Who in their right mind, given any choice on the matter, would want to lock their retirement into the existence and health of a corporation?
Until I saw the Sears debacle occur, I thought everyone basically puts together RRSP (Canadian retirement tax havens, I think 401k?) accounts and rely on their required payments into the Canada Pension Plan. It's much less likely that the government or a bank will fail, and the bank, unlike Sears, is CDIC backed.
I guess my question is: why do we allow companies to manage retirement funds?
Remember, corporate pensions were a big thing when the US was at it's greatest economic strength (post-WW2) and the internet with all of its modern tools to make investing much simpler for the average person didn't exist. You had to pay brokers for every single trade or someone else to advise you or you had to just buy and hold a small set of stocks for 30 years and hope those companies would still be around (a fair bet at that time).
Back then companies didn't really go under like this. If anything, they got bought by a larger company and merged, but the frequency of that was nothing like today.
Today, with health care costs what they are, having pensions and defined benefit plans are insane to me. It's much better for the company to say "we will match x% in a 401k". They are defining their contribution and it has a cap. If anything happens to the company, the employee's funds are safe as the money is already transferred. For the employee, it does require them to manage this money but that's far easier and cheaper today and that money doesn't require the company to be around forever. If things tank, the employee is protected.
I would guess it's mostly old companies who have them. One factor may be that it's tough to transition a company to not having a pension plan once one has been established. At the very least, you create two classes of employees, old employees who have pensions and new employees who don't. It's a form of compensation, so you have to figure out a way to achieve parity in a way that makes everyone feel they're being treated fairly.
The mean time between job transitions was less. That's partially because pensions created job loyalty even if was through golden handcuffs. If people had to work another 5 years for another 15-20% in your pension, people would do it.
It fell down because:
1. Corporate raiders would buy companies to take the money out of the pension plan. Pensions are by and large unregulated. And pensions are just a bunch of money sitting in an account of which payouts are largely determined by corporate policy instead of by contractual obligation.
2. Companies would fail to pay into their own pension fund based upon overly rosy economic projections that wouldn't come through. This forced companies to declare bankruptcy just to get out of the burden of paying a pension that was promised as part of the salary years ago, even if it was a contractually obligated pension.
3. 401k's became the norm. Because companies now no longer have a separate account they have to manage, and it's only x% (3 or 4 usually) of your paycheck.
In the end it comes down to, how well you trust people to manage your future. Back in the 50's it worked largely well, because people weren't willing to break societal norms.
Defined benefit pensions have been heavily regulated since ERISA (1974) and PPA (2006).
>Back in the 50's it worked largely well, because people weren't willing to break societal norms.
Back in the 50s, people were barely even getting paid from the pensions. And the population was young, everyone was paying into the funds, instead of receiving from them. And their lives were much shorter. There are consequences to future growth when people start having fewer and fewer children and living more and more years.
To the point of guaranteeing that people got the pensions promised to them? No.
1. your paycheque is forcibly deducted an amount based on a formula
2. that amount goes into CPP investment
3. when you retire you can get a monthly pension based on the total amount you paid in
To me that seems like a sane way to protect people from themselves.
In this way, the government simply collects money from current earners and then distributes that to the existing retirees. It's not like there is a trust set up and your money is locked away with your name on it. Canada's system may or may not be structured the same way. The idea is that if the government defaults on this, then there are much larger issues anyway. But because it's just a tax they can technically do whatever they want with the money and being the scumbags that they are, they periodically do steal from that money, which is why Social Security is underfunded.
Personally, I think the payouts are even pretty respectable, despite what others might think. The average payout is currently around $1,500 per person per month. That's not a lot, but if you have a spouse that's $36,000 a year. Also, one thing that most forget is that even if your spouse doesn't work their entire life (i.e. stay at home parent), a spouse can claim an additional 50% of their spouses as their own. Every person who is married has this option - they can claim their own or the 50% of their spouses (which does not reduce their spouses, it's just on top). For anyone working, it usually makes sense to claim their own unless there is a massive difference in pay. So if one person is scheduled for 2k a month, the other is guaranteed at least 1k or their own if it's higher.
