In a first, CalPERS may cut small town’s pensions

A CalPERS crackdown on employers that have not been paying into the pension fund could cut the pensions of all four retirees of a small Sierra County city, Loyalton, which stopped making its payments more than three years ago.

It would be the first time that CalPERS used its power to cut pensions, in proportion to the payment not made by the employer, after a plan is terminated and closed to new members, a CalPERS spokesman said.

The city council of financially troubled Loyalton voted unanimously to stop making payments to CalPERS in March 2013. The city had a population of 769 in the last census and is about a 45-minute drive from Reno.

Four Loyalton retirees have continued to receive full California Public Employees Retirement System pensions. Another former Loyalton employee is vested in a city pension but has not yet retired and applied for it.

To avoid deep pension cuts, Loyalton owes CalPERS a $1.66 million lump sum payment that cannot be made over time with installments. The city has talked about trying to get back into CalPERS or possibly obtaining a loan.

According to a state controller’s report for 2015, Loyalton had revenues of $1.17 million, expenditures $1.68 million, liabilities $6.16 million, assets $11.1 million, fund equity $4.8 million, and population 733.

In a “final demand letter” on Aug. 31, CalPERS gave Loyalton 30 days to “bring its account to current.” If the city does not pay the amount owed, the CalPERS board will be asked to declare Loyalton in default, which could trigger the pension cuts.

Loyalton city council members and their lawyer plan to meet with CalPERS officials this week. The CalPERS board is not expected to act on the issue until its regularly scheduled meeting in November.

CalPERS also sent a 30-day demand to two other employers that are inactive but not yet terminated: the California Fairs Financing Authority, a joint powers authority of the state and fairs owing $360,958, and the Niland Sanitary District, owing $23,795.

If the Fairs authority and the Niland district do not make the payment, CalPERS staff will begin termination proceedings and ask the CalPERS board to terminate their contracts at the November meeting.

The CalPERS plan for the Fairs authority, now operating as a private organization, would face a $9.4 million lump sum payment if terminated, according to its valuation report. It has 20 retirees, 14 transferred members, and 24 separated.

The Niland district, located at the south end of the Salton Sea, would face a lump sum payment of $88,000 if terminated, said its CalPERS valuation report. It has one retiree, one transferred member, and two separated.

Last week, the CalPERS board was told that a new policy has been drafted to speed up collections. The task also has been placed under new top-level supervision in the CalPERS bureaucracy.

“The whole contract area was just recently moved into the finance area because we recognize that there was some breakdown in making sure we get these collections sooner,” Cheryl Eason, CalPERS chief finance officer, told the board.

tombstone

The deeply divided current members of the Loyalton city council agreed on one thing in telephone interviews last week: Two stone signs costing $10,000 each, telling motorists they are entering Loyalton, were not a good use of scarce city funds.

Some call them the “headstones.” Loyalton, which had a population of 1,030 in 1980, lost its main employer when the century-old Sierra Pacific lumber mill closed in 2001. An article in the Sierra County Prospect this year asked: “Is Loyalton dead?”

Loyalton is the largest and only incorporated city in Sierra County, population 3,240. A county history says it was carved out of Yuba County in 1852 because administration from Marysville in the Central Valley was too difficult.

The Sierra County seat is Downieville, population 282, about an hour drive (per Google maps) west of Loyalton on Highway 49. The county supervisors hold half of their meetings in Downieville and the other half in Loyalton.

A city council member who voted to terminate the CalPERS plan, Patricia Whitley, said a 50 percent pay raise that may not have been legitimate increased the cost of unaffordable pensions.

A city council member retired with a pension, John Cussins, who addressed the CalPERS board last week, said pay had been substandard before the pay increase, which was followed by a pay cut during the recession.

Some issues mentioned by Whitley and Cussins and Mayor Mark Marin: missing money, embezzlement, misuse of enterprise funds, illegal contracting, understaffing, employee turnover, a city museum building, and a city lawsuit over a troubled waste water project.

Cussins said he retired five years ago with a disability after more than 21 years as maintenance foreman playing a versatile role for the shorthanded city. He acted at times as a city manager or public works director, plowed snow, and dug graves.

Since retiring, Cussins said he has aided the city with drinking water maintenance and the use of his water and sewer licenses. His CalPERS pension last year was $36,034, according to Transparent California.

The large lump sum termination payment charged by CalPERS for five modest pensions, $1.66 million, results from a recent policy change. When a plan is terminated, CalPERS must pay the lifetime pensions with no more money from employers and employees.

CalPERS had used its investment earnings forecast, now 7.5 percent, to discount the terminated plan debt. Then in 2011, CalPERS dropped the terminated plan discount to a risk-free bond level (3.25 percent recently), causing the debt and termination fee to soar.

During the Stockton bankruptcy, a federal judge said a CalPERS termination fee that boosted the city’s pension debt or “unfunded liability” from $211 million to $1.6 billion was a “poison pill” if the city tried to move to another pension provider.

Several small cities that considered leaving CalPERS did not after looking at the high termination fee, among them Pacific Grove, Villa Park, and Canyon Lake. CalPERS has included a hypothetical termination fee in annual local government plan valuations since 2011.

Terminated CalPERS plans go into a pool that paid $4.7 million to 716 retirees and beneficiaries from 93 plans in the fiscal year ending June 30. The Terminated Agency Pool was 261.9 percent funded as of June 30, 2014.

CalPERS likes to keep a healthy surplus in the terminated pool for the same reason, some would say, that it lowered the discount rate and has the power to cut the pensions of underfunded plans that go into the pool.

If the Terminated Agency Pool falls short, the funds of all of the state and local government plans in CalPERS could be used to cover the shortfall — a big bite if a large plan entered the pool, which some feared in 2011 as the recession widened pension funding gaps.

A staff report to the CalPERS board last week said an underfunded plan that has not paid the fee can, after reasonable efforts to collect, enter the terminated pool with little or no cut in pensions if there is no impact on the pool’s “actuarial soundness.”

Whether Loyalton qualifies for this type of “limited” entry into the terminated pool is not clear. Sticking points for the CalPERS board might be the voluntary termination, years of ignoring collection demands, setting a precedent, and maintaining equal treatment of plans.

Putting a lien on Loyalton assets or attaching its revenue stream were mentioned at the CalPERS board last week. But taking revenue would further harm the financially distressed city, the board was told, and cities often are able to block attempts to attach their revenue.

Reporter Ed Mendel covered the Capitol in Sacramento for nearly three decades, most recently for the San Diego Union-Tribune. More stories are at Calpensions.com. Posted 26 Sept 16

68 Responses to “In a first, CalPERS may cut small town’s pensions”

  1. john m. moore Says:

    There will never be a better time to terminate from CaLPERS than ASAP. In Pacific Grove, it began termination proceedings in 2008. It had just issued $19M in POB and had no deficit but the unions and staff trashed it. At the termination rate, it now has a deficit of about $140M including POB. There is no limit on how that deficit will grow.
    You may ask, how can a city pay off such large deficits? The best answer is to file a chapter nine in bankruptcy and terminate the plan in bankruptcy and generate a Plan that pays only reasonable and affordable pensions.
    The argument against filing is that a city or county could not hire competent staff w/o its massive salaries and impossible pensions. One answer to that claim: “So be it.” Another answer is that it is simply untrue. How did that claim hold up in Vallejo, Stockton and San Bernadino where pensions were not modified in bankruptcy: they are now in much worse financial and service deficit condition than pre-bankruptcy. Each of them have huge salaries and pension deficits that are beyond management.
    The cases discussed by Mr. Mendel will become common place in a few years. Meanwhile cities and counties will push for new development and taxes beyond all reason but will still be unable to avoid the massive growth of deficits.
    The only true pension reform is to “remove and replace” current members of city councils and supervisors and replace them with reformers competent to terminate any defined benefit pension plan and replace it with an affordable plan.

  2. spension Says:

    Much of what you say in the beginning makes sense, but not this:

    …”terminate any defined benefit pension plan and replace it with an affordable plan.”

    The simple fact is that many defined benefit pension plans in the US are affordable. The problem in California is not that the DB was utilized, but that the DB benefits were raised to levels that were unreasonable.

    DC plans have entirely different forms of corruption… the investment groups who run them treat them as piggy banks for unreasonable fees. There is no limit to what a DC plan operator can take…
    http://www.nytimes.com/2014/02/02/business/a-long-fight-to-get-what-was-theirs-in-a-401-k.html

    For the most part, the fees in DB plans have been far lower than those in DC plan. Again, the heart of the matter is that DB benefits in California were raised to unreasonable levels, not the DB structure itself.

    As for the private sector in the US… the DB plans there were largely drained by greed and corruption, as documented in this book:
    http://www.retirementheist.com .

    A bottom line message is: the private sector in the US is always corrupt with retirement plans for anyone but executives. The public sector in California is innumerate and made DB benefits higher than are sustainable. But Wisconsin, Washington, South Dakota, etc have perfectly fine DB plans.

