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States face a $1 trillion pension shortfall

gdgyva

gdgyva

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The U.S. is facing a $1 trillion pension shortfall because states aren't paying enough money into their retirement plans for public workers.

Just 15 states contributed enough into public pension funds in 2014 to both pay retiree benefits and start to pay down their debt, according to a Pew Charitable Trusts report released Wednesday.

In that year, state-run retirement systems had a $934 billion gap between benefits promised and how much is saved to fund those payments. Because of strong investment returns, that's a smaller shortfall than the previous year.

But preliminary data shows that the funding gap will grow again in 2015, topping $1 trillion -- thanks to weaker returns.

"The lesson here is that state and local policymakers cannot count solely on investment returns to close the pension funding gap over the long term," the report said.

They also need to change their funding policies so they start paying down their pension debt -- which means contributing more than 100% of the needed funding to meet benefit obligations.

The 15 states that did contribute enough in 2014 are: West Virginia, New York, Indiana, South Dakota, Louisiana, Utah, Wisconsin, Oklahoma, Tennessee, Nebraska, Maine, Idaho, Vermont, North Carolina and Delaware.

States face a $1 trillion public pension shortfall - Aug. 24, 2016

and it just keeps getting worse and worse for the taxpayer

and you and i both know, the feds will bail them out....

just as the states will bail out the cities and counties who let their pension issues get out of hand

pensions just dont work anymore....not with the old numbers....it has been proven time and time again

we are living too long....cant work for 40 years, and collect for another 40 years after that

the numbers just wont work
 
Guess government shouldn't have stolen so much out of pensions.
 
gdgyva said:
The U.S. is facing a $1 trillion pension shortfall because states aren't paying enough money into their retirement plans for public workers.

Just 15 states contributed enough into public pension funds in 2014 to both pay retiree benefits and start to pay down their debt, according to a Pew Charitable Trusts report released Wednesday.

In that year, state-run retirement systems had a $934 billion gap between benefits promised and how much is saved to fund those payments. Because of strong investment returns, that's a smaller shortfall than the previous year.

But preliminary data shows that the funding gap will grow again in 2015, topping $1 trillion -- thanks to weaker returns.

"The lesson here is that state and local policymakers cannot count solely on investment returns to close the pension funding gap over the long term," the report said.

They also need to change their funding policies so they start paying down their pension debt -- which means contributing more than 100% of the needed funding to meet benefit obligations.

The 15 states that did contribute enough in 2014 are: West Virginia, New York, Indiana, South Dakota, Louisiana, Utah, Wisconsin, Oklahoma, Tennessee, Nebraska, Maine, Idaho, Vermont, North Carolina and Delaware.

States face a $1 trillion public pension shortfall - Aug. 24, 2016

and it just keeps getting worse and worse for the taxpayer

and you and i both know, the feds will bail them out....

just as the states will bail out the cities and counties who let their pension issues get out of hand

pensions just dont work anymore....not with the old numbers....it has been proven time and time again

we are living too long....cant work for 40 years, and collect for another 40 years after that

the numbers just wont work
Click to expand...
Hmmm. I don't see Iowa on that list, and our Governor boasts all the time how solid our state is and what a great job he's doing. Interesting.
 
Ikari said:
Guess government shouldn't have stolen so much out of pensions.
Click to expand...

Did they though? I know every state is different but I'm pretty sure pension funds are generally untouchable. Where the problem rises is promising too much for too little put in by employers/employees combined with unrealistic actuary assumption on rate of return.
 
Winchester said:
Did they though? I know every state is different but I'm pretty sure pension funds are generally untouchable. Where the problem rises is promising too much for too little put in by employers/employees combined with unrealistic actuary assumption on rate of return.
Click to expand...

exactly

and we keep adding on to the unfunded liabilities every year it seems
 
Ikari said:
Guess government shouldn't have stolen so much out of pensions.
Click to expand...
Pretty tired of the feds bailing the states out of their bad decisions.
 