Honestly, it's a nice idea and has been working reasonably well for decades. But the issue is that when you look at it with a technical eye, you'll see it's all basically the same structure as a ponzi scheme. The current people taxed don't pay for themselves, they pay for others who came before them. Over time the number of people required to pay for a single retiree has gone up. This indicates a growth requirement in the tax base. Without this constant growth which seems to go up more and more over time, the system fails. People ignore this because they think it's impossible because it's run by government. I'm not so sure that's true.
The current contribution rate is 10.2% of your gross pay, it's been 9.9% for at least the past few years but it's being bumped slightly over the next few). If you're an employee, the employer will pay half. That rate is only applicable on income between $3500 and the earnings ceiling of $57,400 (adjusted yearly based on inflation), so this year's maximum total contribution is $5497.80 - again if you're an employee you'll only see half of that deducted.
The Government keeps track of your total contributions, and you can opt to start receiving pension payments back at age 60, 65, or 70 - the later you wait the larger the payment. Generally speaking, you look back at all your contribution years, average your income compared to the earnings ceiling, and then scale it up to the average applicable income over the past 5 years, and the baseline is 25% of that. So if you retire in 2 years, and the average applicable happens to be this year's value, and on average over your working career you earned 75% of the applicable amount, your pension would be (57400-3500)0.750.25, or about $10k/year. Your income this year would have been about $43k, so that's reasonably close to 25%.
Funding is a little weird. The baseline plan is funded so as to supposedly not require increased contributions (but require that contributions do continue perpetually), but they're also adding an enhancement in 2023-2024 of 8% of income earned over the standard earnings ceiling, to a limit of 14% of the earnings ceiling, which is supposed to be a fully-funded benefit.
I think you need about 10 years on contribution to get the maximum benefits possible though you can get some of it earlier for permament disabilities. At retirement age the the average of you top 35 years income is used to calculate how much benefits your earned. Those in the lower income bracket get a higher percent and the curve flattens out at higher income.
When Social Security is envisioned simply as a welfare program for people who are too old to support themselves, its structure becomes entirely reasonable.
That was something the Baby Boomers inflicted on themselves. They knew that there were fewer children behind them, so they needed to do something to ensure that they didn't run out of money immediately. So they raised their Social Security tax rates to collect more than they needed. And they had to put it somewhere. Long-term federal bonds were a pretty good place to put it, since they pay a bit more than inflation. There was talk about putting it into the stock market, but that would have been a pretty heavy thumb on the economy.
That was in the 80s. That started coming due about a decade ago, and now is in full swing. We always expected that "trust fund" to come down... but for a variety of reasons it came down faster than they bargained for. And for a variety of reasons, the government took that demand for its bonds as a sign that it should grow, a lot -- and somehow managed to borrow yet more money, even though it had a captive audience of bond buyers.
Maybe "steal" isn't the wrongest word. But it's helpful to understand just what they were thinking. (As a Gen Xer, I'd say what they were "thinking" was that their goal was to screw us and our children, which they've done a great job of.)
With regards to "it's like a ponzi scheme". I completely see what you're saying. But shouldn't it look more like a population pyramid? Where, yes, the word pyramid is in the name, but generally a mature nation won't be top-heavy (except for the baby Boomer issue but that's kind of transient, no?)
My sense is that it should work perpetually so long as a nation doesn't see massive population decline and employment remains reasonably consistent. And in years/decades when there are imbalances, the government can step in and prop it up through other means rather than watching a private corporation file bankruptcy.
I feel like maybe we're judging the long-term efficacy of such a system too early. Right now we're dealing with a one-two punch: baby boomers are retiring and people are living longer. But neither of those are going to increase perpetually.
But the same thing is true for a ponzi scheme, right? The idea is a never-ending growth from which new people pay the existing. The requirement that the US population must continue to grow - not just stagnate and contain the same number of people, but grow, indicates a ponzi-esque scheme to me. There is a finite amount of resources on the planet. Therefore there is a finite number of people that can be living on this planet. But such systems mathematically require that the number of new people constantly goes up over time. This is indicative of an unsustainable system.
