Public Pension Issues
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Pension Issues, Trade Unions and Pension Issues
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Social Security's Unfair 'Prosperity Bonus' (December 9, 2008)
The genius of Social Security--and what makes it so civilized--is its social nature: It says to each and every one of us that we will take care of each other. However, once a person has paid $6,300, the prosperity bonus kicks in. A corporate executive who earned $5 million this year pays only .01% of his income in Social Security tax, and starts receiving his prosperity bonus in early January. The prosperity bonus puts millions of dollars into the pockets of the highest earners while depriving the Social Security system of much-needed revenue that would help to ensure its long-term solvency.
White House Says No To Pension Relief (December 8, 2008)
Opposition from the current administration could derail corporate hopes for speedy approval of changes to pension laws, leaving large private employers potentially on the hook to pump billions into their under-funded pensions. Whatever happens, the workers look like they will lose. If the changes are not approved, companies may reduce their workforce to pay for their increased contributions. If the changes are approved, many pension plans.
Diversity in Retirement Wealth Accumulation (December 2008)
Typical households have significant amounts of wealth in Social Security, pensions and retirement accounts, and housing by the end of their careers. However, lower-income households, those without college degrees, and racial minorities hold relatively little wealth outside of Social Security.
Social Security Still a Valuable Retirement Benefit (November 30, 2008)
Social Security is one of the biggest assets for millions of Americans in or near retirement. Despite a global financial crisis, it has kept all its value. A recent survey of 300 61-year-olds showed that just 22% said they knew exactly how much their benefits would be. Twenty-six percent had no idea, even though Social Security has been mailing Americans an annual benefits estimate since 1997. Many respondents plan to take their benefits as soon as they are eligible (62 years of age) despite the fact that such an action will lower their benefits permanently.
Rules Keep Some Retirees’ Pensions below Poverty (November 19, 2008)
The 2008 US federal poverty levels are $10,400 a year for a single person household and $14,000 a year for a two-person household. If relying solely on pension benefits, up to 30% of the retirees from the two largest Louisiana state employee retirement systems would live under the federal poverty line. Even if employees receive Social Security benefits from other jobs or spousal employment, the pension benefits could be reduced because of federal restrictions.
Pension Funds Still Invest Despite Prices (November 17, 2008)
Three of the world’s largest pension funds, the California Public Employees' Retirement System (Calpers), British Telecom Group and PGGM, which manages pensions for the health care and social work sectors in the Netherlands, are increasing their investment allocations in commodities. Although this is partially due to the very low current prices of commodities, pension funds say that with the global financial crisis upending asset values from stocks to bonds to real estate, a diverse portfolio is all the more important.
Was There a Loan It Didn’t Like? (November 1, 2008)
The Ontario Teachers’ Pension Plan board, a big shareholder of Washington Mutual, has filed a complaint against officers of the company. The shareholder complaint depicts WaMu’s mortgage lending operation as a boiler room where volume was paramount and questionable loans were pushed through because they were more profitable to the company. The complaint is supported by evidence from 89 employees such as senior mortgage underwriter Keysha
Report: Are There Opportunities to Increase Social Security Progressivity Despite
Underfunding? (November 2008)
Social Security has a tremendous effect on well-being in old age as it was intended to keep older Americans out of poverty and provide them with a crucial source of income. Researchers at the Urban Institute explain why Social Security fails to provide for certain minority groups and provide suggestions for change.
Black Hole Gapes for Pensions (October 31, 2008)
The underlying cause of the current financial crisis, particularly the damage to pension funds, was predicted over three years ago. Pension funds belong to the workers required to contribute to them out of their payroll deductions. They are not charity payments from government employers. They are compulsory savings of public sector workers. They should not be exposed to some of the riskiest financial investment instruments ever conceived.
