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A comment on The State Pension Funding Gap. Parent comment

Re:The State Pension Funding Gap by nradov on Friday April 13, 2018 @09:01AM (#16829542)
We need to eliminate all public employee defined benefit pensions and replace them with defined contribution plans. Pensions are simply too risky for both taxpayers and retirees. Politicians can't be counted on to fund pensions properly. Many local governments will go bankrupt in the coming decades due to inability to meet pension obligations, which will result in cuts to critical government services and retirees forced by bankruptcy judges to take benefit cuts.
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Re:The State Pension Funding Gap by PurpleBoxDragon on Friday April 13, 2018 @09:38AM (#16829838)
>retirees forced by bankruptcy judges to take benefit cuts

These people have already sold their services for a promised benefit which is now not being given to them. If there is bankruptcy it should come at extreme costs to the extent that the voters in the location feel pain equal to those who are having their pensions cut. Clawbacks, criminal convictions, liquidations, ensuring that the pain is not felt just by those who are having their benefits stolen and given to someone else.

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Re:The State Pension Funding Gap by nradov on Friday April 13, 2018 @09:50AM (#16829945)
That's not how bankruptcy laws work. Voters will suffer some pain in the form of municipal service cuts and possibly higher taxes. But if current services are cut too far or taxes raised significantly then residents and businesses will simply leave, thereby further eroding the tax base and making it even harder to meet pension obligations.

This is reality and no amount of whining about fairness or past promises will change it.

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Re:The State Pension Funding Gap by PurpleBoxDragon on Friday April 13, 2018 @11:07AM (#16830634)
>That's not how bankruptcy laws work.

Bankruptcy laws should not allow a private entity to go through bankruptcy and continue to operate while discharging its debts. The same should apply to public entities as well. That they may currently allow this is something we need to fix.

If we cannot ensure debts to be met under law, then we should forbid the debts from existing to begin with.

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Re:The State Pension Funding Gap by nradov on Friday April 13, 2018 @12:05PM (#16831290)
That comment displays a rather shocking ignorance of the intent behind bankruptcy laws. When a private company is insolvent it's almost always better for the creditors, employees, and other stakeholders to work things out in reorganization rather than liquidating. Removing the option to reorganize would increase the cost of capital, reduce economic growth, and increase unemployment.

While municipal corporations can dissolve, that wouldn't solve anything. County and state governments can't afford to pick up pension obligations on behalf of cities. And we'll probably find that some entire states such as Illinois can't pay their pensions. There's no way for a whole state to simply stop existing.

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Re:The State Pension Funding Gap by Amezarak on Friday April 13, 2018 @10:05AM (#16830067)
> We need to eliminate all public employee defined benefit pensions and replace them with defined contribution plans

How does this solve the problem? 401(k)s in the private sector have been a complete disaster. Most 401(k)s are also hugely underfunded.

As far as I can tell, the only thing defined contribution plans accomplish is shifting the blame for underfunding and poor investment performance to employees, while enriching the financial companies that collect account and transaction fees.

[1] https://www.fool.com/retirement/general/2016/01/26/20-retire...

[2] https://www.wsj.com/articles/SB10001424052748703959604576152...

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Re:The State Pension Funding Gap by WkndTriathlete on Friday April 13, 2018 @10:46AM (#16830447)
> Most 401(k)s are also hugely underfunded.

That's a disingenious way to state that.

Individuals have control over their own IRA/401(k) contributions. They are "fully funded" up to whatever that individual wants them to be, and that amount of money will be available to them when they retire (+/- investment gains/losses). You can argue that people aren't putting enough money in their IRA or 401(k)s to retire, but that's not "hugely underfunded", that's short-sightedness or circumstance.

Pensions are hugely underfunded because states haven't been setting aside enough for promised benefits. The equivalent would be me sending a check to my IRA or 401(k) institution and them taking 20-30% of that money intended for my retirement account and putting it somewhere else instead. That's fraud and it's illegal in the private sector (c.f. Bernie Madoff). Makes you wonder whether it should be illegal in the public sector, too?

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Re:The State Pension Funding Gap by Amezarak on Friday April 13, 2018 @11:40AM (#16831029)
> You can argue that people aren't putting enough money in their IRA or 401(k)s to retire, but that's not "hugely underfunded", that's short-sightedness or circumstance.

The end result is the same: most people don't have enough money to live comfortably on in retirement. That's what I mean by shifting blame. Sure, it's not the government's fault you don't have a healthy retirement account, they didn't rob your pension fund, you were just "shortsighted".

There's no mystery here, we've known since the institution of Social Security that almost nobody saves enough money for retirement if left to their own devices. Shifting to (nominally) employee-controlled defined-contribution plans just means we have only ourselves to blame for what will be the same societal problem: impoverished retirees.

And the problem will be just as hard to solve, because it will be seen as an issue of people failing to be responsible, so why should we bail them out?

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