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Atlanta poised to dump defined benfits pension system

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While I don't necessarily disagree with the proposal of 401k systems to replace defined benefit systems, to lay the blame solely on the type of system is unfair. When I retired, the Okla. State employment system was not only in good shape, (over 80% funded) it was growing. Then came the the crash of 2007 due to many factors including hedge funds. Now, the Oklahoma employee retirement system, like so many others, is in dire straights. It is not necessarily mismanagement, its the economy.

Andy so you got yours and now its time to change.
 
It is a combination of several factors - managers invested in risky investments and assumed that there would NEVER be a decrease in value, everyone assumed future contributions would continue to rise and offset people retiring, people get more out of the fund then they contribute because benefits are often determined by their end of career salary, not their overall input, and economic conditions have caused layoffs and forced retirements that further stress the funds.

Common sense and rainy day thinking were not taken into account - this is not the first time we have had a recession or the stock market has lost value, it's already happened several times in my lifetime. The problem is that potential negatives are often ignored.
 
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Bob, and the rest. Benefits that have been earned by plan participants are covered now. If the plan were to end now they have over 100% of the money required to pay out the benefits earned to date. Check the study that was posted by Bob Hudson. The unfunded liability has to do with the projected benefits that are going to be earned in the future. As long as all parties can afford their yearly payments to the plan then it will not go bankrupt. Every year this number changes based on many things. These other states that are having problems are the states where they decided to not pay their portion of state retirements to save money NJ is a great example.

30a, the number Bob was talking about was the annual pay raise assumption, it was 7.5% assumed per year and the pension board lowered it. With that change it in turn changes the unfunded liability. Are they going to go with it? Hell Yes. The investment return assumption is 8%.
 
Thanks Henry, you know I am not the numbers guy, Jack Abbit was and still agreed to it, as I was on the negotiation team that year.
 
Just saw this CNBC article called Study: $1400 Tax Hike Needed to Fund US Pensions. The added emphasis is mine.

U.S. state and local governments will need to raise taxes by $1,398 per household every year for the next 30 years if they are to fully fund their pension systems, a study released on Wednesday said.

Everyone needs to figure out how to get pretty regular raises. Sending all of our manufacturing and higher end service jobs offshore while encouraging illegal immigrants to migrate here is probably not going to turn out to be a good way to do that.

Pension funding in U.S. cities and states has deteriorated in the wake of the 2007-2009 economic recession as investment earnings dropped, and some states, such as New Jersey and Illinois, skipped or reduced required payments.

Most companies in the private sector started dropping their defined benefit retirement programs back in the late 90's. First the medical benefits went away, then the pension plans as well. The government can't be far behind.
 
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Yeah the airlines and some of the other corporations bailed on their employees and saddled the government with their underfund plans back in the days of President Bush 43.
 
Andy so you got yours and now its time to change.

Please re-read my post. I am not for change from a defined benefit program because there are too many participants drawing too much money. I stated very clearly that our system was made insolvent by the turn down of the economy even though its investments were in moderate to low risk securities as well as bonds. For many occupations there should be a "defined benefits" program, IMO. Fire fighting, law enforcement and the military come to mind. They are all high risk jobs.
 
30a as for me being grandfathered that is not my concern though I appreciate it. The question was asked of the Attorney for plan, and the way it was explained to me was that if for whatever the plan was terminated the taxpayers, you and I would still be on the hook for the portion of the plan that is unfunded, that I as a plan member will be no longer contributing to. As for me being grandfathered, I am a Union guy and want those that follow the opportunity to the same benefit.

Nope, that's what "grandfathered in" means - you and everyone else currently on the defined benefits plan would continue to pay into it. County taxpayers would still be on the hook for paying for it. But new hires would not enter the defined benefits system, they would enter into a 401K style plan. So over a period of around forty years or so the system would wind down and ultimately end.
 
Bob, and the rest. Benefits that have been earned by plan participants are covered now. If the plan were to end now they have over 100% of the money required to pay out the benefits earned to date. Check the study that was posted by Bob Hudson. The unfunded liability has to do with the projected benefits that are going to be earned in the future. As long as all parties can afford their yearly payments to the plan then it will not go bankrupt. Every year this number changes based on many things. These other states that are having problems are the states where they decided to not pay their portion of state retirements to save money NJ is a great example.

30a, the number Bob was talking about was the annual pay raise assumption, it was 7.5% assumed per year and the pension board lowered it. With that change it in turn changes the unfunded liability. Are they going to go with it? Hell Yes. The investment return assumption is 8%.

What was the average annual pay increase over the last five to seven years? I assume they based that change (which lowers the projected unfunded liability of the fund) on an accurate historical value.
 
Bob, and the rest. Benefits that have been earned by plan participants are covered now. If the plan were to end now they have over 100% of the money required to pay out the benefits earned to date. Check the study that was posted by Bob Hudson. The unfunded liability has to do with the projected benefits that are going to be earned in the future. As long as all parties can afford their yearly payments to the plan then it will not go bankrupt. Every year this number changes based on many things. These other states that are having problems are the states where they decided to not pay their portion of state retirements to save money NJ is a great example.

30a, the number Bob was talking about was the annual pay raise assumption, it was 7.5% assumed per year and the pension board lowered it. With that change it in turn changes the unfunded liability. Are they going to go with it? Hell Yes. The investment return assumption is 8%.

The state passed legislation requiring pension plans such as yours to submit actuarial studies based on a lower rate. (A reasonable thing to do since 8% is unrelaistic.) It'll be interesting to see those numbers. I'm guessing lowering the pay raise rate was in anticipation of this.
 
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