AuthorTopic: Official Pension Fund Collapse Thread  (Read 1194 times)

Offline RE

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Official Pension Fund Collapse Thread
« on: April 21, 2016, 12:23:14 AM »
I have a feeling we'll be hearing a lot more about Pension Funds collapsing over the next few months/years., so standing up a ew official thread.

Amazing how they can bail out insolvent banks and criminal energy companies but they can't find money to bail out pension funds.. :icon_scratch:  Why is that? ???

RE

http://www.zerohedge.com/news/2016-04-20/going-be-national-crisis-one-largest-us-pension-funds-set-cut-retiree-benefits

"This Is Going To Be A National Crisis" - One Of The Largest U.S. Pension Funds Set To Cut Retiree Benefits


Submitted by Tyler Durden on 04/20/2016 17:42 -0400
 

A dark storm is brewing in the world of private pensions, and all hell could break loose when it finally hits.

As the Washington Post reports, the Central States Pension Fund, which handles retirement benefits for current and former Teamster union truck drivers across various states including Texas, Michigan, Wisconsin, Missouri, New York, and Minnesota, and is one of the largest pension funds in the nation, has filed an application to cut participant benefits, which would be effective July 1 2016, as it "projects" it will become officially insolvent by 2025. In 2015, the fund returned -0.81%, underperforming the 0.37% return of its benchmark.

Over a quarter of a million people depend on their pension being handled by the CSPF; for most it is their only source of fixed income.

Pension funds applying to lower promised benefits is a new development, albeit not unexpected (we warned of this mounting issue numerous times in the past). For many years there existed federal protections which shielded pensions from being cut, but that all changed in December 2014, when folded neatly into a $1.1 trillion government spending bill, was a proposal to allow multi employer pension plans to cut pension benefits so long as they are projected to run out of money in the next 10 to 20 years. Between rising benefit payouts as participants become eligible, the global financial crisis, and the current interest rate environment, it was certainly just a matter of time before these steps were taken to allow pension plans to cut benefits to stave off insolvency.

The Central States Pension Fund is currently paying out $3.46 in pension benefits for every $1 it receives from employers, which has resulted in the fund paying out $2 billion more in benefits than it receives in employer contributions each year.

As a result, Thomas Nyhan, executive director of the Central States Pension Fund said that the fund could become insolvent by 2025 if nothing is done. The fund currently pays out $2.8 billion a year in benefits according to Nyhan, and if the plan becomes insolvent it would overwhelm the Pension Benefit Guaranty Corporation (designed by the government to absorb insolvent plans and continue paying benefits), who at the end of fiscal 2015 only had $1.9 billion in total assets itself. Incidentally as we also pointed out last month, the PBGC projects that they will also be insolvent by 2025 - it appears there is something very foreboding about that particular year.

As the Washington Post writes:

    Ava Miller, 64, and her husband, Ed Northrup, 68, could see their combined monthly pension income cut to about $3,000 from the nearly $7,000 they receive now, according to a letter they received from Central States in October.

     

    If the cuts go through, Miller, who worked as a dispatcher in Flint, Mich., said they will need to dip into their savings to help cover their $1,300 mortgage payment, heating bills and trips to visit her 84-year old mother. Northrup, a retired car hauler, has started applying for truck driving jobs that could supplement their potentially smaller pension payments.

     

    What makes the cuts more painful, Miller said, is that she took pay cuts so that the company could continue making contributions to the pension.

     

    "I did everything I was supposed to," Miller said, adding that she and her husband made extra payments on their car loan to cut down on their monthly bills after they received letters in October informing them of the potential cuts.

All hope is not lost, however.

Democratic candidate Bernie Sanders has proposed a bill that would repeal the measure allowing cuts, and instead calls for the government to provide assistance to troubled pension funds.

In other words, another bailout.

Which brings us to the current juncture, where we remind everyone that the governments own safety net, the PBGC has itself become insolvent, and according to CNN, projects that more than 10% of the roughly 1,400 multiemployer plans, covering more than 1 million workers fits the current criteria to be able to apply for benefit cuts for participants.

"This is going to be a national crisis for hundreds of thousands, and eventually millions, of retirees and their families. It's going to open the floodgates for other cuts." said Karen Friedman, executive president of the Pension Rights Center.


We can't help but wonder that as more pension funds become insolvent, and more and more participants are forced to take reductions in benefits, whether helicopter money won't soon become a reality for the United States, even before it becomes one in Japan. Especially if it is spun by some opportunistic politicans as the "only hope" for America's workers to preserve some of their retirement savings.
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Offline MKing

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Re: Official Pension Fund Collapse Thread
« Reply #1 on: April 21, 2016, 07:27:50 AM »
While fitting into more the "procrastination and overestimating market returns" side of the room rather than collapse, this is one that A) folks have seen coming for a LONG time, B) will be important to millions (even if it isn't itself a collapse), and C) can be laid squarely at the feet of idiots in charge.

And it is just a terrible thing for the millions of Americans who were sold a bill of goods, the first being that the union would always be there for them, and the second that the government would backstop the pensions if it turns out the unions were liars. Which of course they are.

