It takes the right kind of culture to reform pensions, or to diligently fund them in the first place.
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4 thoughts on “Forbes post, “Public Pension Funding And Reform— Or Lack Thereof — When We’re Not ‘All In This Together’””
“risk-sharing: each year’s employee contribution (not just employer contribution) varies based on the requirements due to the funded status/funding method, and retirees’ benefits are adjusted up or down based on investment returns.”
“They also consistently make the Actuarially Determined Contribution, year after year — which means, of course, that there is no need for more burdensome catch-up contributions later on.”
There’s the rub. If one has been consistently contributing correctly for years, the risk is minimal. Wisconsin, perhaps, might need to reduce COLAs by one percent. And/or increase employee contributions by one or two percent. (Do you have any data on the actual changes in the last ten/twenty years?)
New Jersey hasn’t had COLAs since 2011. They would need to increase contributions as much as 5-10 percent, for employers -and- workers. And/or cut wages by as much.
Just not feasible.
The “average” 70 percent funded state -might- be able to transition to risk sharing without too much shock to the system.
The sooner, the better.
Should be and/or cut –pensions–
(Maybe wages too, they are in bad shape.)
Also, many states that are only 70 percent funded –have been– contributing 100 percent of their ARC (e.g.,California). It’s a simple fix, discount rate, but not an easy one.