  3. Tough Love Says:

    Quoting spension ……..

    “The simple fact is that many defined benefit pension plans in the US are affordable.”

    PRIVATE Sector DB Plans YES, ….. because they are almost always the MUCH less generous “Cash Balance” form of DB Plans (which look like and function just like the very modest 401k DC Plans common in the Private Sector).

    PUBLIC Sector Plans of the Traditional “Final Average Salary” type almost universally found in the PUBLIC Sector are VERY rarely affordable ….. and ALWAYS grossly excessive (even WHEN a Town/City has sufficient money to throw at it).

    While DC Plans have their “issues”, the Political corruption (with Elected Officials granting grossly excessive pensions in exchange for campaign contributions and election support) is insurmountable, making Final Average Salary DB Plans a TERRIBLE option in the PUBLIC Sector.

    You continue to blow hot air ……. DC Plan “fees” are a minor when looked at in the context of Public Sector Final Average Salary DB Plans that are ROUTINELY 3 to 4 time (4 to 6 times for Safety workers) greater in “value upon retirement” than those granted comparable Private Sector workers who retire at the SAME age, with the SAME pay, and the SAME years of service.

  4. Tough Love Says:

    And a FAR better reading list (than the above-linked book by spension) is :

    (1) Plunder: How Public Employee Unions are Raiding Treasuries, Controlling Our Lives and Bankrupting the Nation

    https://www.amazon.com/gp/product/0984275207?ie=UTF8&tag=pensio-20&linkCode=as2&camp=1789&creative=9325&creativeASIN=0984275207

    and

    (2) Government Unions and the Bankrupting of America

    https://www.amazon.com/Government-Bankrupting-America-Encounter-Broadsides/dp/1594035903/ref=pd_bxgy_14_img_3?ie=UTF8&psc=1&refRID=99Y5M0H5BYB91Q6VQXRH

    (3) Government against Itself: Public Union Power and Its Consequences

    https://www.amazon.com/Government-against-Itself-Public-Consequences/dp/0199990743/ref=pd_bxgy_14_img_2?ie=UTF8&psc=1&refRID=N7EAHJXA4WQ2DN6G4XX9

  5. neblina Says:

    Defined Benefit plans work fine no matter what the haters day. The real problem with small cities usually lies with city councils that hire a city manager at high pay who never stays but manages to waste money on things like this city did.. the two signs for 20,000. That’s probably the tip of the iceberg.

  6. Tough Love Says:

    neblina,.

    Let me guess ……. Taxpayers that are RIGHTFULLY fed up being responsible for all but the 10% to 20% of Total PUBLIC Sector Pension Plan Costs actually paid for by the workers’ contributions (INCLUDING all the investment return thereon), and with those Public Sector Plans ROUTINELY 3 to 4 time (4 to 6 times for Safety workers) greater in “value upon retirement” than those granted comparable Private Sector workers who retire at the SAME age, with the SAME pay, and the SAME years of service….. are “haters”?

    So which Public Sector agency do (or did) you work for ?

  7. spension Says:

    Quoting TL…

    “Quoting spension ……..

    “The simple fact is that many defined benefit pension plans in the US are affordable.”

    PRIVATE Sector DB Plans YES, …”

    Nope… in the Private Sector, for example, the current Prez of Wells Fargo has a plan worth $138 million (just for one guy!). He got that for overseeing the stealing of millions of identities of Wells Customers.

    As for the little guys in the private sector, their pension funds were systematically drained by the execs, as documented in the book by a WSJ reporter (and Pulitzer winner):

    http://www.retirementheist.com

    The fraudsters of the Private Sector taught all the lessons to those portions of the Public Sector that have become unpleasantly greedy.
    And DC plans are still controlled by the Private Sector, and they systematically drain DC plans with high fees.

    Good portions of the Public Sector still run good DB plans…. I listed a few. There are more. DB plans, well run, are cheaper (due to the reduction in longevity risk, and from much lower fees) and better (because of higher worker participation rates) than DC plans.

    OASDI itself is a DB plan, and it really only has one problem… income above $118,500 makes no contribution at all to it. Oh, and the fact that many wealthy people like Donald Trump in this country avoid all taxes.

  8. Tough Love Says:

    Spension,

    More hot air………..

    While the $138 million Wells Fargo CEO’s payout is of course absurd (and should be clawed-back as much as is appropriate to reflect recent illegal activities), that, like all other excessive pay in the PRIVATE Sector, is paid for by shareholders (who can choose to invest elsewhere) and customers (who can choose to shop elsewhere) ….. NOT by Taxpayers who have no other options when Public Sector workers are (as is ROUTINE today) vastly overcompensated.

    Can Taxpayers opt-out of Police, Fire, DPW, or DMV services if they can find cheaper alternatives? Of course not.
    ——————————

    Quoting ……

    “Good portions of the Public Sector still run good DB plans…. I listed a few. ”

    MORE hot air,………….

    You listed 3 states without any support of why these plans are “Good DB Plans”. You and I had a lengthy back-and-forth commentary on this subject last month here:

    https://calpensions.com/2016/09/06/as-pensions-eat-budgets-what-can-a-county-do/

    As I stated there (WITH the reasons why such is the case) a DB Plan is indeed in “fine shape” when it has a funding ratio of 100% using the valuation methodology and assumption that the US Gov’t REQUIRES of Private Sector Plans.

    I had stated that for PUBLIC Sector Plans (with their MUCH more liberal valuation methodology and assumptions) to be in EQUAL shape they would need to have a funding ratio of 150%. And per my last comment in that link, it looks like I had UNDERSTATED it and a 160% funded ratio is what is really needed for a PUBLIC Sector Plan (valued under PUBLIC Sector Plan valuation methodology and assumptions) to be in “fine shape”.

    You had promised the readers (from that link) a “list” of Public Sector Plans in such “fine shape” by STILL haven’t provided it. Give the reader that “list” of Public Sector Plans reporting funding ratios of 150+ %

  9. spension Says:

    TL said… “You had promised the readers (from that link) a “list” of Public Sector Plans in such “fine shape” by STILL haven’t provided it.”

    I’ve linked many, many times (over the years) to the very long list at:
    http://corporate.morningstar.com/us/documents/reports/statepensions.pdf

    You haven’t bothered to request a copy, which is your failing, not mine. Amazing you’d comment at all about public DB plans without reading the Morningstar report.

    Who funded the Wells Fargo President Stumpf’s post-employment riches of $138 million? Why, the public of course, who had their identities stolen by Wells Fargo to drive his profits.

    And Wells handles loads of public business transactions… that is why treasurer Chiang is prohibiting them for touching public money for a while… but for sure, taxpayer money has subsidized Wells.

    Can the public opt out of the PBGC, which defrays costs of hundreds of DB plans drained by the private sector, as documented by the Wall Street Journal reporter and Pulitzer winner in:

    http://www.retirementheist.com

    Of course not. Nor can the public claw back the outrageous fees that the private sector grabs out of Defined Contribution plans.

  10. Nancy Hubbard Says:

    You folks keep talking about the EXHORBITANT pensions given to retirees….Here are the exhorbitant pensions that are collected by the retirees in Loyalton. Could you live on this? And are you aware that most government employees in Cal PERS are NOT ALLOWED to be in the social security system? Its not opt out…its NOT ALLOWED. So what are these senior citizens going to live on when you take away their fixed income that THEY PAID INTO ALL THEIR LIVES!!!!!!???

    Patsy E Jardin Employer: CITY OF LOYALTON
    Pension: CalPERS, 2015 $48,173.76 2004 $48,173.76
    Patsy E Jardin Title: N/A
    Employer: CITY OF LOYALTON
    Pension: CalPERS, 2014 $47,539.92 2004 $47,539.92
    PATSY E JARDIN Title: N/A
    Employer: CITY OF LOYALTON
    Pension: CalPERS, 2013 $46,609.08 2004 $46,609.08
    PATSY E JARDIN Title: N/A
    Employer: CITY OF LOYALTON
    Pension: CalPERS, 2012 $45,694.20 2004 $45,694.20
    John C Cussins Employer: CITY OF LOYALTON
    Pension: CalPERS, 2015 $36,034.36 2011 $36,034.36
    John C Cussins Title: N/A
    Employer: CITY OF LOYALTON
    Pension: CalPERS, 2014 $35,648.76 2011 $35,648.76
    JOHN C CUSSINS Title: N/A
    Employer: CITY OF LOYALTON
    Pension: CalPERS, 2013 $35,111.76 2011 $35,111.76
    JOHN C CUSSINS Title: N/A
    Employer: CITY OF LOYALTON
    Pension: CalPERS, 2012 $34,423.32 2011 $34,423.32
    Orville D Mcgarity Employer: CITY OF LOYALTON
    Pension: CalPERS, 2015 $6,814.12 $6,814.12
    Orville D Mcgarity Title: N/A
    Employer: CITY OF LOYALTON
    Pension: CalPERS, 2014 $6,741.24 $6,741.24
    ORVILLE D MCGARITY Title: N/A
    Employer: CITY OF LOYALTON
    Pension: CalPERS, 2013 $6,639.72 $6,639.72
    ORVILLE D MCGARITY Title: N/A
    Employer: CITY OF LOYALTON
    Pension: CalPERS, 2012 $5,998.44 $5,998.44

  11. Tough Love Says:

    spensions, You repeated the SAME link as the one in the previous back and forth commentary we had …. but that Link contains NO LIST (of Public Sector Final Average Salary DB Plans in “fine shape”) and simply say ……
    —————————————————————-
    “Below is an excerpt from Morningstar’s “The State of State Pension Plans: A Deep Dive into Shortfalls and Surpluses” report.
    To obtain a copy of the full report, please contact the municipal research team at MuniSupport@morningstar.com.”
    ————————————————————————
    Perhaps the “full report” does have a “list” of some type. In any event, I received no reply when requesting (almost 2 weeks ago) a copy of the “full report” from MuniSupport@morningstar.com.

