<p>[Andy</a> Kessler: The Pension Rate-of-Return Fantasy - WSJ.com](<a href=“http://online.wsj.com/article/SB10001424127887324100904578403213835796062.html?mod=hp_opinion]Andy”>http://online.wsj.com/article/SB10001424127887324100904578403213835796062.html?mod=hp_opinion)</p>
<p>""Federal bankruptcy judge Christopher Klein ruled on April 1 that Stockton, Calif., can file for bankruptcy via Chapter 9 (Chapter 11’s ugly cousin)…</p>
<p>Stockton may expose the little-known but biggest lie in global finance:
pension funds’ expected rate of return. It turns out that the California Public Employees’ Retirement System, or Calpers, is Stockton’s largest creditor and is owed some $900 million. But in the likelihood that U.S. bankruptcy law trumps California pension law, Calpers might not ever be fully repaid."</p>
<p>“And the trouble is not just in California. Public-pension funds in Illinois use an average of 8.18% expected returns. According to the actuarial firm Millman, the 100 top U.S. public companies with defined benefit pension assets of $1.3 trillion have an average expected rate of return of 7.5%. Three of them are over 9%. (Since 2000, these assets have returned 5.6%.)”</p>
<p>PA school districts were allowed to underfund pensions for years, and now face a problem with ballooning payments and potentially drastic program cuts as a result. They have been aware but ignored the problem for years.</p>
<p>funny how this works… a generation of Americans vote themselves to get more than they give and then act surprised when it comes time to collect.</p>
<p>It’s not just the government…</p>
<p>When it comes to pensions, many of the largest companies in the country are in bad shape too…</p>
<p>Funny how that works, isn’t it?</p>
<p>Well, there’s the Pension Benefit Guarantee Corporation for public companies. Perhaps we should use that for state government too. If my pension blows up, that’s where I’ll be.</p>
<p>BTW, $SPX is up 11% this year. That must be good for pension funds.</p>
<p>Except for the ones in hedge funds that went short.</p>
<p>The stock market is helping lower pension underfunding.</p>
<p>Until they increase their expected returns to match this year’s ROR.</p>
<p>Many state governments are required by law to balance their budgets. One of the ways governors balance their budgets is just by not funding pensions. Then when the underfunding becomes a big issue, they blame the gap on the public employees being greedy and wanting too much. Easy peasy.</p>
<p>In MA, new state employees now have to kick in 9-11% of their pay (although they don’t pay into social security), the minimum retirement age for new employees has been raised to 60 (from 55), and pension spiking as been outlawed.</p>
<p>And town have had their arms twisted to join the state health insurance plan, instead of the solid-gold plans that were often provided to local employees (who are covered by the state pension plan).</p>
<p>So some efforts have been made to rein in public pensions.</p>
<p>They are still far too generous IMO, although I say that as a taxpayer and not a state employee. 
</p>
<p>Unfortunately all the older employees in the system are grandfathered, and the state is paying billions per year of tax revenues into the fund.</p>
<p>We used to use 8.25%, I think they lowered it to 8%.</p>
<p>We are going to have to have some serious inflation to get 8 percent returns with bonds yielding 3 percent…</p>
<p>
</p>
<p>That’s what Illinois has been good at doing. It’s too bad it’s completely illegal, but nobody will enforce the law…</p>
<p>We could just go with 401Ks all around - that way you take out state and local politics from the picture. But then state and local workers don’t have guarantees. And then you have to worry about the Feds looking around at the huge pots of money in IRAs and 401Ks and salivating.</p>
<p>In NJ the State was supposed to contribute 4% of an employees compensation for the pension. As most are aware they missed that for 20+ years. In NJ there is a 401k type option for higher education the employee contributes 5% and the State match is 8%. Teachers while employed locally are supposed to have their pension also 4% funded by the State. It was a move to assist with property taxes. Employees over the years have had to contribute anywhere from 3.5 to 7%.</p>
<p>
</p>
<p>then the company can go under.</p>
<p>My 401K is underfunded…nobody matches it…there won’t be any bankruptcy court to bail me out… I am under 55 so I will not be getting the full benefit of social security…what’s a gal to do?</p>
<p>What the rest of us are doing. Work, work, work!</p>
<p>Soccerguy315, ideology sounds really good. Really. It does. Then there is reality.</p>
<p>If your professors told you that ideology was real, then you had some very poor professors. </p>
<p>I prefer to live in reality.</p>
<p>People are hurt in reality. People rely on others to do the right thing. And some times things blow up.</p>
<p>Here is a real example. I know somebody that worked for United Airlines for a long time.</p>
<p><a href=“United Air Wins Right to Default on Its Employee Pension Plans - The New York Times”>United Air Wins Right to Default on Its Employee Pension Plans - The New York Times;
[Court</a>
approves termination of United Airlines pension plans - World Socialist Web Site](<a href=“http://www.wsws.org/en/articles/2005/05/unit-m13.html]Court”>Court approves termination of United Airlines pension plans - World Socialist Web Site)</p>
<p><a href=“Workforce Management Software News, Blog, and Resources | Workforce.com”>Workforce Management Software News, Blog, and Resources | Workforce.com;
<p>Why are Southwest and JetBlue doing so well compared to the rest of the industry?</p>
<p>Can I ask- is 4% contribution by an employer considered excessive? If NJ made the contributions they were supposed to 4% of an employees base salary and the pensions were adequately funded is that amount really that much out of line in comparison to what other large employers provide in terms of their portion of the retirement plan?</p>