Fidelity: Many Folks Will Seek Social Security at 62 (October 27, 2008)
A survey by Fidelity Investments, the Boston mutual funds giant, has found that 45% of 61-year-old Americans plan to begin taking Social Security at the age of 62, the earliest age that eligible recipients can apply for retirement benefits. About 77% of those surveyed said they expect to use Social Security funds to pay for basic living expenses such as food, utility costs and mortgages. This suggests that financial hardship, rather than financial planning, is driving the decision to take Social Security early.
NYC May Turn Pension Fund into Road Builder (October 21, 2008)
New York City is exploring whether to invest some of its over $100 billion pension fund in roads, bridges, power plants and schools. Public and private pensions around the nation have ample reason to seek higher returns by investing in roads and other hard assets. This year, many have been burned, not only by stocks, but also by investment in real estate, hedge funds and commodities. The target for many pensions is an 8% annual return, which will be very difficult to reach in 2008. Why not invest in "green transport' such as rail lines?
Privatizing Social Security Was an Idea Whose Time Never Came (October 15, 2008)
The same administration that was advocating the privatizing of social security is now supporting the partial nationalizing of some of the nation's big banks with an injection of $250 billion. The author reports, “many people have told me they are thanking their lucky stars that Bush's plan to privatize Social Security was blocked. As it is, many of the elderly depend on that monthly check for survival.”
Landmark State Pension Reform Bill Signed into Law (October 11, 2008)
Following the announcement last month, by New York State Comptroller Thomas DiNapoli, of tougher retirement reporting rules and the creation of a new compliance unit to weed out pension cheats, a pension reform bill that closes the loopholes allowing some public employees to collect salaries on top of pensions has been signed into law by Gov. David A. Paterson. The new legislation increases the penalties for pension fraud, requires greater accountability on the part of agencies seeking to hire public retirees, and bars attorneys from serving as both employees and independent contractors for school districts.
Report: Stock Market Fluctuations and Retiree Income: An Update (October 2008)
What kind of retirement plan best guarantees that workers will receive a stable income when they retire? A social Security pension seems to be more secure than incomes from private pension plans. Social Security benefits are indexed to inflation and are adjusted every year to keep their purchasing power stable.
Tighter Rules for State Worker Pensions Are Enacted (September 29, 2008)
New legislation in New Jersey will raise the retirement age for new public employees from 60 to 62, bar pensions for new workers earning less than $7,500 and eliminate one state holiday, Lincoln's Birthday, after contracts expire in 2011. It will also bar public employees from using time worked in other states to reach the 25 years of employment needed to qualify for lifetime health benefits from New Jersey. Governor Jon Corzine signed the act despite the objections of
Wamu Hit to Pensions: $47 Million (September 26, 2008)
After a $130-million write off of Lehman Brothers assets last week, the Washington State Investment Board (WISB) today estimated that the loss to the state's pension and other trust funds managed by the WSIB from the Washington Mutual bank failure is approximately $47 million. Despite these huge numbers, the losses are relatively small compared to WSIB’s $78 billion total assets under management. WSIB manages 17 public pension funds and 21 other public funds.
State Comptroller Takes Aim at Pension Cheats (September 26, 2008)
New York State Comptroller Thomas DiNapoli recently declared, "I want to make sure that only the individuals who deserve a state pension get a state pension." This statement accompanied an announcement of state pension reforms that included the establishment of a 20-person compliance unit to oversee pension reporting. The comptroller's office has recently revoked pensions or rescinded pension credits of 35 professionals statewide--most of them attorneys--and is seeking to recoup $950,000 owed to the state retirement fund, officials said.
Pension Panel Looks For Ways to Stop Costs from Soaring (September 22, 2008)
In Rhode Island, the conflict between pension benefits and their cost is typical of the struggles taking place in many states. Even though state workers contribute 8.75% of their pay, the state has been paying more than twice that—21.13% of payroll this year— to finance the defined-benefit packages. The state’s annual cost for these benefits skyrocketed from $31.8 million in fiscal 2002 to $136.5 million last year for state employees alone.