    I suspect that if you REALLY have such a list (of SUBSTANTIVE SIZE Public Sector DB Plans reporting 150+% funding ratios …. meaning that they are indeed in “:fine shape”) as you claim, that you would have ALREADY pasted the list directly instead of REPEATEDLY dancing around the question.

    You’re STILL blowing hot air …………

  12. Tough Love Says:

    Nancy Hubbard,

    A reasonable and appropriate goal is that Public/Private Sector jobs with reasonably comparable risks and which require reasonably comparable education, experience, knowledge and skills, the “Total Compensation” (wages plus pensions plus benefits) be very close.

    While arguably, certain highly-educated (e.g. PHDs and “professionals”) Public Sector workers earn less in “wages”, there isn’t much evidence of that for the rank-and file.

    So with “wages” (for the vast majority of workers) quite close, and equal “Total Compensation” as a reasonable and appropriate goal, there is ZERO (yes ZERO) justification for ANY greater pensions or benefits …. let alone the structure that we have RIGHT NOW wherein Public Sector pensions are ROUTINELY 3 to 4 times (4 to 6 times for Safety workers) greater in “value upon retirement” than those granted comparable Private Sector workers who retire at the SAME age, with the SAME pay, and the SAME years of service.

    You quoted the pensions of 3 Loyalton retirees. The first retired in 2004 (12 years ago) when wages were a great deal lower, and the last had less that 7 years of service.

    Are these representative of the pensions now granted new, full-career Public Sector retirees? THAT is what should be compared to similar Private Sector workers.

    A “full career” in the Public Sector is most often 35+ years, not 30 or 25 or 20 as is the case in the Public Sector. And while Private Sector pensions are typically reduced by 4% to 6% PER YEAR OF AGE for collecting one’s pension before age 65, Public Sector workers can begin collecting full/unreduced pensions 5, 10, even 15 years younger. Why is that fair to Taxpayers ….. who are responsible for all but the 10% to 20% of total Plan costs typically paid for by the workers own contributions (INCLUDING all the investment income thereon)?

    And Yup, PUBLIC Sector retiree get annual COLA increases while you would be hard pressed to find a PRIVATE Sector pensions with annual COLA increases. That benefit ALONE increases the VALUE of Public Sector Plans by 25% to 35%. Why should the Taxpayers pay for 80% to 90% of the cost of a benefit that THEY do not get ?

    Public Sector workers are NOT “special” and deserving of a greater pensions and better benefits…on the Taxpayers’ dime..

    And shall we discuss Retiree healthcare subsidies?

    Who in the Private Sector gets employer-sponsored retiree heathcare benefits any longer ?
    ———————————

    EQUAL …but NOT better.

  13. Nancy Hubbard Says:

    I notice that you keep talking about “On the Taxpayers dime”. I am a public sector employee, and I am not allowed to pay into social security, so I am dependent on my pension for my retirement years.
    So here’s some actual facts for you.
    My monthly gross is approximately 2% less than my counterparts in the private sector.
    I pay 11% of my earned income into my pension plan every month. I don’t have a choice in the matter…that is the amount that is taken out of my check before I see a penny.
    Social Security workers (private sector) pay a max of 6.2%, and in some cases less than that.
    In both cases those funds are supplemented by taxes, Social security by the Federal govt, and CalPERS by the state govt.
    Are you now suggesting that we cut all of the retirees off of social security because they are a greedy drain on the taxpayers? Hell no! because they earned that money by putting in their time in their jobs. And so did I.
    Yes I have a medical plan that will reach into my retirement…but guess what? When I reach medi-cal age I will lose that medical plan and be on medi-cal coverage just like the rest of the country.
    So..hmmmm…..It sounds like I am in the same boat as the rest of the country. I go to work every day…collect my pay…THAT I HAVE EARNED!!!!!…..and get to look forward to a future of inadequate medical care just like the rest of the country.
    Oh…and BTW…Nobody gets 100% on their salary in a pension. The best they can hope for is 80% (capped) and that is after working 30 years for the government. So I dont know where you are getting your so-called figures, but they are dead wrong.
    The only reason I do this job that I hate instead of working in the private sector is because as a government employee I have access to a 452K plan instead of just a 401K. So I can try to prepare myself a little better for my golden years trying to live on an inadequate pension.
    So….. if you still want to call me a greedy and grasping government employee, I guess that just proves your intentional, willful ignorance, as you suck down great gulps of the the coolaid that special interests are pouring out for the American workers, in the hopes that noone will notice that special interest are responsible for America’s fiscal problems…NOT your fellow American citizens who are simply trying to get by and provide a decent life for their families…just like you

  14. spension Says:

    TL said… “I suspect that if you REALLY have such a list (of SUBSTANTIVE SIZE Public Sector DB Plans reporting 150+% funding ratios ….”… the 150+% is your hot air. Utterly meaningless, of course, just your innumeracy.

    I’ve posted that link for years, not weeks. You never bothered to acquire a copy of the report. Your lassitude… but that is the typical attitude of many in the private sector… you are a know-it-all who doesn’t hoof it to get the job done, and points fingers at everybody else… no personal responsibility at all.

    Like Wells Fargo President Stumpf, you feel you deserve post-employment riches of $138 million, just because you feel you are superior.

    Or you think the private sector deserves to drain the DC system through high fees.

    TL says;
    “A reasonable and appropriate goal is that Public/Private Sector jobs with reasonably comparable risks and which require reasonably comparable education, experience, knowledge and skills, the “Total Compensation” (wages plus pensions plus benefits) be very close.”

    Not reasonable at all, because the private sector is administered by Donald Trumps and John Stumpfs, who feel they have God-given right to pay no taxes and drain their employees retirement savings, as documented by a Wall Street Journal Reporter and Pulitzer Prize winner in:

    http://www.retirementheist.com

    The private sector dumps their employees pensions on the Pension Benefit Guarantee Corporation, and the taxpayer must pay in the end. Unless the private sector contributes to DC plans, but then they swoop in (like Penn Specialty Chemical) and grab the DC savings of their employees.

    Nancy Hubbard… yup, lots of public employees in California get modest pensions, like, my 6th grade and first grade teachers… both in their 90’s, both who worked 40+ years. The problem is other public employees in California grabbed unreasonable pensions, like, 3% at 50. It is a real mess.

  15. Nancy Hubbard Says:

    spension thanks for the backup…but I still have to argue with your final statement. “The problem is other public employees in California grabbed unreasonable pensions, like, 3% at 50”. I say if they were smart enough to take a job that offered those benefits…more power to them. Its not GRABBING something unreasonable, its simply taking a job that offered them something they wanted. Don’t blame the workers…they are just schlepping along trying to make ends meet just like you are.
    Now to address the retirement at age 50. Most CA state employees who have qualified for retirement at age 50 are in the following categories.
    Law Enforcement, Fire, and First Responders.
    Many studies have been done over the years that show that a high percentage of American workers in these categories die an average of 5-7 years after retirement. This is because of the stress that is put on their bodies from spending so many years in a state of heightened (fight or flight) senses. Their bodies and health are ravaged by adrenaline and other hormones that were only intended for short term, temporary use. I am not a law enforcement officer, but I have seen plenty of them in my career as a nurse. I can testify that seniors in these categories are generally in worse health than other people who didn’t have the years of heightened stressors to deal with on a daily basis. If we continue to increase retirement age to these people, the result will be that many of them will “die in their traces” and never get to enjoy retirement at all. Is that fair to those people that put their lives on the line for us every day?
    I agree with you that there needs to be some reform…but I don’t agree that the heroes of our society should have to work until they die in their job, while the private sector workers that they protected and cared for get to live long lives, with many years of retirement to look forward to.
    And just in case you didn’t know…The state of California changed the pension plans for new employees a couple of years ago to a tiered system, with significantly smaller percentages of the final years pay based on your age at retirement. And they included the above mentioned categories in that change. So while they can still retire at 55 (I don’t think 50 is allowed anymore at all, but Im not sure), they will take a penalty to their monthly pension payment based on how far before 65 or 70 they retire. And their pension payments don’t go up when they reach certain ages. Anyone who is hired into a state job has that stipulation in their benefits package now. But that doesn’t meant that the state should get to nullify the contracts they made with already existing employees. the state employees who have worked their whole lives for the state, trusted that their pensions would be paid as per the legal contracts and agreements with the state, and they planned their financial lives and retirements accordingly.They also paid large percentages of their wages into the state pension plan. what are they supposed to do if they don’t get their pensions as promised? The government will still have to support them…It will just be on the welfare roles instead. How is that better?

