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US Wants More Disclosure on Pension Funding
Lisa Lambert of Reuters reports, U.S. wants states to reveal more about pension funding:
A Of Estimates David The board, which sets accounting standards, will release an exposure draft on the possible requirements in June. Governments "Where the The "This is the actual expected Last The Republican Over Years "The riskless rate goes farther than necessary," she said. The three major rating agencies also are ratcheting up their scrutiny of public pensions. Laura The debate over pension funding will continue. I just wrote about CalSTRS's $56 billion pension shortfall yesterday. I've also written a few comments on CalPERS holding their assumed rate of return at 7.75%.
States Finally, When a pension fund falls below the 105-percent threshold, the Dutch supervisor requires it to close the gap within five years. A When
federal board will soon propose that U.S. states disclose more about
their pension funding as worries grow whether states and municipalities
can pay for their employees' pensions.
the longer-term problems in states' budgets, none loom larger than
underfunded pensions. Recent budget crises forced states to cut
contributions to their retirement systems and the financial crisis
lowered pension funds' investment returns.
of unfunded liabilities ranging from $700 billion to $3 trillion have
led bond buyers, employees and political leaders to demand the most
accurate estimates.
Bean, director of research and technical activities at the federal
Governmental Accounting Standards Board, told a municipal analysts'
meeting on Friday the board will soon propose increased disclosure of
states' pension funding.
would have to make more thorough annual Cost of Living Adjustments
calculations along with presenting employees' projected salary
increases, Bean said.
fistfights occur is with the discount rate," Bean said about returns on
pension funds' investments, which affect how well a government can
cover those liabilities.
board would require governments to disclose their long-term expected
rate of return on plan investments as determined by actuaries, Bean
said.
rate of return as recommended by the actuaries," he said. "We're going
to make very clear this is not a number that is pulled out of the air.
This is based on solid science."
year, pension expert Joshua Rauh, a professor at Northwestern
University, suggested that pensions forecast their investment returns at
too high a rate. By lowering the rate, which is typically about 7
percent, Rauh determined pension funds are short $3 trillion.
federal standards board wants to "draw back the curtain" and provide
more information about how return rates are derived, Bean said.
members of the House of Representatives would like public pensions to
forecast a lower rate of return, around 4 percent, which they consider
"riskless." Some have introduced legislation that would bar a state
from selling tax-exempt bonds if they did not lower the return to what
is considered a riskless forecast.
the last five years, 21 states have failed to make their full
contributions to their pensions, said Eileen Norcross, a senior research
fellow specializing in pensions at the Mercatus Center at George Mason
University.
of strong investment gains balance out years of low returns, Elizabeth
McNichol, senior research fellow at the think tank Center on Budget
and Policy Priorities, told the conference. Her group has found that
public pension investments have earned over 8 percent annually over the
past 20 years.
Porter, managing director at Fitch Ratings, told the conference the
enhancements the agency made to its pension analyses last month have so
far not generated many negative rating actions.
There is sharp disagreement on the appropriate discount rate. Should it
be closer to 4% or should it closer to 8%? Why not settle for something
in between like 6%? (Of course, some will argue that even 6% over the long-run is unrealistic!)
should disclose more about their pension funding. They should be as
transparent as possible on their funded status, why they use a certain
discount rate, explicitly stating the assumptions they use to derive
their assumed rate of return, and what will happen if they miss it by 1%
or more on rolling-four or six-year basis.
plan sponsors and policymakers should carefully read a 2010 study from
Boston College's Center for Retirement Research written by two Dutch
pension experts on how the Dutch should address their funding gap following the 2008-2009 financial crisis. I quote the following:
In response to underfunding, most Dutch pension funds will
automatically suspend indexation, which will help Dutch plans on their
path to recovery. In addition, the excess return earned above the
nominal rate of interest used to discount liabilities will contribute to improved funding. However,
given the severity of the problem, these stabilizing forces may not be
enough – additional measures may be necessary to speed the recovery.
