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Surely it was someone's job to project these future costs when putting such promises into employment contracts. And I would also presume that these future cost

by delinka 10y ago

Surely it was someone's job to project these future costs when putting such promises into employment contracts. And I would also presume that these future cost calculations should result in some amount of planning to understand what the minimal amount of tax revenue or investment would have to be to support the future obligation. However, even if that happens, how do employees prevent politicians from mucking about with those plans so that they can receive the retirement benefits that helped convince them to take jobs? These fears are why someone must have encouraged Congress to muck about in the USPS budgets wrt retirement accounts. The only solution I see is mandating that (gov't) employers pay, during an employee's employment, into a retirement account such that politicians and bosses can't touch the money, and only the employee can do anything with it during retirement.

tantalor 10y ago
> Surely it was someone's job Yes, the actuary Ronald Seeling did just that, and they ignored him outright.
nevdka 10y ago
Your proposal is essentially what we have in Australia with superannuation. Employers pay a minimum of 9.5% of pre-tax salary into the retirement accounts, and then can't touch it.
- fowl2 10y ago
  And this is the same system that the public sector uses (grandfathered exceptions exists, of course). Of course once your super fund runs out, and it will very likely run out, you're back on the tax-funded age pension.
wahern 10y ago
Your solution is precisely what is required of all private companies by federal law--all future pension obligations must be 100% funded at any point in time, and the funds are basically untouchable once deposited. Thus, the moment somebody retires, 100% of his expected payout until death is literally sitting in the account. Basically, after N years of employment into an expected M-year career, at the end of year N then N/M of the expected pension payout must be sitting in the account. To account for unpredictable dips in market value while still following the law, in practice retirement funds tend to be overfunded. This is partly why private companies prefer 401(k)s--you don't need to overfund the accounts. (The other reason is that executives can be given disproportionately more benefits relative to regular workers under a defined-contribution plan (e.g. 401(k)) than a defined-benefits plan (e.g. pension).) State governments are currently excluded from the federal funding requirements governing the private sector. The easy solution, politically, would be to amend federal law to make state employers subject to the same or similar rules required of private employers. There are some thorny constitutional issues, though, around the federal government placing mandates directly on state governments. So while being the easiest solution (because Congress is less beholden to state employee lobbying interests than local legislatures), it's still not an easy bill to pass. That said, it's not fool-proof. A big reason for the merger frenzy during the 1990s and 2000s was that mergers provided opportunities for CFOs to extract money from pension funds. That is, mergers allowed them to fudge the numbers much more creatively. The increase in pension funds "bankrupting" companies is related to these shenanigans. The CFOs and other executives didn't care, though, because the shuffling of pension funds provided enough quarterly paper gains to trigger huge bonuses.

by delinka 10y ago

tantalor 10y ago

> Surely it was someone's job Yes, the actuary Ronald Seeling did just that, and they ignored him outright.

nevdka 10y ago

Your proposal is essentially what we have in Australia with superannuation. Employers pay a minimum of 9.5% of pre-tax salary into the retirement accounts, and then can't touch it.

fowl2 10y ago
And this is the same system that the public sector uses (grandfathered exceptions exists, of course). Of course once your super fund runs out, and it will very likely run out, you're back on the tax-funded age pension.

wahern 10y ago

Your solution is precisely what is required of all private companies by federal law--all future pension obligations must be 100% funded at any point in time, and the funds are basically untouchable once deposited. Thus, the moment somebody retires, 100% of his expected payout until death is literally sitting in the account. Basically, after N years of employment into an expected M-year career, at the end of year N then N/M of the expected pension payout must be sitting in the account. To account for unpredictable dips in market value while still following the law, in practice retirement funds tend to be overfunded. This is partly why private companies prefer 401(k)s--you don't need to overfund the accounts. (The other reason is that executives can be given disproportionately more benefits relative to regular workers under a defined-contribution plan (e.g. 401(k)) than a defined-benefits plan (e.g. pension).) State governments are currently excluded from the federal funding requirements governing the private sector. The easy solution, politically, would be to amend federal law to make state employers subject to the same or similar rules required of private employers. There are some thorny constitutional issues, though, around the federal government placing mandates directly on state governments. So while being the easiest solution (because Congress is less beholden to state employee lobbying interests than local legislatures), it's still not an easy bill to pass. That said, it's not fool-proof. A big reason for the merger frenzy during the 1990s and 2000s was that mergers provided opportunities for CFOs to extract money from pension funds. That is, mergers allowed them to fudge the numbers much more creatively. The increase in pension funds "bankrupting" companies is related to these shenanigans. The CFOs and other executives didn't care, though, because the shuffling of pension funds provided enough quarterly paper gains to trigger huge bonuses.