  16. Tough Love Says:

    Quoting Spension … “I’ve posted that link for years, not weeks. ”

    Then humor me.

    If you now HAVE (or ever HAD) a “list” showing many SUBSTANTIVE SIZE Public Sector Final Average Salary DB Plans reporting 150+% funding ratios …. meaning that they are indeed in “fine shape” …. then post it.

    I DO NOT believe that you can produce such a list.

    Is that clear enough ?
    —————————————

    The rest of your comment is amazingly idiotic … read it a few times.

  17. Tough Love Says:

    Nancy Hubbard,

    I lack the time or desire to address everything you stated, so I respond to a few of the most ridiculous of your comments:

    (1) Quoting … “I am a public sector employee, and I am not allowed to pay into social security, so I am dependent on my pension for my retirement years.”

    No, you SHOULD BE dependent on a taxpayer-funded pension EQUAL to but not greater in value than what comparable Private Sector workers typically get from their employers PLUS significant personal savings …. just like Private Sector workers must do if they will EVER be able to retire..

    And you don’t GET SS because you don’t PAY for it. SS is actually a LOUSY “investment” for all but the lowest-earning participants. YOU should have annually saved and invested that 6.2% of your net pay that you did NOT contribute into SS (plus a great deal MORE). If you didn’t. it’s NOT the Taxpayers’ problem.

    (2) You contribute 11% of pay into your pension and claim you are paid 2% less than your Private Sector counterpart. Let’s assume the latter is true and (for simplicity) just assume you are paid equally but contribute 13% of your pay into your pension Plan.

    Assuming you are a non-safety worker in CA, to fully fund YOUR pension over your working career (using the identical assumptions and methodology that the US Gov’t requires of Private Sector Plans) requires a TOTAL level annual contribution of roughly 35% of pay…..YUP, it does. If we subtract the 13% that you pay, that leaves the Taxpayer contributions at 35%-13%=22% of pay. When Private Sector Taxpayers (making the SAME “wages” as you in this example) rarely get more than a 3% to 4% employer %-of-pay “match” into a 401K Plan, why is your getting 22% of of pay from the Taxpayers necessary, just, fair, reasonable, appropriate, or affordable ?

    (3) quoiting ….. “In both cases those funds are supplemented by taxes, Social security by the Federal govt, and CalPERS by the state govt.”

    While you are correct (in the extreme) for CalPERS with the State Gov’t (meaning State’s TAXPAYERS) responsible for all but the less-than-20% of Total Plan Costs typically paid for by the workers own contributions (INCLUDING all the investment returns thereon), you are COMPLETELY wrong with respect to a Federal Gov’t (meaning Taxpayers) subsidy for SS. There is NO SUCH Federal subsidy for ss. ALL SS payments come from contributions from SS participants and their employers.

    There ARE taxpayer subsidies for Medicare….. perhaps that is what you meant.

    (4) quoting ….. “Yes I have a medical plan that will reach into my retirement…but guess what? When I reach medi-cal age I will lose that medical plan and be on medi-cal coverage just like the rest of the country.”

    Good, that’s the way it should be …. ASSUMING that you pay an annual deductible, a monthly premium, and 20% of all your medical care expenses (just like those on Medicare must do),

    (5) Quoting ….

    “spension thanks for the backup…but I still have to argue with your final statement. “The problem is other public employees in California grabbed unreasonable pensions, like, 3% at 50”. I say if they were smart enough to take a job that offered those benefits…more power to them. Its not GRABBING something unreasonable, its simply taking a job that offered them something they wanted. Don’t blame the workers”

    You know, I also do not “blame” the workers, who wouldn’t take all that they were offered. But that does not change the FACT that these workers are indeed the FINANCIAL BENEFICIARIES (via these grossly excessive pension & benefit promises) of the COLLUSION between the Public Sector Unions and CA’s Elected Officials, with the former BUYING the favorable votes of the latter (on pay, pensions, and benefits) with campaign contributions and election support.

    It is that COLLUSION (bribe giving and receiving in any other venue) that justifies the Taxpayers’ reneging on the 50+% share (MORE for safety workers with the MOST egregious pensions) of such pension/benefit promises that very CLEARLY would NOT have been granted in the absence of that collusion.

    (6) and BY FAR, the king of you ridiculous comments, quoting…

    “Many studies have been done over the years that show that a high percentage of American workers in these categories die an average of 5-7 years after retirement. ”

    The supposition …. that Police/Fire workers die at younger ages than those in other occupations …… has been debunked by none other than CalPERS own Chief Actuary, clearly stating that there is absolutely no difference in life expectancy between Police/Fire CalPERS retirees and all other CalPERS retirees.

    Most people (my self included) might agree that Police/Fire workers (simply by the very nature of their work responsibilities) deserve a “somewhat” greater pension, and I bet most unbiased observers (i.e., excluding those biased by being IN such positions) might suggest that 25% greater or perhaps even 50% greater is reasonable, but I would wager that NONE …. absolutely NONE ….. would suggest that Police/Fire pensions should have a Taxpayer-funded “value upon retirement” 4 to 6 TIMES greater that those of Private Sector workers (in jobs with comparable risks and requiring comparable experience, education, skills, and knowledge) who retire at the SAME age, with the SAME pay, and the SAME years of service.

    And THAT very accurately describes the grossly excessive generosity of CURRENT CA Police/Fire pensions.

    ————————————————————————–
    ————————————————————————–
    EQUAL ….. but NOT better.

  18. Tough Love Says:

    Nancy Hubbard,

    I’m sure that you believe that I know little about what I write, and that perhaps I’m simply a kook or troll.

    I just saw this article written by a CA County Pension Board member with normal college degrees in business and economics, and Master’s degrees in Finance and Taxation….as well as 30 years experience in the financial sector..

    Perhaps you will believe him ……………..

    http://www.ukiahdailyjournal.com/article/NP/20161002/LOCAL1/161009994

  19. spension Says:

    Quoting Tough Love:

    “If you now HAVE (or ever HAD) a “list” showing many SUBSTANTIVE SIZE Public Sector Final Average Salary DB Plans reporting 150+% funding ratios …. meaning that they are indeed in “fine shape” …. then post it.

    I DO NOT believe that you can produce such a list.”

    And the goalposts change… already provided a list at 150%, but you just don’t like it. So you changed your request. Your 150+% is absolutely meaningless, by the way.

    You are simply too sleepy to do the work to educate yourself, TL.

    “The rest of your comment is amazingly idiotic … ”

    Yes, you find it idiotic for anyone to point out that:

    1)Much of the private sector purposefully and corruptly drained its employees DB plans and transferred the wealth to its executives, as documented by the Wall Street Journal reporter and Pulitzer Winner in: http://www.retirementheist.com .

    2)The private sector drains DC plans through high fees, like http://www.nytimes.com/2014/02/02/business/a-long-fight-to-get-what-was-theirs-in-a-401-k.html?_r=0.

    3)The leaders of the private sector like Donald Trump and John Stumpf get $100 million+ retirement packages while paying no taxes and while enjoying huge taxpayer subsidies.

    Sorry, Tough Love, no-one believes any of your posts hear, you have no credibility whatsoever. You are innumerate and deal in mendacity.

  20. spension Says:

    Nancy Hubbard… in my opinion anyone who knew about the 3% per service year at 50 and chose a job because of that was smart just like Donald Trump was smart to pay no taxes.

    What is legal is not necessarily ethical or moral. As we now know, the 3% at 50 was implemented because of innumerate financial projections, over the objections of many sober and careful analysts.

    Anyone who is ethical and moral should have known they were taking something tainted when they took 3% at 50, just like Donald Trump knows that it is tainted to pay no taxes. Right still right and wrong is still wrong… no amount of bluster changes that fact.

    The employer’s contribution for some employees who will receive those pensions now exceeds 50% of salary in some cases. Sorry, that is just an unreasonable employer contribution.

