Public pensions after Detroit

  • Article by: New York Times Editorial
  • Updated: August 5, 2013 - 10:40 AM

Detroit's bankruptcy and the problems facing its pension funds offer two important lessons to other communities. One is that state and local governments need to do a much better job managing retirement funds. The other is that they should not pre-emptively reduce hard-earned benefits at the first sign of trouble.

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schristeAug. 5, 1311:38 AM

Thank heavens for Minnesota State Retirement System (MSRS), we here in Minnesota have been doing the "New Brunswick" plan for several years now. MSRS has made significant cost savings adjustments and the Governor just signed another Omnibus Retirement Bill to make more. The investment returns of these well managed fund account for over 73% of the benefits paid out. And of the 27% left, employees pay have of the costs. Read for yourselves. (http://www.msrs.state.mn.us/pdf/mythvsfact.pdf)

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pumiceAug. 5, 1312:00 PM

From the article: "Most government retirement systems are in much better shape than critics suggest." Because they were adequately funded and because investment decisions were made by seasoned professional managers. By the way, like the New Brunswick plan touted by the NYTimes editors, cost of living adjustments do fluctuate based on the health of some pension funds.

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monkeyplanetAug. 5, 1312:30 PM

My views are normally left of center, but I've come to the conclusion that unionization ought not be allowed for government employees. It creates a direct conflict of interest for elected representatives. They have an incentive to give the unions what they ask for not at their own expense, or the expense of a private company, but on the taxpayers' dime. The government and its retirees seem to be completely unconcerned that employees in the business world have very few guarantees of any sort. Is it ethical to ask a waitress to subsidize generous public sector retirement healthcare, when she'll be lucky to get Medicare in the future?

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elmore1Aug. 5, 13 1:20 PM

" Sen. Orrin Hatch, R-Utah, have suggested that cities and states reduce benefits for retirees or force them into riskier and more expensive retirement options including annuities and 401(k) plans. That would be the wrong lesson to learn from Detroit." - That is an EXCELLENT lesson to learn from Detroit. The private sector converted pension plans to 401k's years ago. Doing this in the public sector would provide more flexibility to the Govt and allow employees to move around and not stay like "headless nails" waiting for their pensions.

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pumiceAug. 5, 13 1:45 PM

Re: "The government and its retirees seem to be completely unconcerned that employees in the business world have very few guarantees of any sort." The government is concerned that workers have guarantees, monkeyplanet--guarantees such as due process, the minimum wage, the right to organize, the right to bargain collectively, the right to engage in protected concerted activities (addressing an employer about improving his/her pay, about safety concerns, about improving workplace conditions). The government has agencies (DoL, NLRB, OSHA, EEOC) which act on behalf of workers.

We retirees demonstrate our concern that succeeding generations--our children, grandchildren, great-grandchildren--have the same rights, benefits and protections as we had. How? We encourage unionization, and we vote for candidates who support middle class workers and middle class small businesspeople...

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redblack30Aug. 5, 13 2:01 PM

"They have an incentive to give the unions what they ask for not at their own expense, or the expense of a private company, but on the taxpayers' dime." If this statement were true, public employees would be paid more in wages and benefits than comparable workers in private industry. Looking at the past 20 years in Minnesota, the statement is false.

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gandalf48Aug. 5, 13 2:49 PM

From article - [Most government retirement systems are in much better shape than critics suggest. While many pension funds suffered losses during the financial crisis, they should be able to pay out benefits to retirees as long as governments keep funding them adequately and the economy continues to recover. Some lawmakers like Sen. Orrin Hatch, R-Utah, have suggested that cities and states reduce benefits for retirees or force them into riskier and more expensive retirement options including annuities and 401(k) plans. That would be the wrong lesson to learn from Detroit.] *** This line "as long as governments keep funding them adequately" should be "tax payers should be asked if they would like to pay more for public sector workers benefits than they would ever receive in the private sector". The government gets its funding from the tax payer, not out of thin air. The last line about 401(k) plans being "the wrong lesson to learn from Detroit" is so crazy, the reason the 401(k) works is because the money paid in plus interest will equal what is paid out...it's a basic math equation that equals out. The reason pensions don't work is because that will never happen...pensions nearly always pay out much more than the workers and government contribute to the system. I see nothing wrong with governments matching up to 3-4% (of total salary) of public sector worker contributions into a 401(k); to ask for a pension is to ask for more than you contribute (or tax payers contribute).

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goferfanzAug. 5, 13 4:04 PM

"""We encourage unionization, and we vote for candidates who support middle class worker.""".... Actually, what pumice doesnt post is that federal debt is up 10.006 Trillion from 8/2003 until 8/2013 (8 trillion of this since Reid/Pelosi swept into power in Congress in 1/2007). That is obviously 1 trillion per year in debt, mostly by printing it. Thus, "we the people" have elected people who spend today, against our children's future standard of living. Concern for our children? Hardly........

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badcopperAug. 5, 13 4:37 PM

There is no way to Guarantee a return on ANY investment. How can public pensions do so? By taking money out of the pockets(retirement) for privately employed citizens.

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badcopperAug. 5, 13 5:04 PM

We encourage unionization----- so you are against the concept of meritocracy? Nice lesson to teach youngsters. Don't try your hardest. Do just enough to get by and you will be rewarded as much as your peer who busts their hump everyday.

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