Surprise, surprise. Politicians use the promise of long term benefits to obtain short term benefits like getting elected, hoping they will be long retired in the Bahamas before the bill comes due.

The best solution? Immediately suspend the pensions and benefits of all politicians until such time as all government pensions are fully funded.

As an aside, the same politicians are using exactly the same technique in the case of other long term promises. Obamacare for one.
 
gdgyva said:
The U.S. is facing a $1 trillion pension shortfall because states aren't paying enough money into their retirement plans for public workers.

Just 15 states contributed enough into public pension funds in 2014 to both pay retiree benefits and start to pay down their debt, according to a Pew Charitable Trusts report released Wednesday.

In that year, state-run retirement systems had a $934 billion gap between benefits promised and how much is saved to fund those payments. Because of strong investment returns, that's a smaller shortfall than the previous year.

But preliminary data shows that the funding gap will grow again in 2015, topping $1 trillion -- thanks to weaker returns.

"The lesson here is that state and local policymakers cannot count solely on investment returns to close the pension funding gap over the long term," the report said.

They also need to change their funding policies so they start paying down their pension debt -- which means contributing more than 100% of the needed funding to meet benefit obligations.

The 15 states that did contribute enough in 2014 are: West Virginia, New York, Indiana, South Dakota, Louisiana, Utah, Wisconsin, Oklahoma, Tennessee, Nebraska, Maine, Idaho, Vermont, North Carolina and Delaware.

States face a $1 trillion public pension shortfall - Aug. 24, 2016

and it just keeps getting worse and worse for the taxpayer

and you and i both know, the feds will bail them out....

just as the states will bail out the cities and counties who let their pension issues get out of hand

pensions just dont work anymore....not with the old numbers....it has been proven time and time again

we are living too long....cant work for 40 years, and collect for another 40 years after that

the numbers just wont work
Click to expand...

There needs to be a move towards defined contribution plans vs defined benefit plans at the state level. I think it's inevitable anyway as the taxpayer can't be on the hook to cover for poor market performance. My wife contributes to our state's teachers retirement plan, she puts in 7.5% and the school matches 7.5%, it ought to be left at that and what the account balance is, is what it is, and we can plan accordingly. It's what I and most private sector employees have to deal with.
 
gdgyva said:
please expound on that statement

which government stole which pension, and when
Click to expand...

They made contract to provide a pension, they didn't. Instead of investing the money they were supposed to appropriately to meet their obligations, they spent it elsewhere and are now in shortfall. The government doesn't not spend money, it just reallocates it to other accounts.
 
reinoe said:
Pretty tired of the feds bailing the states out of their bad decisions.
Click to expand...

Most of those decisions were made decades and decades ago. The problem is defined benefit plans have become ingrained in state government and are very, very hard to get out of once set up. When the switch occurs there is going to have to be 2 classes of employees those grandfathered in and the new young employees who effectively are going to get a pay cut as they won't have the cadillac retirement plan.
 
Ikari said:
They made contract to provide a pension, they didn't. Instead of investing the money they were supposed to appropriately to meet their obligations, they spent it elsewhere and are now in shortfall. The government doesn't not spend money, it just reallocates it to other accounts.
Click to expand...

Generally not true. Most state pensions are required to actuarially fund their pensions through a combination of employer/employee contributions. An actuary uses a higher rate of return in the assumptions, contributions can be less. If real rates are lower, gonna be a huge unfunded pension liability, which usually are set up to be covered over a 30 year period. State pensions are so huge a relatively small change in rate of return over time can balloon into massive unfunded pension plans.
 
Winchester said:
Generally not true. Most state pensions are required to actuarially fund their pensions through a combination of employer/employee contributions. An actuary uses a higher rate of return in the assumptions, contributions can be less. If real rates are lower, gonna be a huge unfunded pension liability, which usually are set up to be covered over a 30 year period. State pensions are so huge a relatively small change in rate of return over time can balloon into massive unfunded pension plans.
Click to expand...

