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When the PBGC gets it, usually benefits are cut to more sustainable levels and can actually be paid based on the pool of available funds.

by coryrc 7y ago

toomuchtodo 7y ago
There's no reason as-is benefits couldn't have been sustainable if properly managed by the plan sponsor. It is not the pension participant's fault public policy failed them and did not properly account for the ability of the corp to default on its contract using BK law, nor required adequately funding the plan. There is no limit to available funds in an economy not on the gold standard. These aren't trillions of dollars in obligations (in the case of these smaller pension plans, not speaking about public pensions such as those in Illinois), and we've burned up a greater sum on air conditioning and lost cash payments in the middle east alone during conflicts. As long as you can get past the "moral hazard" folks and not impact the macro too much (ie inflation), you can get away with a lot when working with funny fiat money. This is part of what government exists to do, providing security to its citizens. A contract was made, and it should be kept (with pensioners coming first ahead of all other creditors).
- lotsofpulp 7y ago
  >public policy failed them and did not properly account for the ability of the corp to default on its contract using BK law. Public policy did account for it (ERISA and PPA), and provided for the PBGC to provide a limited backstop, although it's not possible to backstop so many failing pension plans due to erroneous investment return and population growth rate and mortality assumptions. >A contract was made, and it should be kept (with pensioners coming first ahead of all other creditors). They are ahead, but there's usually nothing left, and definitely nothing that could satisfy the requirements of a pension. Compounding is a hell of a force, and PPA 2006 didn't come into effect until too late. And anytime you enter into a transaction with someone, you are subject to counterparty risk, even the government. The US is lucky it has more capacity to print its way out than most countries.
  - toomuchtodo 7y ago
    > Public policy did account for it (ERISA and PPA), and provided for the PBGC to provide a limited backstop, although it's not possible to backstop so many failing pension plans due to erroneous investment return and population growth rate and mortality assumptions. Then public policy did not account for it. > And anytime you enter into a transaction with someone, you are subject to counterparty risk, even the government. The US is lucky it has more capacity to print its way out than most countries. Print dollars, transfer from the general fund, or have the Fed start buying up equities and using the cashflow to fund any necessary benefits payments (a somewhat more adventurous twist on the Bank of Japan's role in that country's economy). It's the government's job to be the guarantor of last resort, and they have the tools available to do so.
    - lotsofpulp 7y ago
      >Print dollars, transfer from the general fund, or have the Fed start buying up equities and using the cashflow to fund any necessary benefits payments (a somewhat more adventurous twist on the Bank of Japan's role in that country's economy). It's the government's job to be the guarantor of last resort, and they have the tools available to do so. This is already happening. Defined benefit pension funds and defined contribution pension funds (401k/IRAs) are all invested in the same place: the public stock market and real estate. That's why I think bailouts of public stock market values are basically guaranteed, as long as the US dollar remains relatively desirable. Individuals may or may not be bailed out, depending on their political power. As I mentioned in another comment, these pension recipients got bailed out because their members are important in elections: https://www.nytimes.com/2019/12/24/business/coal-miner-pensions-bailout.html https://www.nytimes.com/2019/12/24/business/coal-miner-pensi...
      - toomuchtodo 7y ago
        > This is already happening. Defined benefit pension funds and defined contribution pension funds (401k/IRAs) are all invested in the same place: the public stock market and real estate. That's why I think bailouts of public stock market values are basically guaranteed, as long as the US dollar remains relatively desirable. Keep in mind that half of Americans have no 401k savings. Agree with your point that QE has been beneficial for those who have retirement arrangements that are invested in the asset classes you mention. My concern is that is insufficient to keep a lot of retirees out of poverty and the associated suffering, and a whole lot of political will is going to be required down the road to stomach more drastic measures than the country has traditionally considered.

When the PBGC gets it, usually benefits are cut to more sustainable levels and can actually be paid based on the pool of available funds.

by coryrc 7y ago

When the PBGC gets it, usually benefits are cut to more sustainable levels and can actually be paid based on the pool of available funds.

toomuchtodo 7y ago

There's no reason as-is benefits couldn't have been sustainable if properly managed by the plan sponsor. It is not the pension participant's fault public policy failed them and did not properly account for the ability of the corp to default on its contract using BK law, nor required adequately funding the plan. There is no limit to available funds in an economy not on the gold standard. These aren't trillions of dollars in obligations (in the case of these smaller pension plans, not speaking about public pensions such as those in Illinois), and we've burned up a greater sum on air conditioning and lost cash payments in the middle east alone during conflicts. As long as you can get past the "moral hazard" folks and not impact the macro too much (ie inflation), you can get away with a lot when working with funny fiat money. This is part of what government exists to do, providing security to its citizens. A contract was made, and it should be kept (with pensioners coming first ahead of all other creditors).

lotsofpulp 7y ago
>public policy failed them and did not properly account for the ability of the corp to default on its contract using BK law. Public policy did account for it (ERISA and PPA), and provided for the PBGC to provide a limited backstop, although it's not possible to backstop so many failing pension plans due to erroneous investment return and population growth rate and mortality assumptions. >A contract was made, and it should be kept (with pensioners coming first ahead of all other creditors). They are ahead, but there's usually nothing left, and definitely nothing that could satisfy the requirements of a pension. Compounding is a hell of a force, and PPA 2006 didn't come into effect until too late. And anytime you enter into a transaction with someone, you are subject to counterparty risk, even the government. The US is lucky it has more capacity to print its way out than most countries.
- toomuchtodo 7y ago
  > Public policy did account for it (ERISA and PPA), and provided for the PBGC to provide a limited backstop, although it's not possible to backstop so many failing pension plans due to erroneous investment return and population growth rate and mortality assumptions. Then public policy did not account for it. > And anytime you enter into a transaction with someone, you are subject to counterparty risk, even the government. The US is lucky it has more capacity to print its way out than most countries. Print dollars, transfer from the general fund, or have the Fed start buying up equities and using the cashflow to fund any necessary benefits payments (a somewhat more adventurous twist on the Bank of Japan's role in that country's economy). It's the government's job to be the guarantor of last resort, and they have the tools available to do so.
  - lotsofpulp 7y ago
    >Print dollars, transfer from the general fund, or have the Fed start buying up equities and using the cashflow to fund any necessary benefits payments (a somewhat more adventurous twist on the Bank of Japan's role in that country's economy). It's the government's job to be the guarantor of last resort, and they have the tools available to do so. This is already happening. Defined benefit pension funds and defined contribution pension funds (401k/IRAs) are all invested in the same place: the public stock market and real estate. That's why I think bailouts of public stock market values are basically guaranteed, as long as the US dollar remains relatively desirable. Individuals may or may not be bailed out, depending on their political power. As I mentioned in another comment, these pension recipients got bailed out because their members are important in elections: https://www.nytimes.com/2019/12/24/business/coal-miner-pensions-bailout.html https://www.nytimes.com/2019/12/24/business/coal-miner-pensi...
    - toomuchtodo 7y ago
      > This is already happening. Defined benefit pension funds and defined contribution pension funds (401k/IRAs) are all invested in the same place: the public stock market and real estate. That's why I think bailouts of public stock market values are basically guaranteed, as long as the US dollar remains relatively desirable. Keep in mind that half of Americans have no 401k savings. Agree with your point that QE has been beneficial for those who have retirement arrangements that are invested in the asset classes you mention. My concern is that is insufficient to keep a lot of retirees out of poverty and the associated suffering, and a whole lot of political will is going to be required down the road to stomach more drastic measures than the country has traditionally considered.