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A Worrying Shift For Pensions: Retirees Will Soon Outnumber Kids
This is by the way another reason why it's stupid to limit immigration. Japan has long been a very insular country hostile to immigration and now their pensioners outnumber their youth and it is a problem.
Sounds like the greatest transfer of wealth since I got divorced.
My ex-wife got half my pension and I had a hunch my kids were not going to move out and go away quietly, but now the state is implementing new ways to fund my pension?
Next article: "Pensioners Required to Re-Enter the Workforce to Refund Their Pension"
I already now how this next article is going to end, but I do need copies for my ex-wife and kids.
There are substantial differences between Social Security and pension plans. For one, while SS may walk like a duck and quack like a duck, it doesn't eat (get funded) like a duck - it's pay-go as opposed to pension plans which are supposed to be prefunded. For another, it covers virtually the entire population as opposed to covering just employees. Even federal, state, and local governments are employers when it comes to pensions. SSA is not.
Here's an older (2010) NYTimes column by Floyd Norris that does a much better job of going into the distinctions. It begins:
Is Social Security a pension plan?
No, but it was sold to the public in the 1930s as if it were one, and that matters.
So while I tend to agree that immigration (and demographics in general) are intertwined with Social Security, that's much less the case with actual pensions. If a company's (or government's) business doubles in size, its workforce is not going to double. Automation and other improvements in productivity will preclude that.
The Bloomberg piece is describing pension plans in general, though it's making things out to appear that only public employers have this problem. Yet its conclusion applies universally: "Fully funded plans would have enough assets to cover the projected payouts."
Employees are required to contribute to their pension. In 13 states these pension plans replace SS as a retirement benefit (Windfall Elimination Provision).
Employers (often state politicians) commonly under-fund these pensions. As a result, they often come up with creative ways to "Pay-Go" their pension obligation using bonds and other stop gap measures.
Bond issuers are wise to these pension problems and many bonds have "a contractual pledge made to bond investors that prohibits the restructuring of the teachers’ pension". In this case, the State of CT, "first must prove (to bond issuers) that it is funding the pension system at the proper level (70% level) before asking for employees to restructure their pension plan." Source: smooth spiking teacher pension contributions
Also interesting, some state treat pensions as an asset that has property or other legal rights.
The last cited article notes that pensions have evolved historically from a gratuity to a promise of deferred compensation. Pretty much everything else springs from that - something for something. You go to work for an employer, and in exchange for accepting lesser immediate compensation, you are promised more money on the back end.
Whether that promise creates a property right (which is hard for governments to take away because of the 5th amendment) or just a right to sue if the pension isn't paid, pensions are enforceable contracts.
I'm not sure what the mention of the SS windfall provision is intended to communicate. Though the provision does make SS appear to be just another pension plan - it treats SS payments as pension payments that are reduced because you paid into a different pension plan instead.
Comments
My ex-wife got half my pension and I had a hunch my kids were not going to move out and go away quietly, but now the state is implementing new ways to fund my pension?
Next article:
"Pensioners Required to Re-Enter the Workforce to Refund Their Pension"
I already now how this next article is going to end, but I do need copies for my ex-wife and kids.
Here's an older (2010) NYTimes column by Floyd Norris that does a much better job of going into the distinctions. It begins: http://www.nytimes.com/2010/11/05/business/05norris.html
So while I tend to agree that immigration (and demographics in general) are intertwined with Social Security, that's much less the case with actual pensions. If a company's (or government's) business doubles in size, its workforce is not going to double. Automation and other improvements in productivity will preclude that.
The Bloomberg piece is describing pension plans in general, though it's making things out to appear that only public employers have this problem. Yet its conclusion applies universally: "Fully funded plans would have enough assets to cover the projected payouts."
CNN (Oct. 2015):
Is your [private] pension safe? These are the next funds to fail
http://money.cnn.com/2015/10/20/retirement/pension-fund-cuts/index.html
Employees are required to contribute to their pension. In 13 states these pension plans replace SS as a retirement benefit (Windfall Elimination Provision).
Employers (often state politicians) commonly under-fund these pensions. As a result, they often come up with creative ways to "Pay-Go" their pension obligation using bonds and other stop gap measures.
Bond issuers are wise to these pension problems and many bonds have "a contractual pledge made to bond investors that prohibits the restructuring of the teachers’ pension". In this case, the State of CT, "first must prove (to bond issuers) that it is funding the pension system at the proper level (70% level) before asking for employees to restructure their pension plan."
Source:
smooth spiking teacher pension contributions
Also interesting, some state treat pensions as an asset that has property or other legal rights.
gov-pension-protections-state-by-state.html
Whether that promise creates a property right (which is hard for governments to take away because of the 5th amendment) or just a right to sue if the pension isn't paid, pensions are enforceable contracts.
I'm not sure what the mention of the SS windfall provision is intended to communicate. Though the provision does make SS appear to be just another pension plan - it treats SS payments as pension payments that are reduced because you paid into a different pension plan instead.