OPS Pension Fund $771M Short After Odd Investments

[funhusker]

1 hour ago, teachercd said:

Ha!  

 

I teach with a dood that retired from Papio at like 52 (I think) now he makes 4k a month from Papio (after his 100,000 early buyout, paid in 3 installments) and now he teaches full time with me...sweet deal!

Yep.  As long as it's there, it can be awesome.  Hell, one of the guys in our dept retired in his early/mid 50's from our district.  He took 3/4 years off and is now back teaching 1/2 time.  He's getting pension, plus paycheck and benefits.

[VectorVictor]

23 hours ago, teachercd said:

Pensions are the perfect method for retirement assuming that the people running it are smart and honest.  We know that for sure.  Once you add in that some people are morons and not honest, it takes a different tone.

 

 

 

This is why I feel that full transparency in the administration of pensions should be a legal requirement. Kind of hard to know if the people are smart and honest if they keep running things behind closed doors. 

[teachercd]

6 minutes ago, VectorVictor said:

 

This is why I feel that full transparency in the administration of pensions should be a legal requirement. Kind of hard to know if the people are smart and honest if they keep running things behind closed doors. 

Good point!

 

 

[HuskerNBigD]

Hell of a lot of misinformation being spewed by someone that seems to have the entire financial services industry figured out, but in actuality is far from it.

[RedDenver]

2 minutes ago, HuskerNBigD said:

Hell of a lot of misinformation being spewed by someone that seems to have the entire financial services industry figured out, but in actuality is far from it.

Can you show what's misinformation?

[HuskerNBigD]

On 1/24/2019 at 10:29 AM, BigRedBuster said:

I’m not sure why you keep toying with the myth that 401k money is not yours. 

You keep talking like pension money is fake or that companies can dip into various accounts and take an unlimited amount of cash. The PPA does not allow this. There are funding requirements. Even if a company were to go insolvent, the PBGC covers these events.

 

Your tone comes off as labeling pensions are the worst thing in the world, but @teachercd actually nailed it on the head. The pension system itself is fantastic. Name another benefit that you don't pay for that accretive over time - based off salary or years of service provided? These benefits are actually why many of the companies these days do not offer pensions, they'd rather the employee burden some of the responsibility of contributing to their retirement plan. 

 

However, @VectorVictor is right in the sense that the individuals (trustees) should be held with their feet to the fire in circumstances in which fiduciary responsibilities are not met. He is also correct that 401k's are limited by what the investment committee offers within the plan lineup. You cannot truly invest however you'd like, unless your company offers a self-directed brokerage window. This is for the employee's benefit as human psychology has proven that plan participants will likely chase returns when afforded too many options.

[HuskerNBigD]

12 minutes ago, RedDenver said:

Can you show what's misinformation?

 

The notion that pensions are cancer, 401k money is free (the employee contribution is but typically there is a vesting schedule from the employer), that companies don't have to fund their pension, etc.

 

Pensions, when overseen by a highly competent committee, are a very valuable source of retirement income especially for long tenured employees as years of service provided and ending salary are generally inputs for benefit payments.

[RedDenver]

5 minutes ago, HuskerNBigD said:

 

The notion that pensions are cancer, 401k money is free (the employee contribution is but typically there is a vesting schedule from the employeer), that companies don't have to fund their pension, etc.

 

Pensions, when overseen by a highly competent committee, are a very valuable source of retirement income especially for long tenured employees as years of service provided and ending salary are generally inputs for benefit payments.

Seems more like your opinions than evidence for misinformation. Taking your first sentence:

1. Pensions obviously cannot literally be cancer. That's an analogy reflecting someone's opinion, which isn't misinformation.
2. I've worked for several companies that had no vesting schedule and only one that did have vesting, but the money in my account is still mine, so I don't see how that's misinformation either.
3. Lots of companies gotten out of paying their pension plans. Most of the ones that come to mind were through bankruptcy like United Airlines. And of course there's companies that simply folded that stopped paying out pension because they no longer exist.

[HuskerNBigD]

5 minutes ago, RedDenver said:

Seems more like your opinions than evidence for misinformation. Taking your first sentence:

1. Pensions obviously cannot literally be cancer. That's an analogy reflecting someone's opinion, which isn't misinformation.
2. I've worked for several companies that had no vesting schedule and only one that did have vesting, but the money in my account is still mine, so I don't see how that's misinformation either.
3. Lots of companies gotten out of paying their pension plans. Most of the ones that come to mind were through bankruptcy like United Airlines. And of course there's companies that simply folded that stopped paying out pension because they no longer exist.

1) calling pension plans “the worst” is the very definition of misinformation. IF you have no way to quantify that claim, you cannot call it the worst.

 

2) the money isn’t free, you still contributed to it. Whereas benefits provided by a pension plan are closer to free seeing that no deduction from your personal pay statement is contributed. 

