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Public Pension Problem Shrinking?
Lisa Lambert of Reuters reports, Public pension problem could be shrinking:
As
the issue of underfunded public pensions in the United States takes
center stage at city council meetings, state budget drafting sessions,
congressional hearings and public protests, a report released on
Wednesday says the problem may be getting better.
"Public
pension funds are experiencing a robust recovery from the historic
market downturn of 2008-2009 -- reporting strong investment returns,
growing assets and funding levels on track to meet obligations," said
the National Conference of Public Employee Retirement Systems.
The
group, the largest trade association for public sector pensions,
surveyed state and local systems representing 7.6 million people and
assets exceeding $900 billion.
It
found that over the last year, funds have achieved an annual
investment return of 13.5 percent, nearly double the 7.7 percent rate
most assume.On
average, said NCPERS, pension systems are 76.1 percent funded, meaning
they can cover more than three-quarters of liabilities. Typically,
pensions are considered fully funded when they surpass 80 percent.
"In
addition, funds have responded to changes in the economic, political
and social landscape by adopting substantial organizational and
operational changes to ensure their long-term sustainability," NCPERS
said.
Pensions are backed by
contributions from employees and employers and by earnings from
investments, which NCPERS found make up 66 percent of fund revenue.
Employer contributions, essentially the taxpayer bill, comprise about
24 percent of revenues, it said.
Typically,
when investment returns are low, governments increase contributions.
But amid some of the worst budget crises in recent memory, state and
local governments cut deposits just as the stock market plunged.
With
most states beginning a new fiscal year in less than a month,
investors in the $2.9 trillion municipal bond market are worried that
they cannot fund pension promises.
The
study found the annual investment return for pension funds when
averaged over three years, which would include the time of the
financial crisis, was 1 percent.
NCPERS
found that over the last two years most public pensions have lowered
their assumed rates of return, lengthened the period of time to
amortize their liabilities, increased employee contributions and raised
the retirement age.
The findings
are in sync with a recent National Conference of State Legislatures
report that 33 states changed their public pension plans from January
2010 through May 2011, with 23 requiring future employees to make
higher contributions.
On
Wednesday, the Philadelphia City Council took up reforming its Deferred
Retirement Option Plan. It allows workers to set a retirement date four
years in the future and then deposits pension payments into an
interest-bearing account leading up to that date. Retirees are paid a
lump-sum amount and a reduced monthly pension when they retire.
Saying
the system costs Philadelphia hundreds of millions of dollars, Mayor
Michael Nutter has proposed scrapping the plan, known as DROP.
You can read the NCPERS report by clicking here.
The strong showing in the stock market over the last two years fueled
asset returns but public pension funds are by no means out of the woods.
These are choppy, volatile markets that can turn on a dime. If global
stock markets start retracing, then pension funding will get worse
before it gets better. And pension deals remain elusive in NJ and NY, which means the politics of pensions are heating up, adding more pressure on public pension funds.
***UPDATE***
Bernard Dussault, former Chief Actuary of Canada, sent me a short message on the claim in the above article that "typically,
pensions are considered fully funded when they surpass 80 percent."
According to Bernard, this is "nonsense as a plan is fully funded only
when the funding ratio is at least 100%." Like I stated, public pensions
are not out of the woods, not by a long shot.
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Leo is a pension industry whore, selling out, saying what pension funds want to hear, for the money.
He defends idiotic policies like pension funds being well-funded at 80% and funds doing well at 7% - 10% growth when real inflation is 20%.
He looks the other way while corrupt pension fund managers take bribes and kickbacks from investment fund managers.
He refuses to acknowlege that local and state governments are going bankrupt and won't be funding public pensions anymore.
He refuses to tell people their pensions are slowly becoming worthless as Bernanke keeps running the printing presses, slowly diluting the dollar to nothing.
He lives in some rose-colored fantasy that everything will be ok, when public pensions are in more danger than ever before.
Leo is a pension industry whore, just like Obama and Congress and Geithner and MSM are banker whores.
"NCPERS found that over the last two years most public pensions ... increased employee contributions and raised the retirement age."
That isn't a pension, it's robbery. Changing the terms of a contract as you go on one end of the contract is not a contract. Can I reduce the number of years I have to make my mortgage payments by 2.5 years? Why not? If I pay into SS for 30 years with the understanding that at 65 I can retire then they make it 67.5 have I not been robbed?
Pensions need 100% plus whatever percentage is being bled out by the pension managers and funds they invest in.
no they don't get crack in Canada... they just breed these compliant zombies (crones) via indoctrination (State education) ....Leo also had a bit part as the violinist in the film Titanic ..he won't 'get it' until all aboard have drowned and HMS Pension hits the icy sea bed 2 miles down!
Is leo on crack?
Scalpers like Dussault and Sabia will make out fine on the publics' dime. All pension managers have no idea what a days work is, just creaming a percentage off the top. People would be better off burning their money rather than supporting white collar welfare.
Leo all is well until one morning soon the Fed's seize all pensions and 401K's. You know its going to happen.
You know im all for paying someone a good wage with benefits, but when the rest of the people are getting slaughtered and public workers refuse to join the depression and have the power to do that via property tax and tax forecloser---that just ain't right.
Oh the humanity. Leo's paper world is on fire. All paper trades will be losers. All physical assets (especially those generating revenue) will be winners. Just like paper gold, these pensions will look great until it is time to cash them out. Only then will the retiree realize they were screwed.
***UPDATE***
Bernard Dussault, former Chief Actuary of Canada, sent me a short message on the claim in the above article that "typically, pensions are considered fully funded when they surpass 80 percent." According to Bernard, this is "nonsense as a plan is fully funded only when the funding ratio is at least 100%." Like I stated, public pensions are not out of the woods, not by a long shot.
(Wm Shatner voice) But at what cost? At... what... cost?
(Me) And at whose expense? Yeah, I know, mine.
you could cut the irony in here with a dull knife