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Mandates that are often backed by state law. Tax payers are then required to make up the difference if they don’t hit their targets. A good list here https://w

Mandates that are often backed by state law. Tax payers are then required to make up the difference if they don’t hit their targets. A good list here https://www.nasra.org/latestreturnassumptions https://www.nasra.org/latestreturnassumptions

lotsofpulp 5y ago
Classifying a pension fund’s expected return on assets to be a legal obligation to earn that much is a stretch. The pension fund’s board could just as easily use a lower expected return on assets, but you are correct that using a higher than reasonable return assumption transfers debt from yesterday’s taxpayer to tomorrow’s taxpayer, and that is by design since future taxpayers are not particularly strong voting blocks. And it does cause pension fund managers to gamble on riskier and riskier “investments”, since the alternative is raising taxes and lowering return assumptions to make up for the shortfall and who likes that.
- seibelj 5y ago
  You act as if reducing the rate of return is a simple maneuver. This is politically fraught as it automatically requires employees to contribute more money. Here is an article from today about drama in Illinois, the state with the worst funded pensions in America. Tax payers are legally obligated to back these https://www.illinoispolicy.org/chicago-park-district-reform-bill-puts-pension-costs-on-taxpayers/ https://www.illinoispolicy.org/chicago-park-district-reform-...
  - lotsofpulp 5y ago
    It is relatively simple, as in no laws need to be passed or anything. The pension board could decide to match the PPA 2006 standards the government requires for non taxpayer funded DB pensions anytime it wants. They will not though, since that would increase their own taxes, and of course start a political firestorm.
    - seibelj 5y ago
      You are unbelievably pedantic. You disagree with your opening statement then agree that I’m right!
      - lotsofpulp 5y ago
        I disagree in classifying it as a legal mandate, because that makes it seem like there is some type of law forcing pension fund boards to invest in risky assets. I am not aware of any state law that says the pension fund has to use excessively high return on investment assumptions. State law might say that taxpayers have to prioritize defined benefit pension benefits in the event the pension fund run out. Ironically, the only law about return on investment assumptions is on non taxpayer funded pension plans via ERISA and PPA 2006. I cannot help but think the only reason taxpayer funded pensions have different rules is so future taxpayers can be fleeced. The distinction is important, because the reason the pension fund boards invest in risky assets is not due to the law (aka legal mandate), but rather today’s taxpayers wanting to push today’s labor costs onto future taxpayers while not stating it on official reports so that the responsible actors can maintain plausible deniability.

lotsofpulp 5y ago

Classifying a pension fund’s expected return on assets to be a legal obligation to earn that much is a stretch. The pension fund’s board could just as easily use a lower expected return on assets, but you are correct that using a higher than reasonable return assumption transfers debt from yesterday’s taxpayer to tomorrow’s taxpayer, and that is by design since future taxpayers are not particularly strong voting blocks. And it does cause pension fund managers to gamble on riskier and riskier “investments”, since the alternative is raising taxes and lowering return assumptions to make up for the shortfall and who likes that.

seibelj 5y ago
You act as if reducing the rate of return is a simple maneuver. This is politically fraught as it automatically requires employees to contribute more money. Here is an article from today about drama in Illinois, the state with the worst funded pensions in America. Tax payers are legally obligated to back these https://www.illinoispolicy.org/chicago-park-district-reform-bill-puts-pension-costs-on-taxpayers/ https://www.illinoispolicy.org/chicago-park-district-reform-...
- lotsofpulp 5y ago
  It is relatively simple, as in no laws need to be passed or anything. The pension board could decide to match the PPA 2006 standards the government requires for non taxpayer funded DB pensions anytime it wants. They will not though, since that would increase their own taxes, and of course start a political firestorm.
  - seibelj 5y ago
    You are unbelievably pedantic. You disagree with your opening statement then agree that I’m right!
    - lotsofpulp 5y ago
      I disagree in classifying it as a legal mandate, because that makes it seem like there is some type of law forcing pension fund boards to invest in risky assets. I am not aware of any state law that says the pension fund has to use excessively high return on investment assumptions. State law might say that taxpayers have to prioritize defined benefit pension benefits in the event the pension fund run out. Ironically, the only law about return on investment assumptions is on non taxpayer funded pension plans via ERISA and PPA 2006. I cannot help but think the only reason taxpayer funded pensions have different rules is so future taxpayers can be fleeced. The distinction is important, because the reason the pension fund boards invest in risky assets is not due to the law (aka legal mandate), but rather today’s taxpayers wanting to push today’s labor costs onto future taxpayers while not stating it on official reports so that the responsible actors can maintain plausible deniability.