Under Funded Government (all levels) Pensions

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denrgj's picture
Status: Member (Offline)
Joined: Sep 5 2009
Posts: 8
Under Funded Government (all levels) Pensions

Question related to Municide and ALL Gov't pension plans - Local, Muni, County, State, Fed. Several years ago many large corporations went from Defined Benefit plans - like the Gov't entities mentioned above - to 'Cash Balance plans. The effect for All plan participants was a dramatic reduction in their expected retirement income benefits. In my case, my (I am 55) befits were reduced by over 50%.

The IBM employees and retirees went to court in a closely watched legal battle and lost. The effect is/was that many dozens of the Fortune 500 companies followed suit (including the one I work for). Here is the Question.

If virtually all the gov't entities mentioned above are unable to meet their retiree commitments why are they NOT doing or at least considering the same solution that the private sector has done? I would think by changing to a 'cash balance' type of plan the overall plan cost would be reduced by at least a third. ASIDE from the rioting and violence ( I should add Vastly underfunded Union Pensions here as well), and the unpopularity of a decision like this, why is it not even discussed at any level?

james_knight_chaucer's picture
Status: Silver Member (Offline)
Joined: Feb 21 2009
Posts: 160
Re: Under Funded Government (all levels) Pensions

I am commenting from the UK, so forgive my ignorance of US matters, but here is my 2 cents, for what it's worth:

I guess the difference between private and public sector pensions is that a private company only has so much money, but a government has almost unlimited tax raising confiscatory powers. Many UK public sector pensions are 90% funded by future taxpayers, (as is the old age pension for everyone), so it would be difficult for the government to convince a court that this future tax had suddenly vanished.

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