 

3) Every single defined benefit plan in the US is ensured by the PBGC. So if a company goes bankrupt, you are still going to receive a benefit. 

[RedDenver]

1 minute ago, HuskerNBigD said:

1) calling pension plans “the worst” is the very definition of misinformation. IF you have no way to quantify that claim, you cannot call it the worst.

 

2) the money isn’t free, you still contributed to it. Whereas benefits provided by a pension plan are closer to free seeing that no deduction from your personal pay statement is contributed. 

 

3) Every single defined benefit plan in the US is ensured by the PBGC. So if a company goes bankrupt, you are still going to receive a benefit. 

1. Opinions cannot be quantified, so your claim makes no sense; otherwise, all opinions would be misinformation. You can make an argument why that opinion is not supported by facts or evidence, but it's disingenuous to call it "misinformation".
2. The matching money from an employer isn't deducted from your pay. In fact, some employers will contribute to your 401k without the employee contributing.
3. I looked up the PBGC and it may not be as guaranteed as you might think. There's a cap for what they'll pay out, not all pension plans are insured, there's no cost of living adjustments, and the PBGC can choose not to pay if there's insufficient funds. From the FAQ:

Quote

Under the law PBGC may take action on its own to end a pension plan if termination is needed to protect the interests of plan participants or of the PBGC insurance program. For example, PBGC will end a plan if it will be unable to pay benefits when due.

...

Additional limits may apply if the plan terminated while your employer was in a bankruptcy proceeding and for certain airline industry plans

...

there is no cost-of-living adjustment under the law.

 

[HuskerNBigD]

43 minutes ago, RedDenver said:

1. Opinions cannot be quantified, so your claim makes no sense; otherwise, all opinions would be misinformation. You can make an argument why that opinion is not supported by facts or evidence, but it's disingenuous to call it "misinformation".
2. The matching money from an employer isn't deducted from your pay. In fact, some employers will contribute to your 401k without the employee contributing.
3. I looked up the PBGC and it may not be as guaranteed as you might think. There's a cap for what they'll pay out, not all pension plans are insured, there's no cost of living adjustments, and the PBGC can choose not to pay if there's insufficient funds. From the FAQ:

 

I'm acutely aware of how safe-harbor plans work.

 

The fact is, even those companies that elect to be safe-harbor do not typically opt in for the non-elective option. Generally, they'll choose the 4% option, meaning that plan participants must still contribute in order to reap any benefit of employer contribution. Thus employee contributions are required (i.e. 401k plans are not free).

 

 

Furthermore, I should've clarified point 3 and stated all corporate pension plans, with over 25 employees, are covered by the PBGC. Of course federal government pension plans are not covered by the PBGC and I'll let you go ahead and figure out why that is the case. 

 

As to the various links that you included, here we go.

 

- Not all pension plans are insured: the distinction of what a pension plan is should be made at this point. Every single retirement plan mentioned in this thread is technically a pension plan. Pension plans are broken down between defined benefit plans (what everyone associates as a pension) and defined contribution plans (401k, 403b, etc.). The PBGC will not pay out for DC plans, but they are on the hook for DB (traditional pension) plans.

 

- There is no cost of living adjustment. Again, that is unfortunate for the insured but it is what it is. However, in instances where PBGC are not needed, COLA are included in the pension benefit calculation - as are years of service and ending salary. 

 

Finally, I've spent far too long arguing this topic but I will add this. Even if the company pisses the bed when it comes to poor investments, participants are still legally entitled to benefits. This fact should not be overlooked when comparing a defined benefit plan to a defined contribution plan. Plan participants are their own worst enemy when it comes to investment selections and there are far too many that will piss away their entire 401k thinking they're the next peter lynch and are left with nothing. So you could have your employee contribute 200% on the first 12% and still piss it away. Pension plans eliminate this risk.

[RedDenver]

9 minutes ago, HuskerNBigD said:

The fact is, even those companies that elect to be safe-harbor do not typically opt in for the non-elective option. Generally, they'll choose the 4% option, meaning that plan participants must still contribute in order to reap any benefit of employer contribution. Thus employee contributions are required (i.e. 401k plans are not free).

Employee contributions are not required as there are plans that literally do not require them.

 

But that's somewhat beside the point, as no matter how the plan is configured, funds put into your plan by your employer do not come out of the employee's pay, which was what you previously said was what was good about pensions.

 

As for investing poorly, that's not unique to individuals as seen by the original post in this very thread. But you make a good point about the legal guarantees of defined benefit being much stronger than defined contribution plans.

[BigRedBuster]

39 minutes ago, HuskerNBigD said:

I'm acutely aware of how safe-harbor plans work.

