Brady Bunch wrote:

Rongone wrote:

"Because the stock market and economy were doing so well, they just assumed the existing balance and employee contributions would be enough to fund the pension program. Obviously the projections of 7.5% return every year was unrealistic."


Every American worker with a defined contribution retirement plan faced the same economic downfall. The difference between these people and the members of public defined benefit programs is that private employees had to make up the loss difference (if they were able) by increasing their contribution to the plan from their personal salary/wages, whereas public employees expected that their shortfall would be made up by increased contribution by the taxpayers. That is not a fair solution.

My mentioning of the economic downturn was to show how silly it was for the state legislature and governor to expect those high rates of return to continue forever and use that as an excuse not to properly fund the program.  This foolish mistake has definitely exacerbated the problem.

I think it is unfair to compare what happened in the economic downturn between public employees and the private sector.  People in the private sector for the most part control how their funds are invested and can decide whether they want it invested in the stock market, municipal bonds or whatever.  This allows them to mitigate their risk and be as conservative or risky as they want with their investments.  Public employees in a defined contribution plan do not get to decide where there retirement funds are invested, that is done by the retirement board.

I think all the citizens need to demand of their legislators and their governor to make sure the pension system is properly funded and changes are made to make sure it is able to meet all the obligations it currently has and will have in the future.

Typical defined contribution plans (401K) are administered by a mutual fund company through an agreement with the employer. A limited offering by that fund company of certain selected funds is offered to participants. So yes, employees do have a very limited selection of offered funds to invest their designated contribution. And yes, they can modify or change their selections within the rules, which restrict the timing and number of changes they can make.

So yes, individuals that participate in a defined contribution retirement plan do have to make some decisions in directing their contribution investments. While this may be unlike your defined benefit plan, my question would be: who, in their right mind, would leave all the decision making in retirement investments up to some nameless, faceless group, and have no ability to challenge or change their decisions? If it was my money, I surely wouldn't want that to happen. But, in the case of a public employee defined benefit retirement system, regardless of the poor investment decisions made by plan administrators, the thinking is always that the shortfall will be made up with some package of increased taxes on the backs of average citizens rather than the responsibility being placed on the beneficiaries of those plans. I think the employees that are the beneficiaries of those defined benefit plans should be made responsible for the public pension system to make sure that it is properly funded and able to meet all of its obligations both current and in the future. Just like the majority of Americans that have their retirement funds in a 401K plan that they convert to an IRA when their employment ends.
 

Brady Bunch wrote:

Rongone wrote:

 I think the employees that are the beneficiaries of those defined benefit plans should be made responsible for the public pension system to make sure that it is properly funded and able to meet all of its obligations both current and in the future. Just like the majority of Americans that have their retirement funds in a 401K plan that they convert to an IRA when their employment ends.
 

I'm not sure the employees can be made responsible for the legislators and governor not properly funding the program.  The employees made their required contributions out of their payroll.  In my opinion, it is the responsibility of the legislators and governor to make sure it is funded properly from the governments side.

I would suggest you contact your legislators and the governor to let them know how important this issue is to you and demand that they make the pension reforms needed.  If you would also like them to amend the state constitution to allow them to retroactively change the terms of a contract without the consent of both parties, you should let them know that as well.

 
Believe me Brady, I have been adamant for many years that public pensions should be defined contribution plans rather tha defined benefit for the many reasons I have stated here. I have made my position crystal clear to my state representative and last 3 senators, along with governors back to the Rendell administration. I will continue to present viable reasons for making these changes.

I challenge your comment that employees cannot be made responsible. How can an individual claim no responsibility for administering their own retirement plan and fiscal future after their working career has ended? That is an insidious acceptance of irresponsibile inaction. Although I shouldn't be surprised at that attitude as it seems to be rampant in government organizations and individuals nowadays. Non-acceptance and deflection of responsibility seems to be the prevailing norm. Yeah . . .  Let somebody else pay for my lackadaisical attitude and irresponsibility.

Brady Bunch wrote:

Rongone wrote:

I challenge your comment that employees cannot be made responsible. How can an individual claim no responsibility for administering their own retirement plan and fiscal future after their working career has ended? That is an insidious acceptance of irresponsibile inaction. Although I shouldn't be surprised at that attitude as it seems to be rampant in government organizations and individuals nowadays. Non-acceptance and deflection of responsibility seems to be the prevailing norm. Yeah . . . Let somebody else pay for my lackadaisical attitude and irresponsibility.

The way the retirement system is setup for state employees (and I believe teachers, but maybe Fred could confirm that), is that it is a defined benefit administered by the state.  Employees/retirees don't have any input or control over where the money is invested.  The monthly retirement benefit that retirees receive is based on years of service and average salary for the last 3 years.  Retirees have no control of how the funds were invested and no say.

It has absolutely nothing to do with a lackadaisical attitude or being irresponsible, it has to do with lack of control on the part of state employees in whether the state makes there actual contributions to the plan or how they decide to invest the funds.
 

 
They have no control because they have expressed no interest in assuming the responsibility and control. They are happy with the system as it is. If the public employees (state, teachers, or whoever) and their unions decided they wanted more control and pressed for that control in contract negotiations, they'd probably get it. But the participants are content with the status quo . . . for now.

It has everything to do with deflection of responsibility for your retirement plan. Blame whoever you want, the ultimate responsibility belongs to the participants of that defined benefit plan.

Wait until the pension plans are unable to make their required monthly payouts at the current rates and pension checks are cut by 30 or 40 percent. Then the howling for increased taxes, finger pointing, and assignment of blame will become a deafening outcry. And I, for one, will contend -- "For whatever a man might sow, that also he will reap."

Then we'll leave it there. We both are in agreement that something needs to be done if the numerous Pennsylvania public employee pension plans are to become solvent and survive. We still disagree as to responsibility, timing, and viable options for making up for shortfalls.

Thanks for your input to the discussion.

http://www.pennlive.com/politics/index.ssf/2016/07/pennsylvania_legislatures_summ.html#incart_river_index

Good article about where the state of pension reform stands in PA, hopefully something will be done this summer.