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Or to require that the value of the benefits start being paid down in a sustainable way immediately. Only if those who are benefitting from the delayed benefits

Or to require that the value of the benefits start being paid down in a sustainable way immediately. Only if those who are benefitting from the delayed benefits are required to fund them will this problem really be solved. In the private lending market we call this a downpayment.

WildUtah 16y ago
The Federal Employee Retirement Income Security Act (ERISA) requires that private employers that offer pensions do pay as they go. Defined contribution 403(b) and 401(k) programs have to have their deposits made soon after each year end. Defined benefit plans are more complicated, but there are big federal fines for companies that fail to deposit the increase in expected value of future payments each year. There are extensive (but imperfect) actuarial rules in the US Code to make the actual minimum contribution match the needs of the pension fund. Big funds need to buy insurance, too, in case things go wrong. States and municipalities are immune from the federal standards. That's why they're ignoring the consequences and just promising to pay pensions without depositing enough money according to their own actuarial computations. A private company would have had to cut back on promises or pay the full current cost of future benefits. Heck, even the Federal Government is keeping up with employee pension planning. The trouble is all in states and municipalities. The states know they are doing this; actuarial science is not a mystery. But governors and legislators figure that public employee unions must be satisfied. And the problem won't explode until they're out of office and then it's someone else's problem. And we voters who don't hold them responsible are ultimately at fault. Public employee unions couldn't hold politicians captive if we were willing to vote out pols who kowtow to irresponsible demands.

WildUtah 16y ago

The Federal Employee Retirement Income Security Act (ERISA) requires that private employers that offer pensions do pay as they go. Defined contribution 403(b) and 401(k) programs have to have their deposits made soon after each year end. Defined benefit plans are more complicated, but there are big federal fines for companies that fail to deposit the increase in expected value of future payments each year. There are extensive (but imperfect) actuarial rules in the US Code to make the actual minimum contribution match the needs of the pension fund. Big funds need to buy insurance, too, in case things go wrong. States and municipalities are immune from the federal standards. That's why they're ignoring the consequences and just promising to pay pensions without depositing enough money according to their own actuarial computations. A private company would have had to cut back on promises or pay the full current cost of future benefits. Heck, even the Federal Government is keeping up with employee pension planning. The trouble is all in states and municipalities. The states know they are doing this; actuarial science is not a mystery. But governors and legislators figure that public employee unions must be satisfied. And the problem won't explode until they're out of office and then it's someone else's problem. And we voters who don't hold them responsible are ultimately at fault. Public employee unions couldn't hold politicians captive if we were willing to vote out pols who kowtow to irresponsible demands.