Pensions are absolutely killing the country. I know people love them, but governments and businesses simply don't budget for them properly, and they almost always cause problems when they are defined benefit plans. You can't have someone work for you 20 years and then pay them for another 30 after they retire. The math just doesn't add up. Every pension system in this country should be re-evaluated for fiscal soundness and should be switched to be defined contribution plans. If the fund doesn't have money, people don't get pensions. There's no other way to make it fiscally responsible.
NYTimes was reporting about how most had/are still operating on the assumption of a 7-8% annual return. They highlighted Wisconsin's pension plan as a state using leverage to embark into riskier endeavors. It's something else when a state run pension plan begins to outright gamble for an unrealistic return.
So, what's the solution: 401k's with matching, or what? Anyone expect any of these unions (Police, Fire, Teacher, Bureaucrat) giving up the security of a pension?
Yes look at the list of greedy a-holes who are wrangling pensions. Those b*stard garbage collectors, teachers, police officers, etc. How dare they have any security from their jobs of public service once they've retired.
How about savings based pensions like many companies have today (companies that still actually have a pension). Contributions are made by the employer based on a percentage of salary throughout the career. Payments are based on amount accumulated over the career. The employee knows exactly how much he/she will get as they near retirement, it is 100% funded already over the career of the person, etc. There is no additional need to fund the pension after the person retires, they draw down on it based on need/earnings of the interest, how old they are. This pension, while not guaranteed payments, is then subsidized by social security (of which the tax was paid over the career) and maybe an additional 401K or Roth IRA type plan that the person contributed to. So the government employee still gets a pension (which 80% of working people don't actually get anymore), but they are also responsible for additional retirement funding on their own. Taxpayers don't have to pay guaranteed payouts over 30 years of retirement and govermnent employees still get a strong retirement plan. So you get a pension that paid in at a 5-6% of salary clip over the career, plus social security, plus 401K matching of 6-7%. Not too shabby.
I think that would be fine, but it will cost the state a ton to match investments from the employees.
I see what you are saying, but a lot of people took jobs that didn't pay them as well and stuck with them for decades because of the pension program in place. To take that away from them is criminal.
isn't the healthcare plan essentially a defined benefit plan tho, just like the pension plans that "aren't fiscally responsible?"
No, not for regular health care - because you pay for your health care as you go. You're not paying today for health care in 2040. Medicare certainly is, which is one of the problems it faces. I'm not sure you understand what you're talking about. Actually, I'm positive you don't.
Certainly - I'm not saying you just scrap them for people who have them. But you have to change how you do them going forward and what guarantees you make to people starting today. Same problem we have with Social Security - you can't change it for 60 yr olds, but you can certainly make changes for 20 and 30 yr olds, and potentially limited changes for 40-50 yr olds. For example, I believe the City of Austin gives you a portion of your salary for life if you work there at least 23 years. You start at 20 yrs old, and can retire at 43. You work there 20 years and then for another 50 years, they pay you about 75% of your highest annual salary. That's simply not financially sustainable.
But does it cost less to add 10-12% benefits while the person is working, or to invest to guarantee payouts of 75% of their salary for 30 years after they retire? Corporate America believes it does and has moved to the model I mentioned above because it is more cost effective and sustainable (saves money). I think this is a place where it wouldn't hurt in the long run for the various levels of government to emulate corporations.