Rule Would Alter Public Employee Pensions (September 22, 2008)
A new regulation the IRS is pursuing would prohibit most public pension plans from allowing participants to retire and collect benefits earlier than age 55, with a preferred retirement age of 62. Labor unions and pension officials across the country are fighting implementation of the rule because many public pension schemes, such as the Nevada Public Employees' Retirement System, allow most participants to retire and receive benefits at any age after 30 years of service. Police and firefighters can retire even earlier.
Crisis Draws Attention to McCain Social Security Plan (September 22, 2008)
The proposals to privatize Social Security, particularly to carve private accounts out of Social Security, were controversial to begin with, and the new crisis has only heightened the concerns. The accounts are designed to generate greater returns than the government gets holding onto the money. But if workers invest their Social Security taxes in the stock market, what happens if the market is down when it comes time to retire? These are potent questions for voters, and the unfolding financial crisis could kill any chance this proposal had of becoming law.
Despite Blow from Wall Street, State Pension Fund Called Solid (September 21, 2008)
Despite holdings in Lehman, AIG, Fannie Mae and Freddie Mac, the Tennessee state pension fund, long considered one of the most solvent among the 50 states, easily will weather the current financial crisis. Like many state pension funds, Tennessee’s fund is widely diversified in terms of its investments. “Members and retirees can expect to receive all the promises they’ve been given,” Ed Hennessee, assistant to the state treasurer said.
City Pensions: Crunch Time, Mayor (September 19, 2008)
In Jacksonville, Florida, the local newspaper is urging the mayor to curb pension benefits in the forthcoming contract negotiations with the city’s employees. Citing a study concluding that the city's pension benefits were excessive and unsustainable, but not providing any data or evidence to support this claim, the paper urges the mayor to draw a hard line and practice financial prudence.
Don't Privatize Social Security (September 19, 2008)
Since its inception, Social Security has elevated millions of elderly Americans out of poverty and provided them with basic financial guarantees after a lifetime of hard work. Twenty per cent of older Americans live solely off their Social Security benefits, and 60% of recipients rely on it for more than half of their incomes. GOP presidential candidate John McCain advocates privatizing Social Security, which
might put stable retirement benefits in the same unstable market that has recently nosedived.
Citizens would be wise to study this situation carefully.
NY Joins NJ Pensions in Bid to Starve Short Sellers (September 18, 2008)
Short sellers, who arrange to borrow shares in companies they consider overvalued and sell them in hopes of making money if the stock prices fall, have been deeply involved in the current financial crisis. In July of this year, the New Jersey State Pension Fund banned the loan of their share holdings to short sellers and this action has been followed by the New York State Pension Fund, the Securities Exchange Commission and, in London, the UK Financial Services Authority. This action has been taken to reduce speculation and its negative effect on financial market stability.
Retirees Pinch Pennies More than Ever (September 16, 2008)
With overall annual inflation running at 6.2% and three of the most indispensable items, energy, food and transportation up 29, 6% and 14% respectively, it is no wonder that many retirees are increasingly feeling pinched, as the prices of basic necessities rise faster than they ever imagined or planned for. The Social Security's cost-of-living raise was only 2.3% last year and even combined Social Security, pensions and savings are not enough to ward off worry. Some retirees even cut down on essential medications as a way to make ends meet.
Pension of Disbelief (September 15, 2008)
Some state and local officials are making sweet promises -- high benefits, low retirement ages -- to civil servants without having to raise the funds that might actually be necessary to keep them. The city of Vallejo, Calif., declared bankruptcy in May, partly because it had granted police and firefighters six-figure pensions that kicked in at age 50. State and local government pension plans are allowed to calculate the adequacy of their funding based on relatively rosy projections (typically 8% return on investment). The taxpayer may be left to foot the bill when returns, over the long term, fall short of this number.
Fixing Public Pensions (September 14, 2008)
Many public pension plans are significantly under-funded and it is hard to find a leading politician who is willing to step up and deal with this problem. As the consequences of these liabilities will only be manifested in the future, long after the politicians have left office, it takes a special public servant to become involved in this thorny issue. One example of a respected and effective elected local official willing to take on pension issues is Orange County Supervisor John Moorlach, who represents Rossmoor, Seal Beach, Los Alamitos and other California communities.