number of policy options could help restore funding more quickly than
just waiting for financial markets to recover. Table 1 lists three
possible approaches; each would have different effects on
intergenerational redistribution. Under Option1, the fund takes no
additional actions beyond the automatic suspension of benefit
indexation. Option 2 would take the additional step of increasing
contribution rates by 2.5 percent. Option 3 would keep contribution
rates the same but would, if necessary, cut nominal benefits of current
retirees.
it comes to funding policies, the Dutch pension system isn't perfect,
but it's way ahead of other countries that have no funding policies or
regulations whatsoever.
»
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retirement funds are not bankrupt ... they're bankraped!
I guess the federal government must be looking for some more creative ways to cover up the fact that their own retirement fund is bankrupt. Amazing how you can make demands for things that you yourself are totally guilty of. How do you monitor to make sure someone is doing something correctly when your own blueprint is flawed? Oh yeah, that's right, you can't. This will be another division of the government that monitors nothing and gets paid for it. F'n stupid.
I thing the "US Govt" is looking for money sources (to spend).
When zero hedgers get time......I have 80 stories about the dire situation facing the states....it aint pretty.....
http://nakedempire2.blogspot.com/
So... down with defined benefits and let people manage their money! That sounds good.
But, assuming there really is such a thing as an 'organic' market with 'natural' laws; and assuming everybody would follow said laws in investing, who would pay for the 'transfer of wealth' that is at the foundation of the market?
For somebody to win, somebody must lose.
The problem right now is that 10% of the population is massively screwing the other 90%.
Leo, Knowing your preferance for Hedge Funds, how would new regulations impact reporting requirements for HF investments by pension fund managers ? Obviously HFs increase leverage and risk and are not regulated to same degree or have transparent reporting requirements as corporations or bond issuers.
More nanny state BS. They probably want control of private pensions as well in order to kick the can a little further down the road. Remember, they're elitist and are so much smarter than us.
this is a much better read.
http://downloads.pewcenteronthestates.org/The_Trillion_Dollar_Gap_final.pdf
"Of course, some will argue that even 6% over the long-run is unrealistic!"
Leo, let's argue this, OK? You explain how a perpetual growth rate of 6% could POSSIBLY be realistic. Hell, let's go for just 1%! Everything I own as a wager (but you better have something meaninful to put up as well).
How about treating people like adults and tell them to save for their own retirement?
Absolutely. Pay people up front. I've had it with the grandiose promises to pay at the back end of our lives. Leo says ordinary people, unlike us savy ZHer's, are incapable of managing their own money. There is no better motivation to learn than being held accountable for your own decisions. They might do something as simple as paying off all debts before handing their cash over to someone else to spend on their behalf.
Leo is so cute when he says stupid shit like this
Leo you are a fool. This is the most corrupt Federal govt in history. It is all lies - everyday.
Pot calling the kettle black.
States have to balance budgets. Losses are coming hard and fast as the NATIONAL govt is sucking everyone dry (with its predominance of "security").
It's all one big circle-jerk any way. "Losses" have been "gains" for the private sector: just look at the "defense" and "financial" sectors.
But of course, people will still miss what this is really all about. Pension funds have been no more than manipulators of "growth." They set the tone: look at your local community, all those "forecasts" are really about what they are going to push for, not what load levels that they are "expecting."
Pension funds are competing with other players. And as this game unwinds more players will be pitched over the side. Easiest, because that's how TPTB operate, is to program all of us to actually to the dirty deed so that they don't have to (which they never do, with their final resort to call out their Praetorian Guards).
plentiful cheap oil and retirements a breeze
.
WINNING
Fucking happy motoring meets cliff. Oh shit!
BTW - Excellent summation!
