3 ms·

> It's realized after retirement If any of those funds are being used to fill prior unfunded obligations then they will not be realized by the employee after

> It's realized after retirement If any of those funds are being used to fill prior unfunded obligations then they will not be realized by the employee after retirement, but by other civil service retirees. It's typical that the employer will post a single defined percent of salary toward the pension fund for all employees, not a varying percent depending on the expected funding status of each individual employee. This means that if a pension plan isn't fully funded the employer needs to increase this percent for every employee even though the top-up funds are really only going to backstop the pensions of previously hired employees. Yet this top-up percent will be calculated as part of the total "compensation" for the more newly hired employees. At least I am assuming this is how it works given how the pension works at my employer.

rahimnathwani 3y ago
Even if this is true, the (future) top-up for these employees is likely to be higher than today's top-up (for past employees), because people are living longer.
- anonymouskimmer 3y ago
  These expectations are calculated into the funding obligation. They may be off, they may be overshoots. The last couple of years life expectancy receded by a couple of years to what it was on average in 1996. https://www.health.harvard.edu/blog/why-life-expectancy-in-the-us-is-falling-202210202835 https://www.health.harvard.edu/blog/why-life-expectancy-in-t... At least for the next few years they're unlikely to pay less than is necessary per employee (and in fact pay much more than is necessary). In my job the employer contribution to the pension is about 14% (with the employee contribution about 7% - 9% depending on pension tier), which is making up for a period of time in the late 90s when the contribution was low single digits (IIRC). We're unlikely to see those underfundingly low contribution rates anytime soon. A pension is an annuity, and should be calculated like annuities when determining the benefit received on a per-employee basis.

rahimnathwani 3y ago

Even if this is true, the (future) top-up for these employees is likely to be higher than today's top-up (for past employees), because people are living longer.

anonymouskimmer 3y ago
These expectations are calculated into the funding obligation. They may be off, they may be overshoots. The last couple of years life expectancy receded by a couple of years to what it was on average in 1996. https://www.health.harvard.edu/blog/why-life-expectancy-in-the-us-is-falling-202210202835 https://www.health.harvard.edu/blog/why-life-expectancy-in-t... At least for the next few years they're unlikely to pay less than is necessary per employee (and in fact pay much more than is necessary). In my job the employer contribution to the pension is about 14% (with the employee contribution about 7% - 9% depending on pension tier), which is making up for a period of time in the late 90s when the contribution was low single digits (IIRC). We're unlikely to see those underfundingly low contribution rates anytime soon. A pension is an annuity, and should be calculated like annuities when determining the benefit received on a per-employee basis.