Actuaries Call for Immediate Increase in Retirement Age (September 12, 2008)
According to the latest estimates of the Social Security trustees, the program’s cash flow is projected to move into the red in 2017 and its reserves will be exhausted in 2041. To avoid this catastrophe, policymakers should increase the retirement age to help ensure the financial soundness of the Social Security system, the American Academy of Actuaries recommended in an August policy statement. The group urged lawmakers to act immediately to increase the retirement age to 67 for all workers born after
State Should Revamp Pensions (September 11, 2008)
West Virginia provides another example of the potential future conflict between taxpayers and public sector pensioners. While many private-sector workers have already lost part of their pension and retiree health benefits as corporations struggled to reinvent themselves, the same people (and probably their children) will be asked to pay a significant proportion of the $4 billion unfunded pension liability in West Virginia. If conflict does arise, teachers will be the focal point as their retirement fund is only 51.3% funded, and represents almost 90% of the shortfall.
Panel Pursues Municipal Pensions Reform (September 9, 2008)
Pittsburgh’s Mayor Luke Ravenstahl is searching for a solution to pension plans that have unfunded liabilities. The Mayor proposes a revision of state pension plans which could include revision of reimbursement levels; bar overtime pay from pension calculations; allow for consolidation of municipal pension plans; and permit municipalities to offer defined-contribution, 401k-type plans. Eric Montarti, an analyst with the Allegheny Institute for Public Policy in Castle Shannon, has suggested alternative ways to reduce unfunded liabilities, such as a one-time sale of state-owned liquor stores.
CBO's Social Security Projections Differ from Trustees—but We're Still in Trouble (September 4, 2008)
Nicola Moore reports for The Heritage Foundation. The Heritage Foundation and Congressional Budget Office (CBO) agree that long term projections of Social Security differ from earlier projections. The (CBO) and the trustees, of The Heritage Foundation, believe that the program has promised more benefits than it can afford to pay. However the trustees believe that cash flow deficits and exhaustion of the foundation will occur several years earlier than congressional projections. The article explains where and how the difference in projections occur. The author concludes with an outlook on the future.
Guide Explores Making the Most of Social Security (September 4, 2008)
Jan Dennis reports on work done by Professor Richard L. Kaplan, University Illinois at Urbana-Champaign. Kaplan has written a practical guide to help people decide when to start collecting Social Security benefits. The guide aims to help people maximise their pensions and enjoy their retirement. Dennis reports on the specificities of accessing your pensions early and the financial implications that this will have.
Report: Updated Long-Term Projections for Social Security (August 2008)
This Congressional Budget Office (CBO) paper updates previous CBO
long-term financial projections for Social Security. These long-term projections run 75 years, from the present till 2082. The authors present their predictions both quantitatively and qualitatively. Quantitatively numbers and graphs are used to counterbalance qualifying text. The paper concludes with comments on how these new projections differ from the previous ones.
When Pensions and Teachers Collide (August 22, 2008)
People who decide to become teachers during the middle of their career stand to lose $3,900 a year from their pension. Measures adopted in 1983 were designed to prevent public sector workers from gaining excessive pensions. However, the measures are penalizing people who have not been teachers for 30 years or more. This affects those wanting to become teachers in mid-career. This is particularly relevant as schools are trying to recruit science and math teachers who already work in related fields.
Corporate Governance, Retirement Reforms Seek Home on Democratic Platform (August 25, 2008)
What would an Obama presidency mean for pension plans and retirement? Regarding pensions of middle and lower economic earners, Obama appears to have positioned himself as an advocate for increased state support. Preserving Social Security and ensuring that workers receive adequate retirement benefits is crucial to voters. Concern exists mainly in the private sector. The concern is whether Obama intends to take action, if he becomes president, on what he describes as “the lack of transparency” on company pension investments.