If it were altered in a way such that, for example, there was a 1:1 (payers:recipients) relationship (or less) between the number of payers and the number of recipients, than I'd say that's sustainable because it doesn't require growth. Currently we have ~130M payers and 64M recipients, which means there's a roughly 2:1 ratio. On the surface it looks fine because you think hey people work for 40-45 years and then retire for 20 so 2:1 sounds about right. And it is, but only if you can continue to produce that larger base forever.
I also have not found a source to substantiate the claim that the US government periodically steals money from Social Security.
The purpose of the current system is to make the benefits one receives sort of proportional to the income they earn. Of course it's the government taking in money and spending it, and it's all one government if you zoom out, but it's still useful to categorize certain funds.
Instead we have a weird situation where the tax specifically calls out social security, but in reality gets spent on a bunch of unrelated things, with a thin veneer of technicality to make it all hold together.
EDIT: This is not correct. It appears they have borrowed against the SS fund using treasuries, which will have to be back. Or phrased another way - the SS system chose to invest in US debt.
And I don't know of a debt instrument that can be exited more easily than US Treasuries:
This interview with a prominent actuary who worked in the Social Security admin is also very helpful to clarify the workings of SS:
1. They mitigate risk, by pooling it, because some participants die sooner than others, and stop receiving benefits. This helps fund the few people who happen to live longer than expected.
2. They mitigate risk, because they mitigate inflation, because they are, in part, funded by current contributions. The value of money drops as time goes on. If you retired 15 years ago, it is less risky to be receiving 10% of a salary today, then it is to have saved up that 10% 15 years ago.
Obviously, a mismanaged pension, that relies on incredibly optimistic rates of return, is going to have you taking a haircut. Even so, having a pension, in addition to your personal retirement savings is a way to mitigate your financial risk.
An index fund doesn't mitigate the risk of living until you're 92, when life expectancy tables say that you should have died at 84.
Group funds pool this risk. Because when life expectancy is 84, for every person that lives to 92, eight people die at 83.
Outliving your savings is a catastrophic event in your old age. Group funds act as insurance for this catastrophe.
Anyway, the best thing to mitigate risk of living until 92 and running out of funds is raising kids with the right values or another form of support network. I wouldn't trust any counterparty enough to pay me back decades in the future. Worst comes worst, have some form of suicide accessible.
Yes, I removed part of it, because the arguments about point #2 are, in my opinion, more nuanced than "low cost index funds solve all our problems". There's advantages and disadvantages to non-fully-funded pensions, because of the time value of money, and it depends on the economic climate in which it operates, and on the worker pool that participates. It can work just fine on a national level, but is a mistake for smaller pensions.
> Anyway, the best thing to mitigate risk of living until 92 and running out of funds is raising kids with the right values or another form of support network.
So, you'd burden your retirement-age children with supporting you in your old age? That's going to do great for their own retirements...
The point is that the money is there - but instead of pooling risk between people who can afford it (Other people in your pension cohort, who die earlier), you pool it with people who can't (your aging children), with a backup plan of suicide.
... Or we could just mitigate the risk, with a more diverse pool. With a group fund.
You don't self-insure your car, you don't self-insure your house, and you don't self-insure your health. That's because the costs of statistically unlikely events are catastrophic in all three of those cases. Don't self-insure your retirement.
 I actually do self-insure my car, but that's because it's worth less than what I make in a paycheque. I don't self-insure liability insurance, though, and I wouldn't want to, even if I could.
Good point about being 92 and having children who are also retirement age. But in my family right now, we have 3 great-great grandparents in 90s being supported by grand children and great grandchildren. It really depends what kind of family you have, and perhaps it's simply not realistic for many, and I'm just super lucky to be in one.
