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Tag Archives: CalPERS

If you are a public or private sector worker with a future promised pension, is that pension safe?

Public pensions are allegedly guaranteed by each state and/or the federal government. After all, doesn’t it say so in many if not all state constitutions? That’s why public employees count on the fact that when they retire after working 20, 30, 40, or more years, they will receive the pensions they were promised.

A friend of mine who is still teaching attended a State Teachers Retirement System (STRS) Seminar in Irvine, California recently and asked if teacher’s pensions were safe. My friend was told that the California Constitution guarantees the State of California’s obligations towards the Teachers’ Retirement System. (My friend’s name will go unmentioned in this post because of the fact that in public education today no job is safe for teachers if you say the wrong thing in public.)

My friend thought, “What (the STRS representative) does not realize is if the money is not there, then the money is not there.  The State’s Constitution can be amended.  Also, if there is enough political pressure from voters, school boards, etc. then the State would definitely reduce the funding levels for STRS.”

In an e-mail my friend listed several examples of promised retiree benefits that have already been broken in both the private and public sector.

> Bethlehem Steel- declared bankruptcy in 2001, which affected the pensions of 120,000 retirees and their dependents.  – Your Incredible Vanishing Pension

What happened? Bethlehem Steel transferred its pension obligations to the U.S. Pension Benefit Guaranty Corporation (PBGC).  The PBGC did not cover the retirees promised health-care coverage in retirement.  When PBGC took over, the 30-years-and-out agreement was scrapped, and workers got the standard U.S. worker’s deal.  Some workers were planning to retire at 60, but they had to work until 62 to get their retirement under PBGC.  Also, PBGC only took over $3.7 billion even though the fund should have been funded at $4.3 billion.  Hence, retirees saw their pension reduced.

What happened? Pension checks will shrink by 6.7% or 4.5% for 12,000 Detroit retirees.  Two different sources contradict each other (6.7% vs. 4.5%).  Almost 11,000 retirees and current employees will have to repay $212 million in excess interest that they received when they received bonuses in some years for their annuity.  “U.S. Bankruptcy Judge Steven Rhodes ruled that Detroit’s pensions could be cut even though the state constitution prohibits reducing retirement benefits.”  Plus, cost of living adjustments were eliminated.

  • Stockton Bankruptcy (“Judge Christopher Klein conducted a hearing on the City’s proposed Plan of Adjustment, as amended (also known as the “Exit Plan”) on May 12-14, 2014. . . The City shared that the Plan of Adjustment would go effective by end of day-Feb. 25, 2015”) (“Chapter 9 Bankruptcy”).

What happened? “As part of the city’s bankruptcy plan, all retiree medical benefits—part of a program costing $544 million—have been eliminated. … Under the plan of adjustment, remaining pension benefits for new city employees will be lowered while individual employee contributions will rise.  However, the CalPERS pension benefit for retirees remained untouched during the bankruptcy, but Stockton might not be able to continue to fund the CalPERS pension benefits at their current levels.

What happened? Even though Vallejo did not cut CalPERS benefits to its retirees, the retirees’ benefits could still be in trouble.  “Moody’s recently warned that Vallejo’s pension obligations could force it to file for bankruptcy protection a second time. … Ballooning pension costs, which will hit more than $14 million this year, a nearly 40% increase from two years ago.”

What happened? San Bernardino failed to pay CalPERS’s contribution during the first two years of its bankruptcy.  This failure ended up in court.  What has emerged is “ … residents and businesses [will have] to pay an additional property parcel tax increase to fund $16 million in skipped payments, and interest payments of $602,580 a month for another two-year period”.  San Bernardino just decided to turn over its fire department to the county; essentially, San Bernardino just dumped future CalPERS pension contributions since it would have been required to pay 10% annual increases.  “The City of San Bernardino has voted to become the first participant to dump CalPERS after the state’s pension plan shocked participants by announcing contribution rates would rise by 61% over the next five years.”

Conclusion

What this means is that no matter what a state or federal Contusion or law says about a guaranteed promise, there is no guarantee for any pensions, because what happened with Bethlehem Steel, a private sector company, and public sector unions in Detroit, Stockton, Vallejo and San Bernardino for has set a legal trend for other corporations and/or municipalities to dump their pension obligations, which could spell major trouble for retirees who were counting on them in their old age. Support of the Elderly Before the Depression: Individual and Collective Arrangements by Carolyn L. Weaver reminds that “Before the Great Depression, the care of the poor of all ages was a responsibility assumed primarily by the private sector, generally through the extended family, friends and neighbors, and organized private charity.’ There were no federal programs (other than veterans programs) to assist the poor, whether young or old, disabled or unemployed. The role of the government in preventing poverty through the provision of pensions and insurance was even more limited.”