New York's Aging Population a Concern for Public Resources (August 18, 2008)
A survey in New York State reveals that 75% of people aged 50 and older do not have the resources of $150,000 needed to cover the current cost for three years of long-term care. Much of the shortfall in private funding of long-term care will be borne by Medicaid and Medicare. In New York State, the costs to support long-term care are elevated by the “in-migration” of many 85+ year olds, while at the same time tax revenues are reduced by the “out-migration” of 55- to 74-year-olds, usually to the warmer climates of southern states.
Report: Scare Tactics: Why Social Security is not in Crisis (July 2008)
This report discusses the disagreements over the current condition of Social Security within the US. Although some believe that the system is undergoing an “imminent crisis,” Social Security is stronger today than before. It has decreased the poverty rate among elderly and become a major source of income for many of its beneficiaries. However, some still want to amend the system by using private investment accounts. The report describes the negative effects of a privatized approach. If privatized, the amount of retirement income received would depend on how well investments in the account perform. Further, some experts say that Social Security cannot provide benefits to current retirees AND establish private accounts for future retirees.
Report: Bridging the Social Security Divide: Lessons From Abroad (June 2008)
As the world population continues to age, many countries have changed their Social Security plans. However, the US system has remained unchanged for almost 25 years. The authors suggest increasing the payroll tax, decreasing social security benefits, and creating a study commission to come up with ways to change the system. Interestingly, the authors would not require high-income citizens to pay the same percentage of their income into Social Security that the poorer citizens do. Clearly, US citizens support Social Security and must seek changes that require all to pay a fair percentage into the system.
Report: Why Not a "Super Simple" Saving Plan for the United States? (May 2008)
Many US families have little or no financial assets to fund their retirement.
This paper suggests a new low-cost, easily administered plan of increasing the growth in retirement savings resembling the pension reform plan implemented in the United Kingdom. US citizens will have to review such plans carefully to assure that funding schemes benefit retirees rather than the private insurance “providers.” Perhaps enhancing public Social Security that requires no “profits” to be skimmed off the top would be
a fairer approach.
Retirement Money Worries Mount for Workers (May 20, 2008)
Americans are worried that they might not have enough money for retirement concludes a study sponsored by the Society of Actuaries. Rising prices of health care, food and energy and inflation have driven concern across the country. The survey found that many people are going to work indefinitely or retiring later to in response to their financial anxieties.
Pension Fund Sees First-Quarter Losses (May 19, 2008)
Washington's public employee pension funds dropped to $63.1 billion in the first quarter of the year. Last year, the 21 percent return on investment was the best in the nation, making this year's drop even more striking. "The market's down. And it looks to me like the country's in a little slump. But we're long-term investors and the market will come back," says George Matsen, the former head of the Washington Federation of State Employees.
Ways to Deal with Illinois' Huge Pension Debt Problem (May 19, 2008)
The State of Illinois has the biggest pension debt in the country and a lot of ideas are circulating in the government on how to deal with the issue. The article provides a comprehensive overview of pros and cons of different solutions to the pension problem including the State's borrowing money, increasing income tax or implementing a new benefit plan.
Insurers Faulted as Overloading Social Security (April 1, 2008)
The US Social Security system is struggling with the paper work required to verify applications for disability benefits. Officials blame insurance companies for most of the wasted effort because the companies deny claims and send them back to Social Security, slowing the whole process. The definition of “disability” is in question, resulting in long waits for those who have legitimate claims and need the financial assistance to which they are entitled, either from Social Security or from insurance company payouts.
Report: Can We Afford Social Security and Medicare in the Long Term? (April 2008)
The two largest social insurance programs in the United States, Social Security and Medicare, currently comprise 4.3 percent and 3.2 percent respectively of the Gross Domestic Product and are projected to become increasingly larger percentages of the GDP in the future. Unlike some scaremongers, who claim that funding these programs will result in economic disaster, the report suggests that the United States can afford to continue both programs, but this depends on what level of benefits the nation wants to provide.