OK, but obviously this wasn't done else they couldn't be 1 trillion in the rears. So that money went some place, just not to appropriate pension funding.
 
gdgyva said:
The U.S. is facing a $1 trillion pension shortfall because states aren't paying enough money into their retirement plans for public workers.

Just 15 states contributed enough into public pension funds in 2014 to both pay retiree benefits and start to pay down their debt, according to a Pew Charitable Trusts report released Wednesday.

In that year, state-run retirement systems had a $934 billion gap between benefits promised and how much is saved to fund those payments. Because of strong investment returns, that's a smaller shortfall than the previous year.

But preliminary data shows that the funding gap will grow again in 2015, topping $1 trillion -- thanks to weaker returns.

"The lesson here is that state and local policymakers cannot count solely on investment returns to close the pension funding gap over the long term," the report said.

They also need to change their funding policies so they start paying down their pension debt -- which means contributing more than 100% of the needed funding to meet benefit obligations.

The 15 states that did contribute enough in 2014 are: West Virginia, New York, Indiana, South Dakota, Louisiana, Utah, Wisconsin, Oklahoma, Tennessee, Nebraska, Maine, Idaho, Vermont, North Carolina and Delaware.

States face a $1 trillion public pension shortfall - Aug. 24, 2016

and it just keeps getting worse and worse for the taxpayer

and you and i both know, the feds will bail them out....

just as the states will bail out the cities and counties who let their pension issues get out of hand

pensions just dont work anymore....not with the old numbers....it has been proven time and time again

we are living too long....cant work for 40 years, and collect for another 40 years after that

the numbers just wont work
Click to expand...

Social Security is in even worse condition. In a number of social democracies these programs are being down-scaled or allowed to peter out or replaced, because constructed as as Ponzi Schemes they are nearing breaking point. They were well meant, when they were introduced over hundred years ago. Now they are on the brink of doing us inordinate harm for not having been replaced decades ago, while membership was still on the rise.
 
Ikari said:
Guess government shouldn't have stolen so much out of pensions.
Click to expand...

That sums it up tidily. We should go for the perpetrators though. It has been well known for at least 45 years that the public pension funds and Social Security were not going to be able to fulfill the promises politicians were making to get elected into their jobs. That was fraudulent.
 
Ikari said:
They made contract to provide a pension, they didn't. Instead of investing the money they were supposed to appropriately to meet their obligations, they spent it elsewhere and are now in shortfall. The government doesn't not spend money, it just reallocates it to other accounts.
Click to expand...

Not true at all.

One contributor to the pension plan trouble that is expanding is the absurd discount rate these plans attributed to the investments made with the money in the plans. Previously, the rate of return was all over the place. California's corrupt CALPERS plan used 6-8% return in it's calculations. This grossly overinflated the actual value, and hid the growing short fall taxpayers are obligated to pay.

The GASB (Government Accounting Standards Board) stepped in and set new standards that required the administrators to use rates which more closely matched reality.

GASB Improves Pension Accounting and Financial Reporting Standards

Further, these shortfalls were the result of the bill of goods sold to legislators when many of these plans were adopted. California set the standard in 2009, and many state employees demanded the state government follow their example.

David Crane: California's Pension Fiasco and the Great Nondisclosure of 1999 - WSJ


By
David Crane

Updated May 19, 2010 12:01 a.m. ET

In 1999 then California Governor Gray Davis signed into law a bill that represented the largest issuance of non-voter-approved debt in the state's history.​
 
Ikari said:
They made contract to provide a pension, they didn't. Instead of investing the money they were supposed to appropriately to meet their obligations, they spent it elsewhere and are now in shortfall. The government doesn't not spend money, it just reallocates it to other accounts.
Click to expand...

okay

i can agree with that statement

now can you agree that things have to change....

that new employees will have to use a 401k, or an IRA....and get matching funds, and not have the government on the hook for the next 70-80 years for a person starting work at 20 years of age

we cant make those kinds of promises anymore....there isnt enough money to pay for it all

you cant work 30 years for the DMV, retire at 52 and collect for another 40-50 years.....the math doesnt work

we need another system
 
ocean515 said:
Not true at all.

