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My pension currently uses around 6% assumed rate of return for the purposes of calculating unfunded liability, and has, over the past 24 years, returned 6.03%.

My pension currently uses around 6% assumed rate of return for the purposes of calculating unfunded liability, and has, over the past 24 years, returned 6.03%. Further, keep in mind that the real pension costs are actual dollars leaving the fund and are not directly affected by assumed discount rates. The effect of a low discount rate is simply to have more money in the pension fund, but at the end of the day the liabilities are the liabilities and the discount rate doesn't enter into it. It may be wise to put more away now, but even pay-as-you-go pensions have a long history of working out even if there is greater risk.

lotsofpulp 3y ago
> may be wise to put more away now, but even pay-as-you-go pensions have a long history of working out even if there is greater risk. What is the definition of working out? Of course they work out, as long as there is enough of a tax base to keep soaking. But that is a poor definition of working out, as I have no interest in paying for labor performed decades ago. When it doesn’t work out is when you get into a Detroit situation. Or most recently, Chester, PA, where there isn’t a sufficient tax base to soak anymore.
- cool_dude85 3y ago
  Definition of working out would be the pension costs are still a reasonable and manageable cost as compared to e.g. payroll or the budget. City bankruptcies do occur, I'd argue that blaming pensions is just a scapegoat, but hey, that's me. I haven't looked into Detroit's books, much less Chester PA, Detroit city limits population right now is sub-1920 levels and around 1/3 of where it was in 1950. Such a change would put enormous stress on the finances of any large city, pension or no.
  - lotsofpulp 3y ago
    A properly funded pension should be a non factor in a city’s finances. The fact that leaders in previous decades punted costs (unnecessarily) into the future when the city’s economic productivity ended up not being able to afford is the problem, and what we are discussing on how to avoid (by simply not offering deferred compensation).
    - dboreham 3y ago
      The problem is a bit deeper in that these workers were paid less while employed on the basis that they'd have a sweet pension. So the government employer double dipped on faking their finances.
      - lotsofpulp 3y ago
        Hence the only solution being to make all deferred compensation schemes for taxpayer funded entities illegal. A secondary benefit will be more transparent prices in the labor market that allow quicker responses to changes in supply and demand.

lotsofpulp 3y ago

> may be wise to put more away now, but even pay-as-you-go pensions have a long history of working out even if there is greater risk. What is the definition of working out? Of course they work out, as long as there is enough of a tax base to keep soaking. But that is a poor definition of working out, as I have no interest in paying for labor performed decades ago. When it doesn’t work out is when you get into a Detroit situation. Or most recently, Chester, PA, where there isn’t a sufficient tax base to soak anymore.

cool_dude85 3y ago
Definition of working out would be the pension costs are still a reasonable and manageable cost as compared to e.g. payroll or the budget. City bankruptcies do occur, I'd argue that blaming pensions is just a scapegoat, but hey, that's me. I haven't looked into Detroit's books, much less Chester PA, Detroit city limits population right now is sub-1920 levels and around 1/3 of where it was in 1950. Such a change would put enormous stress on the finances of any large city, pension or no.
- lotsofpulp 3y ago
  A properly funded pension should be a non factor in a city’s finances. The fact that leaders in previous decades punted costs (unnecessarily) into the future when the city’s economic productivity ended up not being able to afford is the problem, and what we are discussing on how to avoid (by simply not offering deferred compensation).
  - dboreham 3y ago
    The problem is a bit deeper in that these workers were paid less while employed on the basis that they'd have a sweet pension. So the government employer double dipped on faking their finances.
    - lotsofpulp 3y ago
      Hence the only solution being to make all deferred compensation schemes for taxpayer funded entities illegal. A secondary benefit will be more transparent prices in the labor market that allow quicker responses to changes in supply and demand.