Posted on 04/20/2016 7:28:06 PM PDT by Nachum
A dark storm is brewing in the world of private pensions, and all hell could break loose when it finally hits.
As the Washington Post reports, the Central States Pension Fund, which handles retirement benefits for current and former Teamster union truck drivers across various states including Texas, Michigan, Wisconsin, Missouri, New York, and Minnesota, and is one of the largest pension funds in the nation, has filed an application to cut participant benefits, which would be effective July 1 2016, as it "projects" it will become officially insolvent by 2025. In 2015, the fund returned -0.81%, underperforming the 0.37% return of its benchmark.
Over a quarter of a million people depend on their pension being handled by the CSPF; for most it is their only source of fixed income.
Pension funds applying to lower promised benefits is a new development, albeit not unexpected (we warned of this mounting issue numerous times in the past). For many years there existed federal protections which shielded pensions from being cut, but that all changed in December 2014, when folded neatly into a $1.1 trillion government spending bill, was a proposal to allow multi employer pension plans to cut pension benefits so long as they are projected to run out of money in the next 10 to 20 years. Between rising benefit payouts as participants become eligible, the global financial crisis, and the current interest rate environment, it was certainly just a matter of time before these steps were taken to allow pension plans to cut benefits to stave off insolvency.
The Central States Pension Fund is currently paying out $3.46 in pension benefits for every $1 it receives from employers, which has resulted in the fund paying out $2 billion more in benefits
(Excerpt) Read more at zerohedge.com ...
Oh, great...I’m owed a pension funded through Western States Teamsters Trust. (From a previous life)
Translation: We expect a bail-out.
Yeah, but they’re all old and easy to take . . .
But I thought Boinie wanted to take trucks off the road and put the load on rail?
Those with large IRAs should expect another push for the government to “help” you manage your account.
#NegativeInterestRatesMatter
So, you’re in favor of giving taxpayer dollars to unions? (Shakes head in disgust.)
Kept reading...finally got to the cut amount.
$700 per month cut to $300.
I can’t even imagine numbers that high.
I get 900 pension and 780 in Social Security.. both widows benefits.
Husband retired in 1984 and best year as a deputy sheriff was $20,020. Inflation since then has made it impossible to live on...that was expected.
The longer I live retired, the more planning and downsizing it takes!
With government and pensions only doing direct deposit it will be another cut in income if we go to negative interest. They will just add more fees at the bank to get to the money.
When a city hires a bus driver who is 25 years old, they have actuaries who project out the pension benefits that driver will receive at retirement, how long the driver is likely to live past retirement, and so on. They know how much they need to invest, and at what interest rates, for the rest of the driver's career in order to meet those obligations.
In the 1970s it was easy to invest for pensions, because interest rates were high. But if the bus driver was hired in 1980, when rates were at their peak, then during the driver's whole career, interest rates would be falling. The pension investors are the most conservative of investors. They take money and like to know exactly how much they will receive in ten, twenty years. But in a falling interest rate environment, their projections for the return on their money would always be too low.
If they are in a long term interest rate slump, all they can do to meet their obligations is accept more risk in order to get a higher return. But these investors are sometimes obligated to only invest in the safest investments. But as the interest rates kept going lower, they had to begin doing stupider things. This is how Wall Street can start bundling up subprime mortgages, label them AAA, and sell them to pension funds that on paper are required to invest in conservative investments, but in reality are so deeply behind their projections that they are forced to gamble.
Doesn't quite read like it's a private pension. Reads like it's union pensions with are quasi governmental in nature. I wonder if they lost money divesting from Israel.
Doesn’t Central States also cover pension benefits for the UPS drivers? Seems like we have called Central States in Chicago to get health insurance benefit info for some of our mental health patients.
BS, we should leave the pension fund to float or sink on its own. If it sinks it is because of the mismanagement of the pension fund. As it stands though, I am sure we will be forced as taxpayers to pay for it thru the pension guaranty fund. One way or another we taxpayers are going to end up paying for all of the failed pensions in this country, not just the robbed and failed SS.
There is a reason for stapling those rates to zero. Take any projected interest rate increase you deem reasonable, and multiply it times the national debt. Now divide by the number of taxpayers.
We are pretty much out of runway.
If Chinese and Indian workers create products and services that are competitive with the U.S., then their standard of living will rise.
In order for these nations to prosper, they will price their products and services below competing products from the U.S.
The result will be a contraction of markets for companies with workers in the U.S. and a lowering of wages. This process will continue until the differences between the standard of living in China or India and the U.S. has vanished.
Unfortunately, the people of the U.S. are not prepared to accept the only deal they are going to get. Instead, we see pie-in-the-sky ideas of how to implement more and more programs, accumulating more debt, and pushing the day of reckoning into the future.
The future is just about here. Zero interest rates have taxed savers and benefitted spenders. This has caused indebtedness to grow to such levels that the interest rates on such debt could not be paid if interest rates were returned to normal.
The government is already providing money as Earned Income Tax Credits for low wage earners. Before the music stops and everyone rushes for the chairs, we will see even more such direct transfers to make up for prior failed policies.
The reason the policies fail is due to the lack of recognition that the problem is that workers must accept a lower standard of living. Taxing "rich people" will not erase this reality, it will only put the government in the position of not solving the problem and cause the wealthy to stop creating jobs.
As an older Baby Boomer, I have witnessed rapid changes throughout my life which have caused people only ten or fifteen years younger than me to experience a dramatically different country than I did. With some luck my prudent habits will see me and my wife through the rest of our lives with some semblance of comfort.
For those who come after us, I see little hope.
Not only no, but hell no.
Those of us who have had to scratch ours together on our own shouldn't have to pay for the people who got the perks and bennies from the union, because every time we bought something with the union label, we paid for it.
Not only that, the Public employees pension plans around the country are so far in the hole light can't hit bottom, and the precedent would have them looting the taxpayer (again) for that.
Take it up with the guys in slick suits who made promises to the rank and file if you got a beef, I didn't make that deal with anyone and I'll be damned if I'm going to pay for it.
“Translation: We expect a bail-out.”
Not much time to push that through the grinder this year. I pray it doesn’t! The best fix is an improved economy raising all of the sinking ships....
in the big picture these plans will be liquidating to meet
monthly payments. The reason the stock markets came back
after 2008 is that boomers were still putting in (one way or another) for retirement. When the tide starts to turn, the markets (stocks, housing ...) will have more liquidators than investors and the house of cards will come down.
In some ways we can already see that the boomers impact on retail as past a certain point their retail consumption drops off. Hence the problems at the big box retailers.
It’s election year, Big Gov to the rescue.
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