they retire before 55 years old then the pension is reduced by I think 5% each year. So If you retire at 50 the pension is reduced 25%.
Some state workers pay into their pension, others do not, such as the teachers.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.