My stepdad is a coal miner, and recently received his notification with the bankruptcy of Peabody that things would be a'changing for his pension as well.

As previously noted, this is yet another symptom of the required spin down in the American standard of living, because of everything from the victim mentality of Americans nowadays, the demographics of the working young and their inability to work their way out of a wet paper bag in an economy that is growing increasingly competitive for just that type of work ethic, the trade imbalance and deficits, the rules allowing Wall Street primacy when it comes to taxing economic activity above and beyond what the government itself does, the state of the public and secondary education systems in America, just pile on all the things that people want to individually mistake for collapse, but taken as a whole are resulting in what we've got. An America in overall decline.

Unfortunate, and if any country can dog eat dog and meat clever its way out of it, we can, but I believe it will take a combination of these things, pensions on the old folks (may of whom are directly responsible for the idiocy that got us to this point), student loans piled on the young, parents that allow schools to pile on self esteem building exercises on little Johnny without teaching him to think, and the parents themselves that can't ever imagine their kid digging a ditch for an hourly wage because they are above that. Turning their kid in some future cube dweller without a seconds understanding of what real work is.

 
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Offline Eddie

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Re: Official Pension Fund Collapse Thread
« Reply #2 on: April 21, 2016, 09:06:29 AM »
I worry about my life insurance company. I know they are making more risky investments than they used to, because they have no choice, with bond yields in the toilet. The company's chief economist jumped off a bridge, last year..or maybe got pushed (but that would be a conspiracy if that happened, so probably not. LOL.)

That's why i'm going to borrow the cash value and pay off my land mortgage.
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Offline RE

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Re: Official Pension Fund Collapse Thread
« Reply #3 on: April 21, 2016, 01:31:12 PM »
Pensions are a form of deferred compensation invented by capitalist pigmen to offer their employees security in their declining years.  Along with the Gold Watch you got for your years of service to the company, you got a pension so you wouldn't have to finish off your life as a beggar on the streets of Berlin & London.

The problem with this was that many if not most of these companies went outta biz, leaving the pensioners hung out to dry.  So in the 19th century Otto von Bismark had the state take over the job of running public pensions.  Theory there being of course that the State can never go broke.

Here in the FSoA, for many years private corporations offered Pension Plans to their workers as deferred compensation.  They made tons of promises they knew they couldn't keep, but in order to attract workers without offering higher salaries this was a way to do it.  Of course, many if not most of those private pension plans went bust along with the companies that offered them,  So Da Federal Goobermint created the Pension Benifit Guarantee Corporation (PBGC), which guarantees the benefits of these private pensions.  Most of the pension liabilities of the PBGC are from private pensions, not from Union pensions.  The only connection the Unions had was in negotiating what the Pension Benefits package would look like.

This is also true for the pension system of the Public Sector Unions.  In this case, the Union negotiates with the state agency for a benefits package of deferred compensation.  Again actuarially this doesn't work out, but again the theory is the State can never go broke. So Public Union pensions have traditionally been fairly generous as these things go.  In recent years however, many of these such as municipal Police department pensions and so forth have gone belly up, and Da Goobermint is becoming overwhelmed with the liabilities.  So they are looking to start cutting these liabilities, essentially giving the pensioners the "haircut" they don't require of the criminals running the banking and energy industries who pay themselves with big salaries, big bonuses and Golden Parachute severance packages.

In Greece, they have cut their pensions so much you have Greek Pensioners eating out of garbage cans and self-immolating.  We're probably still a few years away from that here and the whole monetary system will probably crash before that comes to pass, but even if not it is thoroughly self-defeating when you do it.  The pensioners then have no money to spend and the companies who provided goods and services to them go outta biz, creating still more impoverished people.  The state takes in less income and sales taxes.  And so forth, it spirals up.

This is all part of the great Capitalista Pigman Ponzi Scheme which benefits a few at the top at the expense of the many at the bottom.

RE
« Last Edit: April 21, 2016, 02:20:19 PM by RE »
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Offline RE

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Re: Official Pension Fund Collapse Thread
« Reply #4 on: April 21, 2016, 01:45:04 PM »
I worry about my life insurance company. I know they are making more risky investments than they used to, because they have no choice, with bond yields in the toilet. The company's chief economist jumped off a bridge, last year..or maybe got pushed (but that would be a conspiracy if that happened, so probably not. LOL.)

That's why i'm going to borrow the cash value and pay off my land mortgage.

If you borrow the cash value and then the Insurance Company goes belly up, don't you still owe the money?

RE
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Offline Eddie

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Re: Official Pension Fund Collapse Thread
« Reply #5 on: April 21, 2016, 01:58:06 PM »
If you borrow the cash value and then the Insurance Company goes belly up, don't you still owe the money?

No. Because the policy was funded with after tax dollars, technically, I can borrow the money and never pay it back and not be taxed on the amount withdrawn. That's what I'll do, if I can get some cheaper term life from another company. I'm working on that. At my age, though, it's no longer a slam dunk to get a new policy. I've been working on it for a couple of months.
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