Update: Majority of [US] Pensions Headed for Bankruptcy

  • Posted by a hidden member.
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    Mar 27, 2011 5:17 PM GMT
    The news on US public pension systems (both for public sector employees and for social security) seems to continue getting worse:

    [US] Public Pensions In The Red Even With Rosy Assumptions (Update: $1.2 Trillion Gap)
    http://www.investors.com/NewsAndAnalysis/Article/567229/201103251914/Public-Pension-Plans-Underfunded-Even-With-Rosy-Forecasts.htm

    The Florida Retirement System is one of the nation's most financially fit public pensions, so why does new Republican Gov. Rick Scott call it a "ticking fiscal time bomb"?

    Florida taxpayers, like those around the nation, could face huge additional pension costs if investment gains come up short.

    At the end of June, Florida's system was 87.9% funded, far above the 80% mark that experts deem fiscally sound. But this assumes that investments will return 7.75% annually going forward.

    Assuming 6% returns, the official $16.7 billion unfunded liability would more than triple to $52.7 billion and the funding ratio would fall to 69%. That's according to a new report for the Florida Retirement System from actuarial firm Milliman.

    Florida pension plans returned 2.6% annually over the past 10 years, but 9.6% over 30 years


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    Oct 16, 2012 10:46 PM GMT
    http://www.reuters.com/article/2012/10/15/us-usa-pensions-study-idUSBRE89E0NF20121015

    The largest 100 public pension funds have around $1.2 trillion of unfunded liabilities, about $300 billion above the nearly $900 billion they reported themselves, according to a new actuarial study to be released on Monday.

    The pension systems reported a median funding level of 75.1 percent. The study by the actuarial firm Milliman, which used different ways to value assets and measure liabilities, finds an aggregate level of funding of 67.8 percent.

    But Milliman, one of the world largest actuarial firms took a close look at U.S. public pension funding for the first time, and said the multibillion-dollar difference was good news.

    Rebecca Sielman, the report's author, said results should reassure the public that America's public pensions in general are accurately reporting their funding shortfalls.

    The difference between what public pensions across the United States have reported and what Milliman found wasn't significant, Sielman said. She noted that a relatively small change in the way the figures are calculated could lead to seemingly outsized results because the funds are so large.

    "The numbers really didn't change that much," she said. "It really didn't move the needle."

    Both the pension funds' reported results and Milliman's findings fell within the range of previous estimates from other studies of the total size of the public pension shortfall in the United States.

    With the study, Milliman, stepped into the debate about whether public pensions are underreporting the size of their liabilities.
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    Apr 18, 2014 9:50 PM GMT
    Majority of Pensions Headed for Bankruptcy

    http://www.the-american-interest.com/blog/2014/04/10/majority-of-pensions-headed-for-bankruptcy/

    Investment returns may be up since the recession, but public pensions are still in deep, deep trouble. On Wednesday, the hedge fund Bridgewater Associates released the results of a “stress test” on American public pension plans, and they weren’t pretty. According to the report, 85 percent of all plans are on track to go bankrupt within 30 years unless their average rate of return increases to 9 percent. Barring something truly miraculous, that’s unlikely to happen: Bridgewater expects the rate to be closer to 4 percent, and even the unrealistically optimistic estimates given by pension funds themselves rarely exceed 8 percent. . . .

    This doesn’t mean, of course, that 85 percent of pension plans will actually go bankrupt. These numbers depend on public officials not taking the necessary actions. States and cities are slowly realizing that they have a major problem on their hands. Many will take preventative measures, either by cutting benefits or by increasing contributions to the plans (more likely a combination of the two).

    But given the history of political “punting” by city officials and state lawmakers when it comes to pension reform, it’s probably a safe bet that more than a few cities and states will end up in the same position that Detroit, Chicago, and San Bernardino find themselves in.
  • coolarmydude

    Posts: 9190

    Apr 19, 2014 2:06 AM GMT
    southbeach1500 said
    And we also keep hearing from the Democrats that Social Security "isn't in trouble." icon_wink.gif


    And we keep hearing how Republicans want to privatize Social Security, which is the same model as this pension issue. icon_rolleyes.gif
  • tj85016

    Posts: 4123

    Apr 19, 2014 2:11 AM GMT
    coolarmydude said
    southbeach1500 said
    And we also keep hearing from the Democrats that Social Security "isn't in trouble." icon_wink.gif


    And we keep hearing how Republicans want to privatize Social Security, which is the same model as this pension issue. icon_rolleyes.gif


    no it's not, pensions can invest in any number of shitty mortgage-backed bonds, bonds based on car loans and student loans, crappy stock funds, etc.

    anyone who lets a third party (unions, for example) invest their retirement funds is a moron
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    Apr 19, 2014 2:28 AM GMT
    tj85016 said
    coolarmydude said
    southbeach1500 said
    And we also keep hearing from the Democrats that Social Security "isn't in trouble." icon_wink.gif


    And we keep hearing how Republicans want to privatize Social Security, which is the same model as this pension issue. icon_rolleyes.gif


    no it's not, pensions can invest in any number of shitty mortgage-backed bonds, bonds based on car loans and student loans, crappy stock funds, etc.

    anyone who lets a third party (unions, for example) invest their retirement funds is a moron


    It's incredible how some people can't tell the difference between actually funding pensions vs not bothering to fund them at all and then demonize those who want to save funds for retirees.
  • coolarmydude

    Posts: 9190

    Apr 19, 2014 3:27 AM GMT
    http://www.governing.com/gov-data/state-pension-funds-retirement-systems-unfunded-liabilities-obligations-data.html
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    Apr 19, 2014 1:52 PM GMT
    coolarmydude saidhttp://www.governing.com/gov-data/state-pension-funds-retirement-systems-unfunded-liabilities-obligations-data.html


    It gets far worse when you look at the underlying assumptions. To get to the "unfunded liability" estimate you have to make assumptions of what investment returns will be. Many states overestimate investment returns by a factor of 2 relative to what private pensions estimate - and it's worse for public pensions because they have defined benefit plans and have specific obligations to meet.