I didn’t word that correctly. What I meant is that they fund a portion of the **contributions** which are made well in advance of a person’s retirement. They do not directly fund the **benefits.** [/quote]
The contributions go into investments which later turn into… benefits. So, there’s really no difference between “employer contributions” and “future benefits.” You can word it however you’d like but those contributions ultimately turn into… benefits. I think what you’re trying to say is that the contributions don’t fund CURRENT benefits, but rather are invested to fund FUTURE benefits. But no matter how you want to torture the prose the taxpayers are still funding a portion of the benefits.
[quote=CA renter]
IOW, there are many people out there (the majority, from what I can tell) who think that the employer writes the benefit checks every month. That is absolutely not the case. [/quote]
You’re right on this. It’s not like Social Security which is more of a pay-as-you go system.
[quote=CA renter]
The benefits are paid from the pension funds which are funded primarily by investment returns, then employer contributions, then employee contributions…in declining order. [/quote]
That’s correct.
[quote=CA renter]
Now, the employee and employer contribution amounts will be the same. That also means that if the return assumptions turn out to be wrong, the **employees** will be carrying half of the burden of the unfunded liabilities. Nobody is talking about this.[/quote]
This is incorrect. In fact, so long as the assumed rate of return is greater than the actual rate of return on a public pension fund, the TAXPAYERS will ultimately bear a larger share of the pension liability even if the current “split” is equal on paper. This is a simple actuarial fact. Because the taxpayer must ultimately make up any shortfall, it’s in the employees’ best interests to keep the assumed rate of return higher which keeps their contribution lower (than it otherwise would be)… once the assumed rate of return is shown to be fantasy – say, in a decade or whenever – the taxpayers will have to fund the shortfall. This is one of the insidious outcomes of using a fantastical assumed rate of return and why every union rep on a pension board fights to keep it as high as possible (because they know it benefits the members in the long term at the expense of the taxpayers).
[quote=CA renter]
BTW, the government agency is *funded* by the taxpayers/consumers of public goods and services; the taxpayers are not the employers of public workers any more than I am the employer of Walmart employees if I shop there. [/quote]
You don’t have a choice as to paying your taxes; you do have a choice as to whether you shop at WalMart. So, yes, you’re not the employer in either case, but… when your tax dollars fund the municipality and the municipality is the “employer” I’d say there’s a pretty direct link between the taxpayer and the employees, much more than in the case of your WalMart shopping.