Oh boy, get ready sheeple, this is where Obamy says the government needs to nationalize all 401K's and pension plans. I wonder how much my annuity will be in retirement? More proof to get out of the dollar and into real assets. Take your retirement funds out now, pay the tax/penalty and buy PM's. It's proven our government can't balance the checkbook. Do you honestly think they can manage 4 Trillion in private retirments????????? They want that money and they will come up with any excuse/Black Swan event to get it. "Never let a crisis go to waste!" Now where did I hear that.......
already starting to see a run on some of the pension funds.......got to get it now, before its gone.....also, lots of corruption in those pensions......lots of it......dont think the taxpayers are going to give 2 shits when they implode
Leo.. Its been gambled away. The cost for bigger government/infrastructure development projects surpassed actual budget accumulated for SS retirement fund. End of Story. Wait until all the names of these individuals who lost/gambled the SS monies under the trust fund are released. Oh Nelly.
Leo,
God Bless you for caring and believing, but take a moment to question assumptions.
This all assumes that people who care, who have a smidgen of morality and ethics, are in charge of the Pensions and the Financial Institutions that have dominion over the funds of the pensions.
Based upon what I have seen over the past 30 years, and especially the past 3, neither is the case.
The country is totally corrupt now. Brought to you by Hope and Change.
"Hope and Change", the "Decider", the "It's the economy, Stupid", the "Read my Lips", the "Gipper", the "Malaise", the "Whip Inflation Now", and "The Dick"...along with EVERY single fucking congressman through that era.
Each and every one created the conditions and laws the borught this collapse upon us, and each and everyone of us of a "certain" age went blissfully unaware of what they were doing, because we "assumed" they were doing their jobs.
Now, as a private taxpayer, ANYONE who works for government in a civilian role is despised and an object of suspicion...from school teachers to the President, across the spectrum.
The new pradigm is that if you are a civilian government worker you are a complete fuck-up and the nation would benefit greatly by significantly reducing the herd...by any means necessary.
As to the pensions, if your a government worker you probably have one, if your a private industry worker you have, maybe, a tiny 401-k and the vague hope of social security. Roll ALL the pensions into social security and ALL receive the same benefits anyone else would.
My idea has always been the Claw Back Act.
For those in positions of responsibility and their families (past & present) who caused this unfunded debacle...they get nothing...not even armed security details.
Nothing.
The voting records are there for all to see who they are.
Another stupid-assed party-hack comment! Like this shit started with the current administration?
You people deserve what's coming... You'll always be floundering, always failing to get what's really going on (hatred works great that way). Tools...
At least a VAT tax is not a progressive tax!
So who pays if a state pension goes bust? I guess it becomes a federal problem. A big federal problem. VAT tax, here we come. I think it is now inevitable that this will be proposed by the BOzo-crats in Washington.
I believe that possibly what happens is states go bankrupt ala the new proposals in Congress allowing this, and the pensioneers get stiffed, just like the airline and other private employees got stiffed when they "restructure."
Easy, Joe taxpayer. Can anyone tell me if any state pension fund is 'fully funded' by the using the same criteria that is used for private pension funds? They earned 8% at some point, big fucking deal if they are drastically underfunded. But, since disaster seems to be the catalyst for market gains, we're headed for 20K Dow soon.
"Can anyone tell me if any state pension fund is 'fully funded' by the using the same criteria that is used for private pension funds?"
All the blind govt haters out there just don't fucking get it. Private companies have been puking pensions for a LONG time now- it's standard practice! (thanks to big business' lobbying efforts). Companies can crash and dump their pensions for pennies on the dollar (tab picked up by US taxpayer), and then be bought up by the bigger fish.
The equation isn't: (only)GOVT=FAIL
It's: B-I-G=FAIL (actually, ANYTHING that's predicated on perpetual growth)
Yep. That's the thing people don't want to accept. These generous defined benefit plans, whether from the government or business, are only viable during the growth phase of the cycle... they become completely unaffordable during the stasis and/or the decline periods. Only when the economic/demographic pyramids are aligned in your favor can the numbers work.