    I fully understand that the State of California entered into binding contracts to provide 3% per service year pensions at 50. Various people like Tough Love just want to unconditionally abrogate those contracts. I don’t support that either… that is also unethical.

    What is legal and ethical is the option of the State of California going into sovereign default in the future. All debts of the State of California, pension and otherwise, could be devalued in that case. Low-pension cases like my grade school cases, who worked super hard for 40+ years, could retain their pensions, but high-pension/low service year employees could suffer a cut.

  21. Nancy Hubbard Says:

    Agreed….we definitely need reform, and I am not against it. The top-heavy executive salaries need to come down, and we need to eliminate about half of the middle management jobs. I even agree with the new tiered retirement system, because if someone plans correctly, and saves and invests their money, they can still choose to take a lower tier for compensation, and retire early. Or they can work into their 70s and get a better retirement compensation. It’s their choice. But this new movement to lower the pension plans of those hard working line staff who have put in 20+ years and planned their retirement based on the contracts they entered into when they were in their 20’s, is unethical and downright wrong. They should not be downgraded this late in the game after all their years of loyal service. Anyone who started work under the new rules knows what they are getting into, and can plan their financial future accordingly. But those that are already close to retirement age no longer have the time to make those necessary adjustments.

  22. Tough Love Says:

    spension, The “goalpost” has not changed from day 1 … readers are encouraged to read our earlier comment exchange here:

    https://calpensions.com/2016/09/06/as-pensions-eat-budgets-what-can-a-county-do/

    You had stated that MANY Public Sector DB Plans are in “fine shape”.

    I had explained (in detail) why a 150% PUBLIC Sector pension funding ratio equates to a 100% PRIVATE Sector pension funding ratio under the methodology that the US Gov’t REQUIRES of Private Sector Plans in their pension valuations. And for a Private Sector Plan to really be in “fine shape” it should have a 100% funding ratio…… equivalent to a 150% funding ratio under the ultra-liberal pension valuation methodology/assumption used by PUBLIC Sector Plans.
    ——————–

    We’re STILL waiting and I repeat …you are full of hot air.

    Produce that list.

  23. Tough Love Says:

    quoting Nancy Hubbard ………..

    “The top-heavy executive salaries need to come down, and we need to eliminate about half of the middle management jobs”

    Well, the 2-nd part of that sentence is right on the mark. “we need to eliminate about half of the middle management jobs”, But the 1-st half ….”The top-heavy executive salaries need to come down,”… while also correct, suggest that the pensions granted all but the executives are just fine,

    No they’re not.

    At EVERY income level (from the highest paid manager to the lowest paid worker) the “Total Compensation” granted Public Sector workers should be no greater than Private Sector workers in comparable jobs, and (with near equal “cash pay in most jobs) that means that for workers at EVERY income level we need very material reduction in the promised Public Sector DB pensions & benefits.
    ———————————————————————
    Quoting Nancy Hubbard …..

    “But this new movement to lower the pension plans of those hard working line staff who have put in 20+ years and planned their retirement based on the contracts they entered into when they were in their 20’s, is unethical and downright wrong. “:

    What makes ONLY Public Sector workers “special” and deserving of a better deal than the Taxpayers who pay their way.

    It is both legal and VERY commonplace for Private Sector Corporate Pensions Plan sponsors to materially reduce (or completely freeze) the pension accrual rate for the FUTURE Service of CURRENT workers.

    Public Sector workers are NOT entitled to a better deal or greater protections from reduction in the pension accrual rate for FUTURE service than the Taxpayers …… no matter how much you “protest” that it is unethical.

  24. spension Says:

    TL’s hot air… “I had explained (in detail) why a 150% PUBLIC Sector pension funding ratio equates to a 100% PRIVATE Sector pension funding ratio under the methodology that the US Gov’t REQUIRES of Private Sector Plans in their pension valuations.”

    What the US Government “requires” is documented in
    http://www.retirementheist.com

    and it is… that the private sector can drain employees pensions and reallocate them to executives, and then throw the rank and file employees on the Pension Benefit Guaranty Corporation.

  25. Tough Love Says:

    spension …..

    We’re STILL waiting for that list … that apparently exists ONLY as a figment of your imagination.
    ——————–

    And repeating what I provided above……

    A FAR better reading list (than the above-linked book by spension) includes :

    (1) Plunder: How Public Employee Unions are Raiding Treasuries, Controlling Our Lives and Bankrupting the Nation

    https://www.amazon.com/gp/product/0984275207?ie=UTF8&tag=pensio-20&linkCode=as2&camp=1789&creative=9325&creativeASIN=0984275207

    (2) Government Unions and the Bankrupting of America

    https://www.amazon.com/Government-Bankrupting-America-Encounter-Broadsides/dp/1594035903/ref=pd_bxgy_14_img_3?ie=UTF8&psc=1&refRID=99Y5M0H5BYB91Q6VQXRH

    (3) Government against Itself: Public Union Power and Its Consequences

    https://www.amazon.com/Government-against-Itself-Public-Consequences/dp/0199990743/ref=pd_bxgy_14_img_2?ie=UTF8&psc=1&refRID=N7EAHJXA4WQ2DN6G4XX9

  26. Berryessa Chillin' Says:

    TL, thanks for the link to the 9/6 Calpensions post. I missed it at the time. Outstanding series of comments on your part over there, maybe the best I’ve read at this blog.

    Thanks for not getting diverted by appeals to corruption in private sector pension systems. This blog, after all, is focused on California governmental pensions. Let other people go after those problems elsewhere. As you say, we can always take our business elsewhere, as I did recently after withdrawing all my money at Wells Fargo, as well as ending my credit card with them.

  27. spension Says:

    Tough Love… for the 10th or 20th time, Morningstar published the list available at:

    http://corporate.morningstar.com/us/documents/reports/statepensions.pdf

    You are so lazy you have never bothered to get it.

    Berryessa Chillin’… TL keeps saying that public pensions should be as low as those in the private sector… but private sector pensions were systematically drained by private sector executives as documented by the Wall Street Journal reporter in:

    http://www.retirementheist.com

    If you think that you don’t have to pay for the corruption in the private sector, you are flat wrong… your taxes have to pay for the Pension Benefit Guaranty Corporation, which picks up the tab for all the private sector pension defaults caused by executive corruption.

    Additionally, the private sector uses influence to an extent that exceeds that of the public sector to make sure taxpayers subsidize both the pension defaults they’ve arranged for regular workers, and also the outrageous multi-hundred million pension packages given to executives like William McGuire of United Healthcare…. paid for with your Medicare payroll tax.

    You can’t take your business elsewhere in those cases, unless you move to another country.

  28. Tough Love Says:

    Quoting spension ….

    “Tough Love… for the 10th or 20th time, Morningstar published the list available at:

    http://corporate.morningstar.com/us/documents/reports/statepensions.pdf

    You are so lazy you have never bothered to get it.”
    ————————————-

    And as I have ALREADY respond to you …. The is no list at that link, and when I requested the referenced “full article” 2 weeks ago, they did not (and still have not) responded.

    And to repeat ……………

    “If you now HAVE (or ever HAD) a “list” showing many SUBSTANTIVE SIZE Public Sector Final Average Salary DB Plans reporting 150+% funding ratios …. meaning that they are indeed in “fine shape” …. then post it.

    I DO NOT believe that you can produce such a list.”

    ————————————————–

    Quoting spension ….

    “TL keeps saying that public pensions should be as low as those in the private sector… but private sector pensions were systematically drained by private sector executives …”

    As an overall statement, that it gets a 1 or 2 out of 10 for accuracy and completeness…. especially the word “drained”.

    Yes, there were some bad actors WAY BACK in the 1980’s, but little after that when the US gov’t introduced a 50% excise tax for Plan withdrawals (other than for legitimate purposes).

    Sure, some Private Sector Plans have since gone bust (airlines, steel, mining, etc.) but sometimes companies just fail due to global competition that is beyond their control…. and CERTAINLY does NOT constitute a “draining” of Plan assets.

    And YES, I believe that unless there is demonstrably less in Public Sector “wages”, there is ZERO (yes ZERO) justification for ANY greater taxpayer- funding toward Public Sector pensions (or benefits) than what Private Sector workers get from their employers as contributions into their retirement/benefit Plans.

    EQUAL, but NOT better.

  29. spension Says:

    Quoting TL

    “Quoting spension ….

    “”Tough Love… for the 10th or 20th time, Morningstar published the list available at:

    http://corporate.morningstar.com/us/documents/reports/statepensions.pdf

    You are so lazy you have never bothered to get it.””
    ————————————-

    And as I have ALREADY respond to you …. The is no list at that link, and when I requested the referenced “full article” 2 weeks ago, they did not (and still have not) responded.””

    Oh gosh… a 2013 report that I’ve been posting links to for 3 years, and you are such a know-it-all (without ever doing your homework) that you are just getting around to trying to read it in the last 2 weeks… what did you do for the other 154 weeks of time available where you did not do your homework?

