Question:
Why do Govt workers need anything more than Social Security?
Why are we providing teacher pensions where a school admin in Niles IL receives a $30+ Million pension?
Why do they not follow suit with the private sector and convert all defined benefit plans to defined contribution... Give the workers a 401K instead of adding unlimited liability to the tax payers?
Same with their health plans... Why would they need any health benefit better than a medicare equivalent?
According to PBGC.com there are less than 1500 private pensions left with over 10,000 participants and they are already bailing out and covering Delphi and a bunch of others.
How do us tax payers get on the hook for insuring private company pensions? If the company goes bust there pensions should go bust.
Seems like the smart career is just to jump jobs with companies and entities that have massive pension benefits.
Can none of these actuaries do basic math or comprehend these pension plans are a ponzi scheme?
Pocket, your questions answered:
Why do Govt workers need anything more than Social Security?
For the same reason that you, or anyone else, needs more. SS is designed to be a survival pension, nothing more. It's great benefit is that because of the shared risk feature - common to all defined benefit plans -- less has to be contributed per month to guarantee a certain payout that can't be outlived. This is a huge advantage to the low wage worker who has virtually no disposable income. If you allow people to opt out of social security you shrink the size of the risk pool and have to increase contributions accordingly.
Why are we providing teacher pensions where a school admin in Niles IL receives a $30+ Million pension? (There is no answer without more information. You didn't give a reference, but whenever you read something that sounds absurd, it likely is wrong. see for example:
http://niles.suntimes.com/news/schools/pension-NIL-12122013:article)
Why do they not follow suit with the private sector and convert all defined benefit plans to defined contribution... Give the workers a 401K instead of adding unlimited liability to the tax payers? If the only consideration was to protect taxpayers, there would be no publicly backed pension plans. It is true, public defined benefit (DF) pension plans for the public's employees leave the public -- the taxpayers -- on the hook, in the same way that private DF plans leave the employer on the hook. That is one reason private employers are ditching defined benefit plans and moving to 401Ks instead. This shifts risk from the employer to the employee. Individual 401Ks have higher costs and no risk sharing, but 401Ks with instant vesting of employer contributions (a desirable but uncommon feature) are more flexible and give employees more options than do defined benefit plans with long vesting times-- such as ten years. One the other hand, more must be contributed per month into 401Ks to reduce the risk of running out of money in retirement, since there is no risk sharing. Defined benefit plans, if the risk pools are large enough, when conservatively managed and if vesting times are reasonably short, are vastly superior on average. Many employers are too small to independently manage their own DF plan. They do have options beyond individual 401Ks however.
The best possible plan, on average, for everyone, would be a DF plan on top of social security, with portable, flexible contributions, a huge risk pool not tied to any employer, conservatively managed, broadly invested, well insured, and with pensions strictly based on contributions and not weighted to give somewhat higher ROI to low income participants -- as S.S. is.
So I guess the best answer to your question is that, indeed, taxpayers could be spared the risk of public pensions going bad by moving public employees to 401Ks. (Wall Street would love that!) But on the other hand, public employees, because they constitute an enormous risk pool, provide the ideal situation for DF retirement plans. Such plans can also be a benefit to us taxpayers because there are typically, at the State level, many relatively low income public employees. We would, I am assuming, have to pay these low wage workers more if we expect them to be able to build 401K portfolios. We have the choice of retaining a DF Retirement plan for our public employees at lower cost and low risk to the taxpayer, but not zero, or shifting all risk and somewhat higher cost to the employees. It's clear, in my mind anyway, that for public employees a DF retirement plan is best, but I am assuming we would have to pay our low wage workers more if we shifted them to 401Ks.
Same with their health plans... Why would they need any health benefit better than a medicare equivalent? Medicare is pretty good. Too bad congress does not give it free reign to control costs. But remember this, you pay your entire working lifetime into medicare. Then when you retire and began to draw medicare benefits you will likely pay for medicare supplemental insurance -- unlike social security contributions, your medical insurance premiums don't stop with retirement, they just go down. So in effect, you've prepaid for much of your health care in old age. While you were young and healthy you handed your health insurer a nice plum by paying all those big health insurance premiums (or your employer did on your behalf) on top of your medicare premiums. The insurance companies took care of all the young healthy people and medicare all the old and sick people. You helped make your insurers very happy on the way to the bank. Then when you retired you helped out your insurance companies a bit more by buying supplemental health policies to cover the 20% that medicare doesn't cover plus part of your drug costs. The U.S. is the land of opportunity for medical insurers, that's for sure.
If everyone, even the young and healthy, fell under medicare, the total medicare premium would have to go up a lot, but it would certainly be considerably less than the combination of medicare premium plus private insurance that we all pay now. That's why there was support, outside of Congress of course, for single payer, with the insurance companies offering supplemental insurance to cover what medicare doesn't. But within Congress and the White House there was a strong push to "bring the insurance companies on board", and we all know what that euphemism means.
According to PBGC.com there are less than 1500 private pensions left with over 10,000 participants and they are already bailing out and covering Delphi and a bunch of others.
How do us tax payers get on the hook for insuring private company pensions? If the company goes bust there pensions should go bust. Some would say the Company Principals, then the equity holders, then the bond holders, and finally the pension fund insurer should be on the hook, in that order. In the U.S. we decided to have taxpayer-backed, pension fund insurance. It's a matter of opinion, of course, whether that's a good idea. It is, in any case, the law.
Seems like the smart career is just to jump jobs with companies and entities that have massive pension benefits. Why not just stay with a company you like that has a "massive pension benefit"? Good luck with that by the way.
Can none of these actuaries do basic math or comprehend these pension plans are a ponzi scheme? No legitimate pension plan, including social security, is a "Ponzi Scheme." Actuaries tell us what the probability of this or that is if we do this or that. When we follow their recommendations, the probability is high that things will go right. We haven't, however, always paid attention to them. For example, the social security actuaries have been calling for an increase in the social security contribution rate to adjust for changing demographics. Initially it was two cents on the dollar earned (one cent each, employee and employer). Congress, true to form, has ignored them for a number of years. Sometimes I get the feeling that Congress is more interested in wrecking social security then they are in making it work.