If memory serves, back during the so-called "golden age" of db pensions (the '40s and 50s) the share of US employees promised a pension (of any size) never got above 50%. The percent promised a pension peaked in the mid '70s somewhere around 70%... but notice this: those stats for db pensions are only for those promised a pension, not those who actually received one; and not all of those bd pensions were for generous amounts, a pension of any size at all still counts as a pension. I think the percent of retirees who actually received their promised pension peaked in the late '80s - early '90s at something under 40% of all retirees.
This makes sense when you understand that the odds of your chosen industry, or indeed your nation, staying firmly in an expansion mode for your whole adulthood are rather slim... and when the pyramids flip everything must scale down or collapse.
Can you name me 10 private enterprises that still even offer employees pensions as opposed to 401k/403b plans? And are those fully funded?
I'm not a blind government hater, as you imply, but the government doesn't have to play by the same rules they impose on private enterprises, they have the ability to tax under threat of financial ruin to those that wouldn't pay, and that is a big FAIL. A private enterprise generally can't just print money or force people to pay taxes at gunpopint.
From the fact that congress is exempt from the laws they pass on the rest of us to the criminal activities they turn a blind eye to on Wall Street they are a major part of the problem. I guess maybe I'm not a Keynsian, so I don't see goverment as the solution to all lifes problems.....but nobody is perfect.
"(thanks to big business' lobbying efforts)" - yeah, very true, a corrupt system and with too much power in the hands of too few make for big time fail.
The company I work for will give me 250K euro when I retire.
My private pension fund will get me another 100K euro
And like promised now, I'll get another 30K a year from the state when I retire.
Same for the my wife.
But by then the house will be downpayed and we also have 2 appartments we rent out and which will also be downpayed by then.
And with that we'll have to get by. So if I don't save extra, we would be screwed.
Some people like to spend it all now, and that gives you the cricket and the grasshoper scenario.
If you would need to get by on 30K a year, I wouldn't know how to cut it. So if you know now that things won't go easy street in the future, and you still don't prepare = your own fault.
I have no idea what Seer is talking about...the private company I work for stopped their pension& profit sharing plans about ten years ago due to yearly regulatory & maintenance costs.
The retired pensioners still recieve their checks...even I will get something from it (provided the dollar doesn't implode) for the vested time I worked while it was in effect...it's basically in runoff mode.
The profit sharing plan was rolled into a new 401k plan with a staggered company match which I now control.
As to looting...there is something to be said for private company executives taking the bulk of their wages in stock options...but to reform the tax treatment of capital gains would be a stake through the heart of the vampire squid(s).
As for Leo's observance of an article on a new federal board dictating how state public sector pensions are governed...I will assume mandated cost of living increases will include food & energy as it relates to devaluing dollars which yet another pseudo-federal arm is in charge of engineering?
While this pious & virtuous federal board is brow beating the state public sector pension funds to do a better job of forecasting future earnings & outlays will their own federal non-marketable pension set-up be held out as some sort of model?...very doubtful.
Clearly this calls for some more strongly worded letters, memoranda, gnashing of teeth & junkets to exotic locations around the globe to deal with the peoples business...LOL.
No who will really pay is the people who've worked all their lives and were promised a pension only to have the rug pulled out from under them just as they are approaching their retirement years.
Those who will really pay are the young people who pay the taxes and won't get anything FOR SURE.
Old people now get something, young people now won't get anything when they grow old.
Better save up now or you're screwed.
Call me crazy at 32 years old but, that is why I am enjoying my unenjoyment until the last penny has been seen. Some higher power has robbed me of my retirement, might as well take it now. Not to mention, I'd rather enjoy these younger years while the country/environment isn't in complete turmoil. I figure by 70, I won't be able to slam back margaritas on the beach comfortably! Something tells me the sky might be smoggish gray in color, the ocean will be oily-brown, and the beach patrons will be much darker than me (and I'm a dark Italian)!