Menu Close

The 16 States That Are Killing Their Pensions

For decades, public employees have had pension plans identical to those provided by most large American companies. These are defined benefit plans that pay workers a fixed sum each year after they have retired based on the amount of years they have worked and their salaries at the time of retirement. The trouble this causes for governments is that these funds often do not grow as quickly as the obligations they have to pay out, creating a budgetary crisis. It is not unusual to for a plan to have an obligation to offer its members a guaranteed level of growth which allows retirees to be able to rely on future payments, no matter how the funds perform financially. During a period like the market collapse of 2008, the value of many large pension funds plunged. Pension fund obligations also crippled many large corporations such as General Motors so badly that they filed for Chapter 11 bankruptcy to escape their obligations.

As the Pew Center for the States reported earlier this year, “$1 trillion. That’s the gap at the end of fiscal year 2008 between the $2.35 trillion states had set aside to pay for employees’ retirement benefits and the $3.35 trillion price tag of those promises.” Pew says states wound up in this predicament for a number of reasons including :

  • failing to make annual payments for pension systems at the levels recommended by their own actuaries;
  • expanding benefits and offering cost-of-living increases without fully considering their long-term price tag or determining how to pay for them; and
  • providing retiree health care without adequately funding it.

http://247wallst.com…their-pensions/

Join the conversation and have a little fun at Capitalstool.com. If you are a new visitor to the Stool, please register and join in! To post your observations and charts, and snide, but good-natured, comments, click here to register. Be sure to respond to the confirmation email which is sent instantly. If not in your inbox, check your spam filter.

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.

RSS
Follow by Email
LinkedIn
Share

Discover more from The Wall Street Examiner

Subscribe now to keep reading and get access to the full archive.

Continue reading