One contributor to the pension plan trouble that is expanding is the absurd discount rate these plans attributed to the investments made with the money in the plans. Previously, the rate of return was all over the place. California's corrupt CALPERS plan used 6-8% return in it's calculations. This grossly overinflated the actual value, and hid the growing short fall taxpayers are obligated to pay.

The GASB (Government Accounting Standards Board) stepped in and set new standards that required the administrators to use rates which more closely matched reality.

GASB Improves Pension Accounting and Financial Reporting Standards

Further, these shortfalls were the result of the bill of goods sold to legislators when many of these plans were adopted. California set the standard in 2009, and many state employees demanded the state government follow their example.

David Crane: California's Pension Fiasco and the Great Nondisclosure of 1999 - WSJ


By
David Crane

Updated May 19, 2010 12:01 a.m. ET

In 1999 then California Governor Gray Davis signed into law a bill that represented the largest issuance of non-voter-approved debt in the state's history.​
Click to expand...

Guess they should have done some research before committing to these things. Also...maybe they should have been keeping an eye on all of it as well. Why is it now we're like "uh oh....trillion dollars in the rear"? Government didn't do its due diligence, it didn't invest properly, it didn't live up to its end of the contract. So instead of spending money on proper investment and making contractual obligations, they spent it elsewhere and now we're looking at quite the deficit.
 
Ikari said:
OK, but obviously this wasn't done else they couldn't be 1 trillion in the rears. So that money went some place, just not to appropriate pension funding.
Click to expand...

A 1 trillion shortfall in state pensions is totally believable given how many people participate in them. Hell our state's PERS system is around 1.5 billion in the hole, not sure what the TRS system is in the hole and we only have a million residents in our state. Now I can't say whether states contributed the full amount or not, some probably did. The problem is employees generally have to match what the state/employer puts in so politically telling an employee instead of 7.5% we need to withhold 12.5% is going to be very difficult to implement as employees will freak. Personally I think they ought to be given an opt out option, pay the full amount to get the benefits or we move you to a defined contribution plan.
 
Ikari said:
Oh ok...so they funded it appropriately and there is no short fall. Good to hear.
Click to expand...

There was little chance they could ever fund it properly.

That is why the legislature set it up so the taxpayers would be responsible for any shortfall in any given year.

As such, the legislatures cut spending on social safety nets, police and fire, libraries, etc., in order to cover the additional pension costs.

You might want to do some research on the subject. These memes you're posting aren't even close to reality.
 
Ikari said:
Guess they should have done some research before committing to these things. Also...maybe they should have been keeping an eye on all of it as well. Why is it now we're like "uh oh....trillion dollars in the rear"? Government didn't do its due diligence, it didn't invest properly, it didn't live up to its end of the contract. So instead of spending money on proper investment and making contractual obligations, they spent it elsewhere and now we're looking at quite the deficit.
Click to expand...

They generally invest properly the problem is rates of returns have sucked balls (compared to earlier years) over the last decade and a half.
 
gdgyva said:
okay

i can agree with that statement

now can you agree that things have to change....

that new employees will have to use a 401k, or an IRA....and get matching funds, and not have the government on the hook for the next 70-80 years for a person starting work at 20 years of age

we cant make those kinds of promises anymore....there isnt enough money to pay for it all

you cant work 30 years for the DMV, retire at 52 and collect for another 40-50 years.....the math doesnt work

we need another system
Click to expand...
I tend to agree with this. I do not believe in changing the rules after-the-fact, but at the minimum ALL new hires should be put into a 401k-type system, and the pension system should be closed to new enrollees. It will take awhile for the pension to finally fade away, but it will happen sooner rather than later if we just make that one simple change now.
 
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