However, I have seen nursing home care and other non family provided care for super old people, and I would rather kill myself if I had to depend on that (I support assisted suicide). I also don't plan on keeping myself alive to get into a state where I have to depend on someone else for basic needs, but who knows, talk is cheap. I haven't seen what kind of care tens of millions of dollars or more can buy at that age, and maybe it's worth it then, but I almost feel like you can't pay someone enough to take care of you the way family would.
>... Or we could just mitigate the risk, with a more diverse pool. With a group fund.
If this is the goal, then isn't the whole country the best pool? AKA Social Security?
You have liability insurance for anyone you may hurt with your car. It's a low probability, catastrophic life event, that makes more sense to insure, than to save for. Yes, liability insurance only goes so far in truly catastrophic events, and yes, you can do things with lawyers, but insurance covers most of the serious unlikely problems you may have.
> I have spare versions of both.
Self-insuring a house by owning a second one is not a good plan for the overwhelming majority of human beings.
> However, I have seen nursing home care and other non family provided care for super old people, and I would rather kill myself if I had to depend on that (I support assisted suicide).
Okay - that's an entirely other story. When I am talking about support, I am talking about truly basic life needs. Food, shelter, transportation. None of these are prohibitively expensive, when you have a small income.
A pension can't really afford intensive-end-of-life care, or long-term medium-intensity care. Hardly any kind of savings that you can scrape together can.
> If this is the goal, then isn't the whole country the best pool? AKA Social Security?
Yes, social security is a pension program. I wish I could invest more than 5% of my retirement savings into it, for the reasons I outlined above.
Additionally, why do we let employers be involved in choosing our healthcare companies and plans at all?
Employer managed retirement accounts and healthcare need to go away. They just need to pay more to the employee to do those things on their own.
Healthcare disconnected from the employer is pro-business and it will lead to a better consumer healthcare market with less fixed pricing, more like auto, home, life insurance which people get on their own. Imagine when you change jobs if you had to also change your home, auto and life insurance policies in addition to your health insurance policies, it is silly.
Requiring companies to provide healthcare is also a competitive disadvantage globally when other countries offer it as public or private separate from the job and the businesses, who don't want to deal with it nor do they care about your health beyond your production, don't have to. Starting a business changing jobs are also more difficult with employer bound healthcare.
Healthcare bound to the job is a legacy system that needs to be updated along with retirement disconnected from employers. Employers just need to pay that in salary or that goes to the employee to manage. Safety nets and public retirement systems like Social Security + Medicare make up the rest.
One problem, in the United States, is that Ronald Reagan passed a law that allowed companies to fall behind on their pension liabilities--i.e. shortchange their employees' pension plans. Add 20 years, and suddenly GM, among others, had a bankruptcy-inducing pension shortfall in 2008.
Banks being CIDC-backed just protects the first $100K of one's holdings, so far from the full retirement savings...
When pensions were invented, there wasn't any choice. In fact modern employers in the US use almost exclusively 401k's instead, for exactly the reason you argue.
But employers with pension programs that predate modern retirement regimes still have them. And they can't just "roll them all over" to employee-owned securities in any practical (or even legal!) way, there just isn't a scheme to do that. And you can't just cut them off and start using 401k's instead, because the pensions are are being funded by the contributions of the active employees!
It's basically an addiction. And it's not going to be fixed absent very extensive government involvement and probably more than a few bailouts. Until then we'll suffer along and sigh when companies go under like this, leaving their pension recipients destitute.
If your economic concern includes growing a middle class that is motivated to spend money and to take business risks then they make a lot of sense.
Unfortunately, this requires a lot of compromise, and I see that once financial independence is achieved, it is difficult for families to continue this way of life. There's also other facets of modern life that may not be conducive to this lifestyle.
the main thing i have learned with age is how incredibly important having a very very strong support system is, whether thats family, friends, a club, school, spouse, children, or whatever. you can. not. survive. without this. Its disconcerting how completely i overlooked this in my youth. independence in the context you describe is not something that should be lauded in our society and specifically parents that drive their children away should, in the great majority of cases, be vilified along with the typical narrative of celebrating the child's victory at overcome adverse conditions.
Agreed. Try recovering from surgery alone sometime to find out!
