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>If returns over a long period are below the assumed rate, then the employer simply needs to increase contributions. It's seductive to type out the word "simp

by jasode 6y ago

>If returns over a long period are below the assumed rate, then the employer simply needs to increase contributions. It's seductive to type out the word "simply" to describe a proposed solution but that doesn't mean it's simple in reality. (My previous comment about supposedly "simple" fixes: https://news.ycombinator.com/item?id=16698821 https://news.ycombinator.com/item?id=16698821) E.g. The employer (the state government) that pays into pension funds for teachers won't simply pay more. The taxpayers aren't sympathetic to raising taxes on themselves to pay for fully funded pensions (even if the pension is underfunded) when they perceive the teachers already getting better benefits than they do. A lot of citizen taxpayers who are not teachers also suffer from underfunded pensions themselves!

cool_dude85 6y ago
This doesn't at all address the core point I'm making: that pension funds are not required to achieve a given rate of return in any meaningful sense. But sure, I agree that there are other ways to handle the situation if the fund doesn't achieve its assumed rate of return. There are other options than increasing employer contributions.
- jasode 6y ago
  >This doesn't at all address the core point I'm making: that pension funds are not required to achieve a given rate of return in any meaningful sense. You're being uncharitable in reading gp's (erentz) word "required". No, there isn't a statute or law that says the pension fund must get 8% returns or the pension administrators go to jail. Nobody is saying that. Here's how to interpret the word "required" in a more reasonable manner... Using Illinois Teachers Pension as an example: the pension fund manages ~$50 billion but they still have a ~$70 billion shortfall.[1] The CIO (Chief Investment Officer) is currently Stan Rupnik. His salary is ~$400k per year and he's responsible for investing the pension fund in a way that balances max returns with safety. If he just sits back and folds his arms in a defiant manner exclaiming, "hey, the pension fund is not _required_ to achieve a given rate of return so I'm just going to invest all $50 billion in T-Bills which returns a negligible 0.19% yada yada yada" ... he's not going to keep his job. That's what a meaningful interpretation of "required" is for the context of this discussion. [1] https://www.chicagobusiness.com/finance-banking/teachers-pension-fund-levers-risk-investment-portfolio https://www.chicagobusiness.com/finance-banking/teachers-pen...

by jasode 6y ago

cool_dude85 6y ago

This doesn't at all address the core point I'm making: that pension funds are not required to achieve a given rate of return in any meaningful sense. But sure, I agree that there are other ways to handle the situation if the fund doesn't achieve its assumed rate of return. There are other options than increasing employer contributions.

jasode 6y ago
>This doesn't at all address the core point I'm making: that pension funds are not required to achieve a given rate of return in any meaningful sense. You're being uncharitable in reading gp's (erentz) word "required". No, there isn't a statute or law that says the pension fund must get 8% returns or the pension administrators go to jail. Nobody is saying that. Here's how to interpret the word "required" in a more reasonable manner... Using Illinois Teachers Pension as an example: the pension fund manages ~$50 billion but they still have a ~$70 billion shortfall.[1] The CIO (Chief Investment Officer) is currently Stan Rupnik. His salary is ~$400k per year and he's responsible for investing the pension fund in a way that balances max returns with safety. If he just sits back and folds his arms in a defiant manner exclaiming, "hey, the pension fund is not _required_ to achieve a given rate of return so I'm just going to invest all $50 billion in T-Bills which returns a negligible 0.19% yada yada yada" ... he's not going to keep his job. That's what a meaningful interpretation of "required" is for the context of this discussion. [1] https://www.chicagobusiness.com/finance-banking/teachers-pension-fund-levers-risk-investment-portfolio https://www.chicagobusiness.com/finance-banking/teachers-pen...