  30. Tough Love Says:

    spension ……..

    I have responded multiple times that your above link contains no such list and that I HAVE ALREADY REQUESTED the full article (which “may” contain a list of some type) but that they have not responded.

    Why do you keep pasting/repeating the same thing … that your linked morning-star article contains such a list when it does not ?

    Do you have a comprehension problem?

    ———————-

    The readers are STILL waiting for that promised “list” showing many SUBSTANTIVE SIZE Public Sector Final Average Salary DB Plans reporting 150+% funding ratios …. meaning that they are indeed in “fine shape”

  31. spension Says:

    Tough Love, your comprehension problems don’t apply to everybody. You had 154 weeks to get that report and failed to do so. Nobody believes that the private sector funds its DB funds at 150% of public… what they really do is documented in:
    http://www.retirementheist.com

    For example, there is McKesson, which froze its rank & file DB plan in 1997. But its fund still has earnings, which are applied to the unfunded liability on the $159 million owed to CEO John Hammergren as a pension benefit. That is the true story of the private sector, and explains why any comparison by TL is irrelevant.

    Just a matter of time before McKesson defaults on its rank & file pensions and transfers the liability to the PBGC… at that point probably Hammergren will run off with $300 million.

  32. Tough Love Says:

    quoting spension ….

    “You had 154 weeks to get that report and failed to do so.”

    Ok so I didn’t (P.S. you don’t get to dictate what I do or don’t do).

    So now that that’s settled are you going to produce that list ……….assuming one really exists ?
    —————————————–
    Quoting spension ……..

    ” Nobody believes that the private sector funds its DB funds at 150% of public”

    You know that that is NOT what I stated, I stated that a DB Plan in “fine shape” means a 100% funding ratio when calculated using the assumptions & methodology required by the US Gov’t of Private Sector Plans, and that under the ultra-liberal valuation assumptions & methodology used by PUBLIC Sector Plans, a Private Sector 100% funding ratio is equivalent to a Public Sector 150% funding ratio.

    I never stated that Private Sector Plans are in “fine shape” and have 100% funding ratios …. the average being about 80% today. And that Private Sector 80% funding ratio average is about TWICE what the average of Public Sector Plan funding ratios would be if valued on the SAME basis as Private Sector Plans.
    —————————

    And then you go back to bitching about the misdeeds of the rich ….. which is just your way of re-directing the discussion away form the issue at hand …… that grossly excessive, unnecessary, unfair (to Taxpayers) and CLEARLY unaffordable Public Sector Final Average Salary DB Plans, ALL of which need to be frozen (with ZERO future growth) for the future service of all CURRENT workers.

    And THAT, is JUST to stop digging the financial hole we are now in even deeper EVERY DAY.

  33. S Moderation Douglas Says:

    Tough Love:

    “Public Sector workers are NOT “special” and deserving of a greater pensions and better benefits…on the Taxpayers’ dime..”

    Seriously? How many times have I covered this?

    Anecdotal evidence clearly indicates that public sector workers, on average, are taller and more attractive than private sector workers. (In California. I can’t vouch for the rest of the country. The phenomenon may incrementally decrease as one travels nearer the East coast.)

    And taller persons typically do earn more than the height challenged:

    http://www.businessinsider.com/tall-people-are-richer-and-successful-2015-9

    And more attractive…

    http://www.wsj.com/articles/SB10001424052970203687504576655331418204842

    It’s called “pulchronomics.” It’s science. Deal with it.

  34. S Moderation Douglas Says:

    How very interesting that you think a “Master’s degrees in Finance and Taxation…” is the trump card in a debate on pensions. You know there are dozens, if not scores or more of PhD s with radically different views on both sides of the DB debate.

    And Nancy Hubbard wouldn’t be the first (or last) to believe you’re simply a kook or troll. (Perhaps.)

  35. Tough Love Says:

    Quoting S Moderation Douglas…………

    “Tough Love:

    “Public Sector workers are NOT “special” and deserving of a greater pensions and better benefits…on the Taxpayers’ dime..”

    Seriously? How many times have I covered this?”
    ——————————————-

    “Covered” yes, Accurately, not once.

    But yes, with changing light bulbs being part of your Public Sector job responsibilities, I’m sure it helped being “tall”.

  36. Tough Love Says:

    Quoting S Moderation Douglas…………

    “How very interesting that you think a “Master’s degrees in Finance and Taxation…” is the trump card in a debate on pensions. ”

    Oh how interesting a comment …. since you, a reitred Public Sector light bub changer …. tries to hold himself out as a knowledgable authority on Public Sector pensions, funding , fairness, wages, economics , etc., etc., etc.

    Sorry, but I’ll stil with the guy with Master’s degrees in Finance & Taxation and 30 years of practical experience.

  37. spension Says:

    TL…”And then you go back to bitching about the misdeeds of the rich..”

    whoops, missed the mark again… the point is that private pension defaults, like I’m sure will happen with McKesson, are paid for by the taxpayer through the PBGC.

    Because the executives in the private sector run off with the pension fund that was supposed to have gone to the rank & file of their company.

    The public taxpayer must fill the divot form private sector executive lifting of the company pension funds. BTW, not in the 1980’s… McKesson did their dirty deed in 1997.

    Yes, that is a public pension issue, because the taxpayers are left holding the bag.

    Further, that behavior in the private sector is why comparing to private sector pension/DC benefits is irrelevant. Comparing to corruption is pointless.

  38. S Moderation Douglas Says:

    As I recall, Judge Klein in the Stockton bankruptcy described the relationship as three contracts. First, the city has a contract with the employees to pay the specified pensions once vested. The city then contracts CalPERS to act as an agent in collecting, investing, and disbursing the pensions. The final contract is between CalPERS and the employees/retirees.

    If, according to their rules and contract, CalPERS does not have sufficient funds to pay the full pensions, that does not abrogate the city’s contract with it’s employees. If CalPERS determines it can only afford to pay 75% of the calculated pension, the city has an obligation to pay the other 25% , on a pay as you go basis, to fulfill it’s contract with its workers.

    With the apparently small number and size of pensions, that may be doable, and might even be less expensive than trying to catch up CalPERS funding.

  39. S Moderation Douglas Says:

    TL

    ” Sorry, but I’ll stil with the guy with Master’s degrees in Finance & Taxation and 30 years of practical experience.”

    I’ll see your Master’s and raise you one Ph.D…

    Alicia Munnell earned her B.A. from Wellesley College, an M.A. from Boston University, and her Ph.D. from Harvard University.

    ” The good news is that the total costs for long-term
    commitments – pensions, OPEBs, and debt service
    – appear to be under control in many jurisdictions.
    However, for a handful of states, counties, and cities,
    these costs are an extraordinarily high percentage of
    own-source revenue. These jurisdictions have only
    unpalatable options.”
    **********
    What about those “handful of states, counties, and cities….”
    in the worst shape? As per Mary Pat Campbell…(B.S. Mathematics, B.S. Physics, M.S. Applied Mathematics, Ph.D. program, completed all but dissertation)

    ” I’ll give it away at the beginning: they’re in trouble because they’re not making the “required” contributions to the pensions.

    Yes, there are all sorts of other reasons as well, such as spiking, early retirements, sluggish payroll growth, optimistic valuation assumptions, etc.

    But ultimately the reason the pensions are so little funded is because the state didn’t put in enough funds.

    And they knew it.

    They knew it for years.

    It’s not because of investment fees, though those should be more transparent. It’s not because of part-time board directors who get a lifetime pension for very little work, though that doesn’t help. (I’ll address why these aren’t significant problems in a later post.)

    DON’T PAY THE BILLS, THE DEBT GETS LARGER

    —————————–

    T L…

    ” …. since you, a reitred Public Sector light bub changer …. ”

    You’re so last century. They are all LEDs now. Bubs are obsolete, like rotary dial phones. We have cell phones now. With built in spell – checkers. Well, some of us do, anyway.

    You still crack me up… “simply a kook or troll.”

    You said it, not I.

    S Moderation Douglas…

    US Navy First Class Electricians Mate, 1969

    B.A. Economics, San Francisco State University, 1983

    and reitred light bub changer, 2009

    *********
    Give’m hell, Nancy Hubbard. TL can deal with honest criticism.

  40. Tough Love Says:

    Quoting spension …..

    “TL…”And then you go back to bitching about the misdeeds of the rich..”

    whoops, missed the mark again… the point is that private pension defaults, like I’m sure will happen with McKesson, are paid for by the taxpayer through the PBGC. ”
    ——————————

    Wrong again …AS USUAL. The PBGC gets it “revenue” from premiums charged Private Sector Plan sponsors. To date, not one penny of Taxpayer money has been;

    (a) put into the PBGC, or
    (b) directly used to pay the actual benefits that the PBGC has paid to participants of Private Sector Plans taken over by the PBGC..