I understand there's a general bootstrap mentality, but it's hard to see how 100,000,000 people not having retirement savings is going to work out well.
To your concern about lack of access, the solution is simple: raise the cap on IRAs. This still doesn't solve the nudge problem, where people are less likely to sign up withou HR emailing an enrolment form every year.
There is also probably a correlation between people without 401k access, and those who would not be reaching the current IRA cap anyway.
2. Savings that aren't tax-advantaged
So it's not like not having access to 401k's keeps people from retirement savings. That said, 401k's are nice from a tax perspective and, even though they're still usually opt-in, are at least as straightforward as anything that requires affirmatively making a choice can be.
But, yes, although they have downsides defined-benefit plans were effectively a form of forced savings for long-term employees in large organizations.
Just look at all of the people who are excited to get a huge tax refund, then immediately spend it all.
1. Many times the "corporation" is actually a government with the power to tax, so the benefits are very well protected -- basically citizens are on the hook to pay these benefits. In the case of small cities, bankruptcies do happen, but it would be a good bet (IMHO) to say, bet on a pension w/ the City of NY, or with the US Federal government.
2. Many pensions are guaranteed by US tax dollars: see https://www.pbgc.gov/
3. Traditional Pensions were defined benefit plans and very very good deals you often got cost of living adjustments, you could never deplete the funds, you got to start drawing down early and could draw down as long as you live. Modern plans are defined contribution. The only thing guaranteed is what you put in, not what you can get out. What you get out is based on luck on the market, some statistics, and some government policy (e.g., ask retirees living off interest income how live has been for the past 15yrs)
Given how puny my 401k outcomes are compared to traditional pensions, it may almost make sense to roll the dice on a pension, but it is a bet on the company for sure.
Holy crap. I remember a person from a newspaper told me it was 3-1 for them, and I thought it was hyperbole.
These functions really need to be divorced from one’s employer, and either run independently via private industry, or via government. Especially in modern times when people job and career hop frequently.
Well after you're done working, you don't work anymore. So if a country spends zero on providing pensions, they are actually more economically competitive.
Whether one would want to live there is another matter, but the lower income people have little money to move and build a life elsewhere and the higher income people can arrange a good future for themselves.
You can't build an economy on consumption alone.
 https://www.gao.gov/assets/680/670153.pdf (GAO report)
During WW2 there was a labour shortage as the wartime economy was booming. President Roosevelt signed into law the Stabilization Act of 1942, which froze direct compensation and bonuses, but exempt to the freeze were benefits like health insurance and pensions. So that's what employers started using to attract employees.
This shouldn't be an issue if the pension was pre-funded, which I thought was supposed to be the case in the US.
Was one of the benefits of the pension a healthcare plan?
The article doesn't say that it was.
If it was, though, that is pants-on-head stupid. A pension is supposed to be a fixed payment investment, not a variable-payment one.
What really screwed McClatchy over was that in 2006, it bought Knight-Ridder – then the 2nd biggest chain – for $4.5 billion . Historically speaking, it wasn't the worst deal on the face of it. But in retrospect, McClatchy bought when the price was highest, though it managed to quickly sell off a dozen papers shortly after for not terrible prices .
So along with the declining ad revenue, the CEO would also talk about the massive debt he had just acquired, and the amount of interest we were paying each quarter, but how, once this "secular downturn" got stabilized, the new acquisitions would start paying for themselves. I left the Bee before the first big layoffs hit, but I remember people being mostly "whatever" at the time and putting it out of sight and out of mind. As a regular rank-and-file person, not much you can do or fuss about when the CEO is making billion dollar deals.
Higher productivity, on which all economic growth is ultimately based, requires fewer and fewer people to produce the same amount.
More seriously, it might happen that we get massive automation which means we no longer need humans to create the things that pensioners consume. A "care robot" (see the film "Robot and Frank") would be a game changer here. It's not clear that this is actually going to happen in the next 30 years though.
