[quote=livinincali][quote=CA renter]
When you suggest that public sector employees should have their vested benefits reduced, you are saying that their compensation should be reduced. Defined benefit pensions are a form of deferred compensation. You should know that since you claim to be a financial expert.
[/quote]

I would consider reduced deferred compensation as a cut in total compensation, but I realize that’s the inevitable outcome. The math says it’s pretty much impossible for that deferred compensation to be paid in full. Whether you want to blame wall street, politicians, unions, tax payers, the fed, demographics or whatever it doesn’t change the mathematical equation.

Essentially it’s just far to risky to offer guaranteed deferred compensation that will be paid out 40, 50 60 years after a person starts working based on events that are unknown. When that police officer started 30 years ago making $20K and 30 year treasury rates where over 10% did the actuaries have any idea that the officer was going to work a ton of overtime those last couple of years earn $150K/year and get a defined benefit of $100K year with 30 year interest rates at 3.5%. People couldn’t believe 30 years interest rates would get to to 4% 5 years ago, let alone 30 years ago.

The one benefit of defined benefit contribution plans, retention, isn’t worth the risks, the frauds, the vote buying, and everything else it enables. That’s the bottom line. The rewards (reduced training costs retention, etc.) don’t outweigh the risks and therefore they should be scrapped. They were lies to the employees receiving them. The private sector came to this conclusion a long time ago. Private sector pension plans went bust all the time. The benefits were renegotiated all the time. Most businesses don’t last 50-60 years, even fewer grow and thrive for 50-60 years.

There was a very small period in history where defined benefit retirement plans were offered and many of them failed to deliver. Public sector plans are no different, they will fail to deliver as promised even with laws and implied tax payer backstops. The money isn’t there.[/quote]

Many of those private pension funds went bust because of reasons completely unrelated to the pension funds’ ability to pay out the promised benefits. Funds were mismanaged and used as piggy-banks for corporations, bloated executive pensions, and the way they intermingled funds between the funds of regular employees and executives blew many of them out of the water. UCGal has recommended a book a few times here:

I highly recommend it.

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As for the retention issue, San Diego is dealing with this problem right now.

San Diego’s police force faces an uncertain future, with about half of its officers eligible for retirement in the next few years and younger officers leaving for other agencies that have better pay and benefits. San Diego officers have seen their healthcare costs soar and are paying more into their pensions than officers from most other police agencies.

“We can’t ignore the market,” said Carol Kim. “How can we expect to retain our officers when they can go to other law enforcement agencies in the area and get considerably better compensation packages?”

Kim is particularly troubled by the millions of dollars the City spends to train officers, who leave for other agencies. “It’s a bad deal for taxpayers,” she said. “We need to be competitive if we want to reap the benefits of our investment.”

Kim proposes re-investing one-third of the projected budget surplus that was identified in Mayor Kevin Faulconer’s most recent budget into increased police salaries; her plan calls for a 5% raise in salaries per year for each of the next four years, resulting in a 20% increase in police salary.

Councilmember Ed Harris, who represents District 2, attended the forum and was extremely supportive of the plan. “It’s refreshing to see a candidate who is ready to tackle this crisis and offer concrete, fiscally responsible solutions,” he said.

“We can’t afford to be paying $190,000 to train police officers, only to have them leave for other departments,” said Kim. “It’s time we start re-investing this money into the SDPD to protect both our officers and our communities.”

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Also, there are a number of things that can be changed that would make the public pension funds completely, or nearly, whole. Many of these fixes are already law; they include changes (reductions) to benefit formulas, hybrid pension plans for new hires, increased employee contributions, capping benefit amounts, redefining (reducing) pensionable compensation, eliminating spiking, etc. Also want to clarify that overtime is not usually used to calculate pensions, though you’ll see claims of this in various blogs and forums. Each agency has it’s own agreement with different employee groups, but most municipal employers do use O/T in their formulas.

The point is that ALL stakeholders need to come to the table to fix the problems that were created — and are still being created — by the Federal Reserve and Wall Street. The burden should not be born entirely by public sector employees.