

The coming $2 trillion underfunded public pension crisis - cwan
http://volokh.com/2010/01/05/underfunded-public-pensions-as-stranded-costs-two-trillion-dollars/

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viggity
The mere fact that it is legal for any pension to be underfunded is absolutely
beyond me. But I can't say that I blame any government for doing such, most of
the time they're essentially being extorted by public workers unions for pay
and benefits that far exceed the market rate. What the heck is wrong with a
traditional 401k contributions like the rest of America gets.

I know a guy who worked as a janitor, mopping floors at a state building for
10 years and because of this I'm going to end up paying him 25 to 30 grand a
year, every year after he turns 65? Its outrageous that the state tax payers
are being fleeced.

Eventually municipalities and states are going to go bankrupt and the
pensioners are going to get pennies on the dollar.

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bd_at_rivenhill
The determination of whether a pension is underfunded is based on actuarial
studies that, by necessity, must make assumptions about both the longevity of
retirees (and survivors) and the return on invested funds. A fund which is
fully funded under a 6% return assumption which then takes a 20% hit to its
assets due to a sudden market downturn then becomes underfunded, and the
sponsoring entity is required to make catch-up contributions. There is no
difference between the public and private sectors in this regard. However, as
stated by the author, the pension beneficiaries of a public system have much
more powerful tools to force their interests to come first in the event of
underfunding than do private pension beneficiaries.

There have also been cases of manipulation of the actuarial numbers, including
a case in New York or New Jersey (can't remember which) where the actuary
doing the pension study was also a paid consultant for the public sector
unions. Not surprisingly, he concluded that significant benefit increases
could be managed at the current funding level.