    The rest of what you stated is false and pure nonsense.

  41. spension Says:

    TL, And, of course, the PBGC has a $101 billion deficit, which will be bailed out by the taxpayer.

    You neglect that, of course, because of your nonsense that private-sector accounting is perfect and never has a deficit.

    http://www.benefitspro.com/2016/08/15/what-would-a-government-bailout-of-pbgc-look-like?t=retirement&slreturn=1475785688

  42. Tough Love Says:

    S Moderation Douglas,

    Well, nothwithstanding her degree pedigree, NJ’s resident Actuary/Blogger appears to believe that Alicia Munnell has her head up her A**.

    Pasting the last sentence from Today’s Blog on burypensions.wordpress.com

    “What Ms. Munnell has attempted to do is cut off a perfectly legitimate line of questioning with specious reasoning designed to maintain the status quo.”

  43. Tough Love Says:

    S Moderation Douglas,

    I should have added above …..

    What EVERYONE on the side supporting the Public Sector pension “status quo” is afraid of is that a PROPER valuation will expose the MUCH MUCH MUCH higher EXPECTED cost of CURRENT Public Sector pension Plan promises, and that exposing them will result in the Taxpayers DEMANDING that these Plans be frozen for the future service of all CURRENT workers …… as indeed they should be.

  44. Tough Love Says:

    spension,

    Doo tell …….. Please let the readers know WHEN there actually IS a bailout of the PBGC.

    Like I sated above ….. what you stated was patently FALSE (as usual).

  45. S Moderation Douglas Says:

    ” Alicia Munnell has her head up her A**.”

    I suppose that’s one way to phrase it. I was just trying to point out that very well educated experts with almost lifetime experience have honest disagreements.

    Dr. Munnell seems to agree with Girard Miller on this point:

    Miller:
    “As I’ve testified to the GASB during their public hearings, a risk-free discount rate would ultimately result in excessive burdens on today’s generation of taxpayers and invite mischief in the future as this approach is a sure-fire way to produce over-funded pension plans in the long run. (I know this sounds laughable in today’s funding environment, but that is the logical multi-generational result of the risk-free model.)”

    And they are not talking about maintaining the status quo:

    Miller:

    “A more plausible argument can be made that current investment return expectations are too high for pension plans that face mounting levels of cash payouts coming due in the next decade for retiring baby boomers.”

    Munnell:

    “That said, the long-run returns assumed by state and local plans – currently the average is 7.6 percent – are too high. These rates should be reduced to 6 percent. ”

    *****************
    Unless by “status quo” you mean that neither is supporting a change to defined Contribution Pensions.

  46. Tough Love Says:

    S Moderation Douglas,

    No, by Status Quo, I mean that the continuation of the current grossly excessive Public Sector pensions that:

    (1) are ROUTINELY 3 to 4 times (4 to 6 times for safety workers) greater in “value upon retirement” (when factoring in not just the MUCH greater per-year-of-service “formula-factors”, but also, the incremental value of the MUCH younger full/unreduced retirement ages, and post-retirement COLA increases that are all but unheard of in Private Sector Plans) than those typically granted Private Sector workers that retire at the SAME age, with the SAME pay, and the SAME years of service, and

    (2) TYPICALLY have a level annual Total Cost to fully fund the promised benefits over their working years (using the SAME assumptions & methodology REQUIRED by the US Gov’t of Private Sector Plan valuations) of 30% to 40% of pay for non-safety workers, and 40% to 60% of pay for Safety workers. Using the mid-points of these ranges, and assuming employee contributions of 5% of pay for non-safety workers and 10% of pay for Safety workers leaves the Taxpayers with a contribution responsibility of 35%-5%=30% of pay for non-safety workers and 50%-10%=40% of pay for Safety workers …. with these %s being JUST for the Plan’s “Normal Cost” (with ADDITIONAL Taxpayer contributions needed to amortize any existing unfunded liability). With Private Sector employers typically contributing no more than 3% of pay into a 401K Plan, why should Taxpayers contribute TEN times that % for Public Sector workers.

    And to head of your standard (but erroneous) response …. NO. the mythical lower “cash pay” pay you claim to be commonplace in Public Sector employment doesn’t even REMOTELY come close to justifying this 30%-3%=27% of pay non-safety worker (40%-3%=37% for Safety workers) pension-contribution pay ADVANTAGE now enjoyed by Public Sector workers.

  47. spension Says:

    TL.. and who do you think will pay the $101 billion deficit in the PBGC? Perhaps you’ll wait another 154 weeks to reply, like the 154 weeks you’ve waited to get the morningstar report.

  48. spension Says:

    And TL.. every statement you make about DC plans and private sector pensions has been proven false here.

  49. Tough Love Says:

    spension,

    Perhaps nobody, and the payments will be reduced or simply end.

    As should pension payments to Public Sector workers WHEN (not IF) their Plans …… which are in FAR FAR FAR worse shape …..go belly-up.

  50. Tough Love Says:

    quoting spension …….

    “And TL.. every statement you make about DC plans and private sector pensions has been proven false here.”

    Oh really ?

    Be specific. Quote exactly such statement (WITH the link for context) that you believe to be false, and we can debate that.

  51. S Moderation Douglas Says:

    “I was going to say something extremely rough to Tough Love, and I said to myself, I can’t do it,” “It’s inappropriate. It’s not nice.”

    LOL!!!

  52. S Moderation Douglas Says:

    “I’ll tell you maybe at the next debate, we’ll see,”

  53. Tough Love Says:

    Quoting S Moderation Douglas ……

    “US Navy First Class Electricians Mate, 1969”

    Gee, you must the an expert ……. on Vacuum TubeTechnology.

    LOL

  54. spension Says:

    Tough Love… you always hold up private sector pension benefits as something that the public sector should be compared too… but if anyone points out that public money (Medicare, state bond financing, etc) pays for the $100 million+ pension benefits for executives in the private sector, you want to exclude those private sector benefits from consideration. For example Stumpf (Wells) and McGuire (United Health). You exclude cull the data to exclude those private sector benefits, and all you are doing is showing that you are biased.

    At the low end of the private sector, you never admit that private sector DB pensions were ended largely by corrupt practice, as documented in http://www.retirementheist.com, or you say that the corruption ended in the 1980s… ignoring my specific example of McKesson, 1997. There are many, many other post-1980 examples of the truth about the private sector: its DB benefits have no rules, no-one follows your alleged GASB rules, the private sector runs its DB pension funds like a private slush fund to be raided by executives. Many specific examples are in http://www.retirementheist.com.

    Finally you refer to DC plans as some kind of suitable replacement, but they are completely corrupt, due to high fees. The private sector can just grab all the assets in DC plans, they aren’t covered by any insurance like PBGC, and the Penn Specialty Chemical case proves it.

  55. Tough Love Says:

    Anyone who doubts that Taxpayers are endlessly and royally SCREWED by the insatiably greedy Public Sector Unions/workers …. with all of it “enabled” by the Elected Officials BOUGHT with Public Sector Union campaign contributions and election support ….. should read this article:

    http://nypost.com/2016/10/06/special-annuity-for-teachers-cost-nyc-taxpayers-a-whopping-1-2b/

    Public Sector Unions are a CANCER inflicted upon civilized society.

  56. Tough Love Says:

    Quoting spension, …….”if anyone points out that public money (Medicare, state bond financing, etc) pays for the $100 million+ pension benefits for executives in the private sector”.

    First of all, those big Private Sector executive paydays are very rarely in the form of “pensions”. They arise from the exercise of stock options granted by Private Corporation. That value ARISES from the growth in the price of the Company’s stock.

    These companies (E.g., UHC) are offering a “product” for sale …. heath insurance. Yes, a large part of their “profit” ….and hence stock price increases ….. traces back to the Federal/Sate/City gov’ts as buyers of that product.

    So what are they doing wrong ? Are you arguing against the Private ownership of Companies. Suggesting Socialism?

    It an awfully big stretch to call executive compensation that arises from running a profitable corporation ….simply because Governments are large buyers of the company’s products ……. “public money (Medicare, state bond financing, etc) pays for the $100 million+ pension benefits for executives in the private sector”.

    ——————-

    You’ve been brainwashed by that book. Treasury/IRS controls on the operation of Private Sector pension Plans (via ERISA, the PPA, etc.) are VERY strict.

    While back in the 1980s the buying, selling, and merging of companies WERE structured in some cases to get out from under pension promises, new laws and the introduction of a 50% excise tax on Plan withdrawals stopped those practices LONG AGO.

    Your statement ……”the private sector runs its DB pension funds like a private slush fund to be raided by executives.” … is patently false and ludicrous…. and has been for decades.

