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More bad news for pension plans

By Jennie L. Phipps · Bankrate.com
Monday, July 1, 2013
Posted: 4 pm ET

If you are a participant in a union multiemployer pension plan or a state or local government pension, the retirement planning news out Monday isn't great.

Some 37 percent of the officers of the country's largest multiemployer plans said in a survey released by Pyramis Global Advisors, which manages one-third of all assets in these plans, that they didn't believe the existing plans will survive. The main reasons they believe this are:

  • Company sponsors lack commitment: 36 percent.
  • Legislative requirements endanger the plans: 32 percent.

Other factors cited that put these large plans at risk include declining union membership, increasing benefit payments and the demise of some large-company sponsors.

Another study released Monday morning by the Center for Retirement Research at Boston College and the Center for State & Local Government Excellence determined that the funded status of state and local pensions declined in 2012 to 73 percent from 75 percent. At the same time, the annual required contributions that participating governments must make rose, but these entities made just 80 percent of these required payments.

Millions of workers and retirees are covered by these two kinds of retirement plans, and there is a strong and obvious need to put them on solid financial footing. Everybody is looking for a solution. The report on state and local pensions said the situation will likely improve if the stock market continues to be robust. The union pension managers told Pyramis they are willing to consider alternative investments including property, hedge funds and private equity to shore up shortfalls and manage volatility.

Neither of these ideas look like a slam-dunk.

If you depend on one of these pensions -- or hope you'll be able to do so one day -- how do you feel about these reports?

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19 Comments
Willy05
September 04, 2013 at 10:29 pm

The pension models are defective because no one can forecast long run interest rates or inflation. Pensions have been further hurt by politicos earning top pensionable dollars. To be fair to career workers is the key to the solution. Allow current workers to participate for an additional 5 years then freeze pension values. New hires start under defined contribution plans now, existing members switch over in 5 years. Annual employer contributions continue at the same rate. Over time the pension liability will decline regardless of economic conditions.

Davis
August 22, 2013 at 9:51 pm

The real problem is the dirty politicians rape the funds to balance the budget and then continue to over spend!!

DonH
August 22, 2013 at 4:54 pm

It is too bad that many commenters like to vent their frustration at a government entity and not address the real issues with government or private pension plans. Government and Private Pension Plans base their performance on the US Investment Market Place and this market has gone to lunch since 2008. If we are ever to get our Country moving again, a concerted effort by all is needed. Look for ways to improve your efficiency both in investments and resource use. The more one increases ones efficiency, the more one improves his/her standard of living. Think about this and act appropriately.

Paul
August 21, 2013 at 2:23 pm

I've said it before and I'll say it, again. Unions have served their purpose and they are no longer needed. We have laws in the books, compliment of the Unions, that address all previous labor issues.

Unions should NOT be part of any government offices. All it does is encourage the corruptions we see each day.

ralph
August 20, 2013 at 11:33 am

we had a thruway toll take retire at age 50 taking home 125,000 for the rest of his life and lifetime health benefits. State retirement plans are often worth more than 2 million dollars and yet they complain .... what a joke !!

ralph
August 20, 2013 at 11:31 am

yea lets see start working at age 20 retire at 40 live to 90 . get paid for 70 years out of which you work 20 ... and then complain ...what a joke why dont they privatize these systems

Firefighter’s Wife
August 19, 2013 at 10:22 pm

The benefits from our state pension certainly are not excessive...and by the way, for 25 years we have taken LESS in hourly wages and benefits while working and instead deferred that income until retirement. It's not "extra money" over and above our salary, it is our "saved money" (in the form of contributions to our pension fund) we have already earned and deferred, just the same as social security benefits are earned money taken from people (via taxes) and SUPPOSEDLY saved for their benefit and returned to them at a later date. And finally, FYI, where we live it was/is MANDATORY for us to pay into the state pension fund IN PLACE OF social security (i.e., we don't get SS benefits); no one gave us a choice. I'm tired of hearing us misrepresented as "moochers" and "parasites". We've held up our end of the agreement by providing an essential service to the community (whether or not they paid taxes) faithfully and at risk of life and health. We are NOT lazy welfare recipients sucking off the state.

PAUL
August 14, 2013 at 12:50 am

When employees in the private sector realize their taxes have to go up to pay for government employees pensions(which are grossly underfunded) there's going to be a huge backlash-especially when employees in the private sector have no pension to look forward to. Thank stupid Democrat politicians for that!

Hugh
August 10, 2013 at 4:41 pm

so long as congress have their pensions guaranteed, they don't give a (explitive)!!!

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