[quote=harvey][quote=SK in CV]Why are they only temporary solutions?[/quote]
I answered the question already. Simply tweaking the defined benefit parameters is a short term fix that does not address the crux of the problem.
The problem is deferred compensation. Period.
Any plan of deferred compensation will eventually fall prey to corruption and mismanagement. Deferred compensation is basically debt, and those making the promises are not the ones on the hook to pay it when it comes due. In theory it is possible to set aside enough assets to cover the obligations, but history has shown that these systems are far too prone to failure.
And what’s the point anyway? There’s an equally fair alternative that is not prone to massive failures: Pay people a fair wage at the time that services are provided. If a cop is worth $100/hour, then pay them $100/hour, give them an opportunity to invest some of that tax free for retirement, and be done with it. There’s no need to pay them $60/hour now and agree to some other amount in the future, and then hope that the money is really there thirty years from now.
The rest of the world lives just fine with this system, why should public employees be any different?
The pension system is ridiculously over-complicated and in inherently prone to becoming more complicated over time. Turning a few dials on this Rube Goldberg contraption to get it back to working order will only solve the problem until the next round of union negotiations comes along.[/quote]
Umm….401K’s (and similar plans) are deferred comp plans too. Pretty simple. Lower unknowns, though not necessarily lower cost. Are they inherently doomed to failure too?