    That said, laws and strict controls don’t turn a financially struggling company into a profitable one, and sometimes a company simply doesn’t have the money to fully fund it’s pension Plan. That’s why Treasury Regulations trigger a stop to further pension Plan accruals when the Plan’s funding ratio drops below a cutoff point … which is a 60% funding ratio under the CONSERVATIVE Private Sector valuation standards. This acts to PROTECT the PBGC from backstopping greater benefits than a company can afford to deliver upon.

    Public Sector Plans should ALSO have (by Gov’t regulation) the SAME cutoff that triggers an end to Public Sector Plan accruals when the funding ratio drops below that cutoff ……..to protect the Taxpayers. They don’t because the wolves and in charge of the hen house.

    In fact, if the SAME cutoff standard now applicable to Private Sector Plans was implemented in Public Sector Plans ….. and given that a 60% funding ratio under Private Sector valuation assumptions/methodology equates to a 90% funding ratio under the ultra-liberal Public Sector valuation assumptions/methodology …. well over 75% of all current Public Sector DB Plans would, by being BELOW that cutoff, be barred from granting any further pension accruals.

    Allowing such accruals to continue represents an extraordinary abuse of the Country’s Taxpayers.

    ——————————-

    Quoting spension …

    “The private sector can just grab all the assets in DC plans”

    What the heck are you smoking ?

  57. Tough Love Says:

    spension …….

    The readers are now STILL waiting for 2 things from you:

    (1) that promised “list” showing many SUBSTANTIVE SIZE Public Sector Final Average Salary DB Plans reporting 150+% funding ratios …. meaning that they are indeed in “fine shape”

    and

    (2) exactly what statements of mine (WITH the link for context) that you claim to be false, so that you and I can debate the accuracy of that claim.

  58. spension Says:

    “The private sector can just grab all the assets in DC plans”

    Read about Penn Specialty Chemical. As Shankar Iyer says,

    “I got most of my money but I lost quite a bit,” Mr. Iyer said. “It is interesting to note that the fees I ended up paying exceed what Penn Specialty Chemicals contributed on my account. I have learned never to trust a 401(k).”

    Naturally, like everyone in the private sector, TL, you attack anyone who digs up the truth and publicizes it.

  59. spension Says:

    TL said.

    “(1) that promised “list” showing many SUBSTANTIVE SIZE Public Sector Final Average Salary DB Plans reporting 150+% funding ratios …. meaning that they are indeed in “fine shape””

    List and links already provided.

  60. Tough Love Says:

    spension,

    Penn Specialty Chemical’s bankruptcvy was over 15 years ago.

    $01K fees are way down and regulatrions way up.

    It’s just history.

    Going forwards we CANNOT have DB Plans in the Public Sector because Politicians (who cannot resist the draw of Union money & votes) simply WILL NOT act in the best interests of ALL taxpayers …NOT just those working in Public Sector employment.
    ——————–

    BS, the readers are still waiting for that “list”….. the figment of your vivid imagination …. showing many SUBSTANTIVE SIZE Public Sector Final Average Salary DB Plans reporting 150+% funding ratios …. meaning that they are indeed in “fine shape”

  61. spension Says:

    As all readers (except you, TL, know) I’ve posted many, many times:
    http://corporate.morningstar.com/us/documents/reports/statepensions.pdf

    TL, you’ve had 157 weeks to get a copy, but you’ve never bothered. I guess serious data on public pension systems is uninteresting to you. Only your own inaccurate statements are of interest to you.

    Penn Specialty Chemical proves that DC plans have no legal protection. We’re in the “bait” portion of bait and switch.

    Of course, TL, when the private sector induces fake bankruptcies for $, and starts systematically looting the DC plans using the same mechanism as Penn Specialty Chemicals, you’ll say contributions from workers were the result of corrupt behavior on their part, and so they don’t deserve their DC contributions.

    Like you say for DB plans now.

  62. Tough Love Says:

    spension,

    Do you think that none of the readers check that link ….. and see what I do?

    There is no “list” of ANY type, let alone one showing many SUBSTANTIVE SIZE Public Sector Final Average Salary DB Plans reporting 150+% funding ratios …. meaning that they are indeed in “fine shape”.

    And Morningstar has not responded to my request for a copy of the referenced “full report” (which MAY contain a list of some type).

    ————————————————-

    We’re STILL waiting for that imaginary list. Wouldn’t it be simpler to simply paste it here ….IF SUCH A LIST REALLY EXISTED ?

  63. spension Says:

    “We’re STILL waiting for that imaginary list. Wouldn’t it be simpler to simply paste it here ….IF SUCH A LIST REALLY EXISTED ?”
    “Do you think that none of the readers check that link ….. and see what I do?”

    I’m sure everyone who is interested has requested and received a copy of that list, during the 157 weeks I have been posting it here at calpensions.com. Here it is for like the 50th time:

    http://corporate.morningstar.com/us/documents/reports/statepensions.pdf

    Except of course you, who couldn’t be bothered to get the hard data until very recently. Naturally you blame your laziness on everybody else, because personal responsibility is outside your consciousness.

    No-one believes your qualifications as to what constitutes a well-funded public DB plan… you have proven yourself extremely biased with your tirades about DC plans, which everyone knows are themselves horribly corrupt with scant protections for savers money, as proven by the Penn Specialty Chemical case. To you, that is “just history”, but those like you who ignore history are doomed to relive it… Enron, Madoff, Wells Fargo… DC plans are just another link in the chain. I know… I’ve experienced the high fees in mine until I figured out how to move to Vanguard. But I am a tiny minority, and it is still possible for some of my employers to claw back their contribution just as Penn Specialty Chemical did.

    You have also peed in your mess kit with your extollations of the private sector retirement benefits. Everyone knows the private sector intentionally decimated their retirement system through corruption, as documented by a Pulitzer-winning Wall Street Journal reporter:

    http://www.retirementheist.com

    Whoops, you call serious journalism “brainwashing”… shows how biased you are.

  64. Tough Love Says:

    spension, You should read the linked article below.

    You see, there ARE Gov’t eyes focused on Private Sector transactions that may negatively impact promised pensions.

    In this case, the PBGC essentially force ALCOA to pump an additional $150 Million into it’s pension Plans …. or it likely would have fought against the planed split of the company into 2 separate entities.

    https://mail.aol.com/webmail-std/en-us/DisplayMessage?ws_popup=true&ws_suite=true

  65. Tough Love Says:

    whoops, bad link. Here is the correct one:

    http://www.pbgc.gov/news/press/releases/pr16-15.html?cid=COLA01ACOCT1120161&source=govdelivery&utm_medium=email&utm_source=govdelivery

  66. spension Says:

    Good for the PBGC. $150 million down, $100.85 billion to go.

    http://www.benefitspro.com/2016/08/15/what-would-a-government-bailout-of-pbgc-look-like?t=retirement&slreturn=1475785688

    The private sector is expert at raiding rank-and-file pension plans for executive compensation, and then dumping the underfunded remaining rank-and-file workers on the PBGC.

    As usual, Congress (owned by the private sector) allows severe underfunding of the PBGC staff, and the private sector knows with $100.85 billion at stake, that if they lavishly put their best and snarkiest attornyes & accountants on the problem, they will win over the overborne staff of the PBGC.

    Of course the private sector funds private detectives to investigate the staff of all regulating agencies (including the PBGC), and subtly threatens the staff, and also does its best to hire them away. I’ve seen it all many times.

    That is how the US really works.

  67. Tough Love Says:

    Quoting spension ………

    “The private sector is expert at raiding rank-and-file pension plans for executive compensation, and then dumping the underfunded remaining rank-and-file workers on the PBGC. ”

    Patently FALSE …. executive compensation couldn’t possibly impact the PBGC due to it’s maximum annual payout, which for 2016 is $5,011.36/mo (or $60,136 annually) for a single life annuity with Plan termination occurring at the Participant’s age 65.

    You keep blowing hot air.

  68. Tough Love Says:

    spension, I’m sure you’re gonna love this one, quoting ….

    “Another useful gauge of financial health is the funded ratio, or the total value of a plan’s assets weighed against its accrued liabilities. This calculation is important since total unfunded liabilities alone do not tell the entire story of a state’s pension problems. California has the nation’s largest unfunded liability in absolute dollar terms, but its funded ratio of 35.6 percent is the 21st best. Connecticut has the nation’s worst funded ratio at 22.8 percent, meaning no state is failing to keep its promise to taxpayers and pensioners as badly as Connecticut. The state’s failure to address its pension liabilities is a significant contributor to Connecticut’s ongoing budget problems. While Wisconsin has the best funded ratio in the country, the state’s defined-benefit pension fund is only 63.4 percent funded when more prudent accounting assumptions are applied. Even in the best-case scenario, all states have significant funding gaps. The Appendix shows the funded ratios for every state.”

    Source:

    https://www.alec.org/publication/pensiondebt2016/

    Didn’t you (above) quote Michigan as one of the BEST funded Plans.

    So I guess the readers won’t be getting that “list” of Public Sector Plans in “fine”shape” anytime soon.

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