Market value is driven by supply and demand. If, for example, you get a sudden glut of people looking to sell their securities - say, because all the baby boomers start dipping into their retirement savings at about the same time - that isn't matched by a sudden glut of people looking to buy those securities, then a lot of retirees are going to suddenly discover that their life savings is basically just evaporating at the very moment when they started to rely on it.
Some Gen Xers and Millennials might remember having seen a small version of this play out a decade or two ago, when everyone tried cashing out of their comic book collection at about the same time.
If the economy is growing at a faster rate than pensioners are increasing their consumption, anything they've "banked" can proportionally hold & increase its value (unless it was very poorly invested).
But if pensioner consumption grows faster than the economy, then there's less stuff to go around. Either pensions are worth less, or a bigger slice of the pie goes to pensioners (e.g. propping up asset prices with cheap money) and young people are screwed over (since they don't have many assets).
The weird politics we're seeing these days is driven by a mix of the latter effects, I believe, amongst other things (like loss aversion in older people with less productive capacity, and cohort effects in communication media choice leading to information bubbles).
Politicians bend over to the public employee unions to keep their political support and in turn make very generous pension and health retirement plans that truly are not affordable. Worse, many at the top of the food chain pull down pensions well North of 100k and some hit 250k +. Imagine that, receiving a pension higher than the average salary of a working member of society. However this is what politicians and government employees have engineered behind the scenes. There are two bets being placed here, first being courts will force the states and cities to tax their way back to compliance, the second is a Federal bail out at full $
A 401k is a pension isn't it? Just a defined-contribution pension instead of a defined-benefit pension.
I get a pension at my large young tech company.
My wording is probably off on some of that so an article like this one is probably helpful to flesh out the details:
That's specifically a defined benefit pension - just one type of pension. There are many other types of pension. My pension is basically just a big saving account my employer and I both pay into - it's a defined contribution pension.
It shifts the burden from employers to employees. As a positive, it means employees are more free to change employers while retaining their retirement / "pension" accounts.
On the other hand, as you suggest, defined benefit was one traditional source of income in retirement that didn't require any action/saving discipline on the employee's part. But that's mostly gone in the private sector now.
The problem here is pensions that require future payout over an indeterminate length of time.
Yes that's the way my pension works. It's still a 'pension'!
That's technically correct (for example, you'll see 401(k) accounts referred to as "pension" accounts on their wikipedia page) but people are so used to referring only to defined-benefit accounts as pensions in the United states that they will look at you funny if you call your 401(k) or IRA a "pension." As is virtually happening here.
WV was R+40 in 2016, there's no way it's a swing state .
But the point is that whether or not you get bailed out depends on how much influence you have.
There is no limit to available funds in an economy not on the gold standard. These aren't trillions of dollars in obligations (in the case of these smaller pension plans, not speaking about public pensions such as those in Illinois), and we've burned up a greater sum on air conditioning and lost cash payments in the middle east alone during conflicts. As long as you can get past the "moral hazard" folks and not impact the macro too much (ie inflation), you can get away with a lot when working with funny fiat money.
This is part of what government exists to do, providing security to its citizens. A contract was made, and it should be kept (with pensioners coming first ahead of all other creditors).
Public policy did account for it (ERISA and PPA), and provided for the PBGC to provide a limited backstop, although it's not possible to backstop so many failing pension plans due to erroneous investment return and population growth rate and mortality assumptions.
>A contract was made, and it should be kept (with pensioners coming first ahead of all other creditors).
They are ahead, but there's usually nothing left, and definitely nothing that could satisfy the requirements of a pension. Compounding is a hell of a force, and PPA 2006 didn't come into effect until too late.
And anytime you enter into a transaction with someone, you are subject to counterparty risk, even the government. The US is lucky it has more capacity to print its way out than most countries.
Then public policy did not account for it.
> And anytime you enter into a transaction with someone, you are subject to counterparty risk, even the government. The US is lucky it has more capacity to print its way out than most countries.
Print dollars, transfer from the general fund, or have the Fed start buying up equities and using the cashflow to fund any necessary benefits payments (a somewhat more adventurous twist on the Bank of Japan's role in that country's economy). It's the government's job to be the guarantor of last resort, and they have the tools available to do so.
