In New York and Illinois, politicians are playing politics with investment funds— and other people’s money. Published by Jane the Actuary View all posts by Jane the Actuary
7 thoughts on “Forbes post, “Can States Be Trusted To Manage Retirement Savings? Two New Reasons For Concern””
Can POLITICIANS WITH SPIKED PENSIONS be trusted?
You have greatly understated and misstated the problem with public pensions. They have been a gross failure. At any given time there might be three states with a 90% funding level.
No honest evaluation of public pensions can be undertaken without addressing the spiked pensions of politicians and various politicos which are far beyond any financial justification. The problem with public pensions, to use a sports metaphor, goes far beyond a mater of
X’s and O’s. They are the results no doubt of bad play but, more important, of bad players. The DB programs are a bad play which makes it possible for the bad players (the politicians) to give themselves grossly spiked pensions. For the DB play to be successful, 2 + 2 must equal 7, 17, or sometimes 27 at least for them. The rank and file EE’s and retirees via lower and pensions with no COLA and the citizens are taking it on the chin. Also, many who should be protected by the government are now being harmed.
In Ky there are two major retirement plans which are 100% funded and are never mentioned in the many studies about public pensions in Ky. They are the UK and U of L programs which are 403(b) which is similar to the 401(k) programs. In other words, they are DC retirement programs. They each provide for contributions of 5% EE and 10% ER with the money going into funds at Fidelity or TIAA CREFF chosen by EE. Upon retirement the EE can chose to use part or all of his or her account to buy an annuity from TIAA CREFF.
The big difference between a DC and a DB program is that in a DC your money is your money. The DC program provides for one the underlying fundamentals of both business and government. To borrow from Johnny Paycheck, the EE’s and retirees can not tell the DB program “Take your pension and shove it, I ain’t investin’ with you no more.”