Non-Financial Keys to Retiring Comfortably and Successfully (March 11, 2008)
According to Bill Bryan from the organization, Next Dance, which offers
coaching for pre-retirees, there are different keys to a successful
retirement. The first is to know yourself and what you like to do. It is
also important to know what activities your spouse enjoys, and how you can
spend time together. Social networking and connections are crucial.
Report: Typical Wealth Held by Those at the Verge of Retirement (February 22, 2008)
Looking at the finances of soon-to-be retirees is an excellent method to evaluate their financial status. In this report, the Urban Institute has taken a snapshot of households with an adult 57–61 in 2004. This glance highlights the singular importance of Social Security as well as traditional pensions and owner-occupied housing for typical near-retiree households today. These three together comprise nearly four-fifths of wealth for middle quintile households on the brink of retirement.
Report: Who is Ready for Retirement, How Ready, and How Can We Know? (January 2008)
The report AARP Public Policy Institute examines various studies on retirees' income adequacy, especially the baby boomers. Will they have enough money to live on? While some will not have sufficient funds, others will be inadequately prepared and yet others will be unwilling to leave the work force. The report concludes that it is neither too late for the government nor the private sector to educate “boomers” about their realistic options for the future.
Report: Employer-Sponsored Pensions: A Primer
The Urban Institute report describes pension plans, defines differences between Defined Contribution (DC) and Defined Benefits (DB) plans and distinct public policy issues associated with the plans. The researchers present a timely analysis of employer-sponsored pensions and raise questions on financial security of future retirees.
Planning and Financial Literacy: How Do Women Fare? (January 2008)
The research shows that US older women have very low levels of
financial literacy. In addition, women tend to be more vulnerable to
old-age poverty due to their longer longevity. These alarming findings
raise concerns about the ability of women to do retirement planning
calculations and make sound investment decisions for and during
Why Have Some States Introduced Defined Contribution Plans? (January 2008)
Recently, some State governments have adopted a defined contribution plan
that offers their employees the chance to invest their pension monies in
financial instruments, taking a risk—either to gain or lose— in the
market. In analyzing the results, it appears that Republican Party control
of the State government influences adoption of such plans over the defined
benefit pension plans. The reader will be surprised that about 30% of
State workers have no Social Security coverage.
Report: Retirement Annuity and Employment-Based Pension Income, Among Individuals Age 50 Over: 2006 (January 2008)
This first study by the Washington-based Employee Benefit Research Institute analyzes the correlation between demographic variables, such as age, education, marital status, etc. and the likelihood of a worker receiving a retirement annuity and/or employment-based pension income. The second study finds that total spending of public and private employers for major employee benefit programs went up 50% in the last 7 years. Health costs are growing fast and are likely to soon outstrip retirement and become the major source of benefits expense.
Report: What the Public Really Wants...on Retirement Security (January 2008)
Not having enough money for retirement is at the top of Americans' economic concerns. The recent Gallup poll revealed that 56% of Americans are very worried about their retirement income and only 53% of non-retirees expect to have enough funds to live comfortably when they retire. The report analyzes Americans' views on financial support in retirement, Bush's Social Security campaign and ways to eliminate the widespread economic anxiety.
Plans Social Security Debit Card (January 8, 2008)
The US Treasury continues to move toward
electronic payments of Social Security and plans to encourage recipients
to sign up for the Social Security debit card in April. Debit cards will provide a cheaper and safer way for cash
withdrawals. Although there
are cardholder fees associated with the card, the Treasury claims the new
method will help to avoid financial security issues such as identity theft
and lost or stolen checks.
Report: What the 2008 Trustees’ Report Shows about Social Security
The Social Security Board of Trustees released its 68th Annual Report on the program’s financial and actuarial status. The report projects that Social Security will be able to pay scheduled benefits for the next 30 years. However, if existing tax cuts for the richest US persons become permanent, then the Social Security program faces funding risks.