[quote=davelj][quote=CA renter]In bankruptcy, employee compensation is a priority claim. These pension contributions are a part of employee compensation.
[/quote]
Whether or not pension contributions are “part of employee compensation” is up for debate. Certainly, the *employee* contribution portion of the total contribution is probably sacrosanct. But the status of the *employer* contribution portion is what judges will be deciding.
Recall that when a corporation goes bankrupt and its pensions are taken over the the Pension Benefit Guaranty Corporation that the maximum pension benefit guaranteed by PBGC is ~$56K annually. Benefits above that level are lost – and constitute a haircut to the pension fund – just like the haircut that the bondholders take. So, while it’s not an apples-to-apples comparison, there is precedent in the corporate world for pensions taking a haircut in bankruptcy.
My point is that it remains to be seen what happens to public pensions in bankruptcy. I suspect they will be cut back but that most or all of the cutbacks will occur for those with large pensions, just as in the case of the PBGC.
You make it sound like this issue is settled. I can assure that it’s not. Not by a long shot.[/quote]
Big difference: the PBGC is a public *insurance* entity for *private* pension plans, and they have little control over these pension funds (especially before the Pension Protection Act of 2006), whereas the state and local pension funds are NOT insurance funds for pensions; they are the pension funds themselves, and have more control over the types of investments and contribution requirements for covered pensions.
I would also add that the pension contributions ARE a part of an employee’s compensation because the employers/employees take into account the total compensation for their employees during contract negotiations. Other items are increased or decreased based on the different components of employee compensation, including pension contributions.