 

The fact is, even those companies that elect to be safe-harbor do not typically opt in for the non-elective option. Generally, they'll choose the 4% option, meaning that plan participants must still contribute in order to reap any benefit of employer contribution. Thus employee contributions are required (i.e. 401k plans are not free).

 

 

Furthermore, I should've clarified point 3 and stated all corporate pension plans, with over 25 employees, are covered by the PBGC. Of course federal government pension plans are not covered by the PBGC and I'll let you go ahead and figure out why that is the case. 

 

As to the various links that you included, here we go.

 

- Not all pension plans are insured: the distinction of what a pension plan is should be made at this point. Every single retirement plan mentioned in this thread is technically a pension plan. Pension plans are broken down between defined benefit plans (what everyone associates as a pension) and defined contribution plans (401k, 403b, etc.). The PBGC will not pay out for DC plans, but they are on the hook for DB (traditional pension) plans.

 

- There is no cost of living adjustment. Again, that is unfortunate for the insured but it is what it is. However, in instances where PBGC are not needed, COLA are included in the pension benefit calculation - as are years of service and ending salary. 

 

Finally, I've spent far too long arguing this topic but I will add this. Even if the company pisses the bed when it comes to poor investments, participants are still legally entitled to benefits. This fact should not be overlooked when comparing a defined benefit plan to a defined contribution plan. Plan participants are their own worst enemy when it comes to investment selections and there are far too many that will piss away their entire 401k thinking they're the next peter lynch and are left with nothing. So you could have your employee contribute 200% on the first 12% and still piss it away. Pension plans eliminate this risk.

 

 

This is I think the second time in you have come in to a thread with your guns a-blazing where you have had to back track some.

 

I'll still stick with my opinion that pensions suck.  It's my opinion and it's not "disinformation".

 

Yeah....this sounds like a GREAT retirement plan.

 

https://www.freep.com/story/money/personal-finance/susan-tompor/2018/07/18/detroit-bankruptcy-retirees-pension/759446002/

 

Quote

Health care wasn't the only hit, of course. Yokom saw a cut to her pension. She also was part of a group that had to hand over extra money that was part of a savings plan. She ended up turning over nearly $45,000 in what was known as a "clawback." 

 

[HuskerNBigD]

34 minutes ago, RedDenver said:

Employee contributions are not required as there are plans that literally do not require them.

 

But that's somewhat beside the point, as no matter how the plan is configured, funds put into your plan by your employer do not come out of the employee's pay, which was what you previously said was what was good about pensions.

 

As for investing poorly, that's not unique to individuals as seen by the original post in this very thread. But you make a good point about the legal guarantees of defined benefit being much stronger than defined contribution plans.

There is only one option in which your employer will make contributions without any sort of required contribution from the employee and that is known as a non-elective safe-harbor plan design. A finite amount of defined contribution plans will make this election, meaning a vast majority will not. For companies that wish to meet the safe harbor requirements, but not provide a non-elective contribution, the two other election options are:

 

- company matches 100% of the employees contribution up to 4%; or

- company matches 100% up to employees contribution of 3% then 50% on the next 2% of employee contributions.

 

Both of these options get you to 4%, but require an employee to make contribution. For non safe-harbor plans, most will have a vesting schedule and also require employee contributions. There is no plan outside of safe-harbor that will contribute without contributions. The whole safe-harbor scheme is to benefit highly compensated employees.

 

The point I was trying to make is that the majority of defined contribution plans require some sort of employee contribution (once again, coming from paycheck) in order reap any benefit from the employer; whereas a defined benefit plan does not.

 

I'm finished, I'll get off the soap box and head over to the thread about the S&P now.

[BigRedBuster]

This sounds like a great plan.

 

https://www.cbsnews.com/news/the-gm-pension-plan-a-100-billion-problem-swept-under-the-rug/

 

 

Quote

 

Five or so years ago, when General Motors was simply financially challenged rather than bankrupt, financial writers joked that GM was in truth a huge pension plan, funded by an automobile operation. It wasn't far off the mark: in 2004, each active worker was outnumbered by 2.5 GM retirees, and each Chevy or Pontiac coming off the line had $1,900 of legacy retiree income and health benefits welded, painted and bolted in. In 2003, the company floated a $19 billion bond issue just to top up its pension plan.

 

Fast forward to 2009, and last week's bankruptcy. The GM pension fund, one of the largest U.S. corporate plans, is 14 percent underfunded: pension assets were worth $85 billion at year end 2008, against pension liabilities of $98 billion.

 

When a company files Chapter 11, one typical measure to unburden the new entity is handing over the pension plan to the Pension Benefit Guaranty Corporation (PBGC), an insurance fund comparable to the FDIC.

But the PBGC has decided to let the auto companies keep running the funds for now. There's a comment on the PBGC web site, but it doesn't explain how these frail companies can support their enormous pension costs.