This is already happening. Defined benefit pension funds and defined contribution pension funds (401k/IRAs) are all invested in the same place: the public stock market and real estate. That's why I think bailouts of public stock market values are basically guaranteed, as long as the US dollar remains relatively desirable.
Individuals may or may not be bailed out, depending on their political power. As I mentioned in another comment, these pension recipients got bailed out because their members are important in elections:
Keep in mind that half of Americans have no 401k savings. Agree with your point that QE has been beneficial for those who have retirement arrangements that are invested in the asset classes you mention. My concern is that is insufficient to keep a lot of retirees out of poverty and the associated suffering, and a whole lot of political will is going to be required down the road to stomach more drastic measures than the country has traditionally considered.
I mean we've been dealing with this for thousands of years already. A pension is basically just a loan from an employee to an employer. Back when jews had a monopoly on money lending in Europe, every year the townspeople had to decide whether they were going to pay back their loans or just kill all the jews in their town, or at least take their land and send them elsewhere. Most years they just paid back their loans as agreed, but then every few decades when the debt service got too high things tended to go sideways.
The basic issue is that even after thousands of years, we still haven't really figured out what's equitable in terms of how debt should work.
“ The result of those occupational restrictions was to push Jews into marginal roles, considered socially inferior, such as tax and rent collecting and moneylending, which were tolerated as a "necessary evil".”
But yeah our current system of debt - especially student debt - is messed up.
“The CEO’s compensation is set by the board of directors using public consultants and comparable,” Forman tells CJR over the phone.
==Those papers lost a total of 164 full-time statehouse reporters—a decline of 35%—between 2003 and 2014.==
If anyone is interested in helping the cause, please email me -- jared AT nillium DOT com . I would love to talk more.
Large and mid-sized news companies consolidating and folding is part of a trend that does not involve growth of local newspapers. Those are failing too.
My (maybe naïve) view is that whatever pension benefits are accrued by an employee, should be paid into an annuity or similar, separate fund that is firewalled off from the assets of the employer.
The choice whether to honor pension obligations or pay back debt holders shouldn't exist. The pension was already funded and is held somewhere else beyond the reach of creditors.
(I'm not saying that the full dollar amount needs to be set aside today. Just an agreed-upon NPV of the future payouts for some standard actuarial retirement length.)
The problem is what to do if investment performance doesn’t meet expectations, lifespan increases, or future assumed yield decreases. Generally companies had to pay enough to be back to even within seven years. Newspapers sought the right to have thirty years to fully fund. McClatchy was larger than Congress was comfortable with and found itself unable to pay the required fraction of the difference between the NPV and finding amount. Hence, it declared bankruptcy.
If you're one of the decision makers, you're likely to be on the older side. So you're likely to start receiving the benefits soon anyway, and so any underfunding wouldn't affect you, since there would be a couple decades of money available before it started to run out. So the decision makers can easily choose to shortchange those 20 to 40+ years in the future in exchange for enriching themselves in the now (1970s, 80s, etc).
Seems like society should've seen it coming. Of course, if everyone kept having 4 kids, maybe those fantasy numbers could have been met, but who has the ability to predict numbers decades in the future?
Would you mind elaborating a bit more on the 'current law' aspects? I think that would be more constructive than: 'do some more research on this topic before [commenting].'
I also know nothing about this, but from reading the article and your comment, I'm confused how they arrived at this point of being $805 million behind in their pension obligations if current law is solid on this point. Maybe it took them down in the end, but shouldn't the intervention have happened far sooner?
Problem pensions are defined-benefit, where regardless of the amount of inputs and fund performance, the payments are guaranteed. Even worse, most pensions in America assume 8% average annual return, which is absurd. The whole thing is a house of cards.
Government on the other hand taxes income in order to pay for retirement and people don't have the ability to opt out, so of course they have an obligation to pay it.
You are deriding how these people should have been "personally responsible", what about the responsibility of the corporate side of the equation?