[quote=davelj][quote=CA renter][quote=davelj][quote=livinincali]
Deferred compensation is a stupid arrangement. If you can’t pay enough right now to attract qualified people to the position then we can live without the service.[/quote]
Agreed. This is the root of much financial evil.
The average human is undisciplined and procrastinates. So s/he will not sufficiently save for retirement. It’s basic human nature.
So, under a fixed pension scheme, we take monies from folks who can’t and don’t save sufficiently for themselves and… add ANOTHER layer of procrastination in the form of a… a pension board that oversees the pension. This board is typically largely comprised of politicians and union reps for whom “kicking the can down the road” is the expedient course of action.
So, we double-down, in effect, on the procrastination element in these fixed pension schemes… and here we are – WAY underfunded.
If you look at it through the lens of human nature, it all makes sense. The trick, of course, is to not set these schemes up to fail in the first place… by not guaranteeing retirement benefits in the first place.[/quote]
Great. Let’s start with those who can most afford to lose their DB pensions and retiree healthcare benefits: executives.[/quote]
For solvent pension plans executive retiree benefits are irrelevant – everyone’s getting paid. The problem is with insolvent plans, in which executives (and everyone else) are limited to $60K annually by the PBGC, and public plans, in which there’s no distinction made between executives and everyone else. So, since we have a limit on insolvent plans of $60K/year, I’d be happy to apply that to public plans as well, since they’re mostly insolvent as well (although on one wants to cry Uncle just yet).
So, if you want to define “executive” as anyone due more than $60K annually in either a public or an insolvent private plan, I’m in total agreement.[/quote]
Right, but since the executives are the ones who hold the purse strings, they tend to make sure they are taken care of first, including their pensions. Even if that means that wage-earners have to take a hit in order to fund the executives’ pensions, so be it.
Executives are “special,” and they are entitled to pension benefits that are higher than those of the mere plebs on the shop floor, even in bankruptcy. See this:
One more note. I’m not sure people understand how most public pension funds work, or how they are “guaranteed.” The pensions are NOT funded directly by tax dollars. Their funding comes from employee and employer contributions — and investment returns, which fund the majority of the benefits — and the pension contributions are based on a formula using **current employees’** pay.
So, if there are unfunded liabilities, the actuaries can see this in advance, and they increase the contribution levels of employers (and now, employees)* based on the pay of current employees. The existing retirees are NOT paid directly by the employer or by any taxpayer funds. The employer contributes a percentage of their **existing** employees’ pay to the fund, and the contribution amounts are based on what the actuaries come up with for the year (I believe they are using 3-year averages for return rates and expenses, but would have to look into the specifics again since this can vary).
*With Governor Brown’s reforms, by shifting 50% of the cost onto employees, he significantly reduced the “taxpayer” guarantee for these funds — by about half, in many cases. This is what I’m talking about when I say that the media did not explain this at all to the public. Most people don’t even understand that “taxpayers” do not directly fund pension benefits.