Words for Thought

Did you know that in 1900, 40 percent of Americans lived in poverty? Imagine the burden when a family that was already living in poverty and didn’t have the money to pay for medical care had no choice but to do their best to support their aging parents and/or grandparents and/or children and/or friends and neighbors when there wasn’t enough money to provide shelter or food for even themselves? Maybe that’s why Denmark, Iceland, Switzerland, Norway and Finland are the world’s happiest countries, because they all support strong social safety net programs, the majority feels a moral duty to have them, so no one suffers when friends and family can’t afford to help with food, shelter and medical care. Imagine what it must feel like not to have to worry about your next meal or being tossed out of your home because you can’t pay rent, the property tax, or the mortgage payment.

If you want to know the single most powerful force in the United States that is working hard and spending hundreds of millions of their own dollars to destroy the Social Safety net that supports most Americans in their old age, look no further than ALEC, an organization supported by David and Charles Koch and their so-called libertarian billionaire boys club. To learn more, I recommend Bill Moyers & Company’s The Kochs Are Ghostwriting America’s Story.

What do you want – a collective effort to support each other (for instance, through Social Security, food stamps, unemployment, Medicare and traditional pension plans) or an environment where everyone is responsible to take care of themselves with no collective support and if you can’t do it, just die quickly or miserably?

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Lloyd Lofthouse is a former U.S. Marine and disabled Vietnam Veteran, with a BA in journalism and an MFA in writing, who taught in the public schools for thirty years (1975 – 2005).

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The Private-Sector, Jealousy-Misery Media Factor – Part 3/5

Another example of how misleading Don Thompson’s AP piece, Public retirement ages come under greater scrutiny, was: “With Americans increasingly likely to live well into their 80s, critics question whether paying lifetime pensions to retirees from age 55 or 60 is financially sustainable. An Associated Press survey earlier this year found the 50 states have a combined $690 billion in unfunded pension liabilities and $418 billion in retiree health care obligations.”

What Thompson doesn’t mention is that some states managed their pension funds better than others did.

A March 2011 report on the Best and Worst State Funded Pensions by Adam Corey Ross of The Fiscal Times offers a more balanced picture.

Ross writes, “State pension programs across the country have undergone a major transformation, as more and more of them are cutting back the amount of money they set aside for retired workers, gambling that they can meet their obligations through investments instead of savings…”

In fact, Ross lists the best fully-funded state pensions, which are: New York, Wisconsin, Delaware, North Carolina, Washington, South Dakota, Tennessee, Wyoming, Florida and Georgia. He also lists the worst state pensions where the gamble did not pay off.

California falls between the two lists and is struggling to fill the funding gap. The following video explains why.

In addition, nowhere does Ross or Thompson mention that California has two state pension plans.  There is CalPERS and then there is CalSTRS.

The California State Teachers’ Retirement System [CalSTRS], with a portfolio valued at $148.2 billion as of October 31, 2011, is the largest teacher pension fund and second largest public pension fund in the United States. CalSTRS administers a hybrid retirement system, consisting of a traditional defined benefit, cash balance and defined contribution plan, as well as disability and survivor benefits. CalSTRS serves California’s 852,000 public school educators and their families from the state’s 1,600 school districts, county offices of education and community college districts.

How well funded is CalSTRS to meet its future obligations?

CalSTRS makes it clear that “It’s important to understand that the risk of facing depleted assets exists approximately 30 years from now versus actually facing insolvency today.”

Note: Due to losses from investments during the 2008 global financial crises, the CalSTRS retirement “fund took an enormous hit to its stock portfolio when the market plunged during the heart of the recession, losing nearly $43 billion — roughly 25 percent of its value — from June 2008 to June 2009.”

Continued on December 18, 2011 in The Private-Sector, Jealousy-Misery Media Factor – Part 4 or return to Part 2

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Lloyd Lofthouse is the award-winning author of The Concubine Saga. When you love a Chinese woman, you marry her family and culture too. This is the love story Sir Robert Hart did not want the world to discover.

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