experts put a dour face on it:
Yep. Everyone is going to get burned on this.
Why piss only on public-sector underfunding?
Underfunded private-sector pension plans threaten the retirement security of millions of Americans
Private Pensions Evade Honest Accounting
Because the OP was discussing State Pension plans?
Crushing humanity, one post at a time.
I like long walks, especially when they are taken by people who annoy me.
Pop-Tart® found in drive D: Delete Kids? Y/n
Officially Noted By Agloco
Originally Posted by WC
"...but it was your assumption that assumed I made an assumption"
Originally Posted by boutons_deux
...you're not curious about anything outside of your close-minded, benighted blind ideology.
Private sector pensions will work themselves out. Either the private sector providers and beneficiaries will work out an arrangement that allows the company to survive, or the company will just go bankrupt and everybody loses.
Public sector pensions are the far bigger problem because there's no threat of public sector entities facing a bankruptcy that results in liquidation.
The American people will hold onto their overinflated standard of living with a death grip until the day everything falls apart.
I am not Koolaid_Man and Koolaid_Man is not I.
This is what it will be all about:
5.Allow employers and participants to negotiate reductions in accrued benefits in appropriate circumstances. Current law prohibits reductions in accrued benefits, but employees might rationally conclude that a reduced annuitized benefit and additional job security would be preferable if the ability of the employer to meet its obligations over the long-term is less certain.
None of the pension funds can ever catch up to their requirements:
State financial authorities are betting the pension assets they now manage will get better returns as the U.S. economy recovers and stock and bond markets improve. If so, states can take advantage of today’s ultralow borrowing costs to strengthen their retirement plans now—and pay off the debt later when pension funds generate returns robust enough to more than cover their annual payouts. This strategy could backfire if state retirement fund returns don’t rebound. Recent history isn’t encouraging: In the decade through June 2010, the nation’s biggest state retirement systems earned less than half of what they needed to keep up with pension obligations, according to a Bloomberg survey. Borrowing to pay pension benefits “is risky for a government,” says Douglas Wood, Fort Lauderdale’s director of finance. “If the market stays down and the pension systems don’t earn their fair share on their return, then over time the city has to make that up” from its general budget.
On a side note, are you aware of the SS laws for military personnel? Did you join before 2002?
Check this out:
Retirement Planner: Special Extra Earnings For Military Service
If you like building things, like this Parts Changer does:
You didn't hear about this, because managments and the rubberstamp BOD's went along with it behind closed doors.
The only reason you know about it for public sector employees is because it is well "public".
Essentially Darrin is saying "well, private companies stole from us when we weren't looking, so that is good enough for public employees too".
The bosom of America is open to receive not only the Opulent & respectable Stranger,
but the oppressed & persecuted of all Nations & Religions;
whom we shall wellcome to a participation of all our rights & previleges.-- Some liberal pansy
Popular acclaim will attend on the man who tells the people what they want to hear rather than what truly benefits them.-Plato
" Everyone should plan for their own advanced years"
A majority of American households live paycheck to paycheck, thanks to the War on Employees and Unions holding everybody's incomes static. How many people can afford to put away 5% or 10% of their income into savings. And of course, financial sector fees will eat into their savings, anyway, which is why the Repugs/Wall St want SS funds to be funneled to them.
Read more at http://www.thefiscaltimes.com/Articl...kMTFKLcy2pv.99For years, state and local governments have been playing imaginative or patently dishonest games with their pension funds, thinking they could get away with it. But now the chickens are coming home to roost, as federal authorities have begun cracking down on corruption and mismanagement.
The modus operandi was much the same in state after state: government officials underfunding or skimming retiree pension funds to meet other more immediate costs; financial officers papering over or hiding the extent of the funding shortfalls; and private financial managers exaggerating the return they could deliver on pension fund investments while often leaving the fund vulnerable to unexpected market swings.
State pensions, still feeling the pain of the Great Recession, are now underfunded to the tune of more than $4 trillion, according to State Budget Solutions, a non-partisan fiscal watchdog.
In the past week alone, government officials and private investment groups with major government contracts have learned hard lessons about the risks of playing fast and loose with the government retirement systems:
• The Securities and Exchange Commission charged Illinois with securities fraud following years in which state officials misled investors and shortchanged the state pension system and stuck future generations of taxpayers with the staggering bill. The suit was part of a larger push by the SEC to bring greater transparency and accountability to the municipal bond market, according to the Wall Street Journal.
• A federal grand jury indicted the former CEO and former board member of the $232 billion California Public Employees’ Retirement System on bribery and influence peddling charges. The indictment accuses them of unduly using their influence to defraud a giant equity firm of millions of dollars.
• The nearly bankrupt city of Detroit was placed under a state financial overseer after years of mismanagement, corruption and obfuscation of major obligations – including billions of dollars in retiree health costs. Federal authorities meanwhile charged two former pension officials with bribery and accepting kickbacks.
Because all federal spending and taxes must be approved by both houses of Congress and the executive branch, a separate debt ceiling that has to be increased periodically creates unneeded uncertainty and can potentially lead to worse fiscal outcomes.
http://pando.com/2014/02/12/the-wolf...news-division/[Update 14th Feb 2014: Following Pando's exposé, PBS has announced it will return John Arnold's $3.5m donation.]
On December 18th, the Public Broadcasting Service’s flagship station WNET issued a press release announcing the launch of a new two-year news series entitled “The Pension Peril.” The series, promoting cuts to public employee pensions, is airing on hundreds of PBS outlets all over the nation. It has been presented as objective news on major PBS programs including the PBS News Hour.
However, neither the WNET press release nor the broadcasted segments explicitly disclosed who is financing the series. Pando has exclusively confirmed that “The Pension Peril” is secretly funded by former Enron trader John Arnold, a billionaire political powerbroker who is actively trying to shape the very pension policy that the series claims to be dispassionately covering.
In recent years, Arnold has been using massive contributions to politicians, Super PACs, ballot initiative efforts, think tanks and local front groups to finance a nationwide political campaign aimed at slashing public employees’ retirement benefits. His foundation which backs his efforts employs top Republican political operatives, including the former chief of staff to GOP House Majority Leader Dick Armey (TX). According to its own promotional materials, the Arnold Foundation is pushing lawmakers in states across the country “to stop promising a (retirement) benefit” to public employees.
Despite Arnold’s pension-slashing activism and his foundation’s ties to partisan politics, Leila Walsh, a spokesperson for the Laura and John Arnold Foundation (LJAF), told Pando that PBS officials were not hesitant to work with them, even though PBS’s own very clear rules prohibit such blatant conflicts. (note: the term “PBS officials” refers interchangeably to both PBS officials and officials from PBS flagship affiliate WNET who were acting on behalf of the entire PBS system).
To the contrary, the Arnold Foundation spokesperson tells Pando that it was PBS officials who first initiated contact with Arnold in the Spring of 2013. She says those officials actively solicited Arnold to finance the broadcaster’s proposal for a new pension-focused series. According to the spokesperson, they solicited Arnold’s support based specifically on their knowledge of his push to slash pension benefits for public employees.
The foundation’s spokesperson said PBS executives approached Arnold “with the proposal for the series, having become aware of LJAF’s interest” in shaping public pension policy, and moving that policy toward cutting retirement benefits for public workers.
According to newly posted disclosures about its 2013 grantmaking, the Laura and John Arnold Foundation responded to PBS’s tailored proposal by donating a whopping $3.5 million to WNET, the PBS flagship station that is coordinating the “Pension Peril” series for distribution across the country. The $3.5 million, which is earmarked for “educat(ing) the public about public employees’ retirement benefits,” is one of the foundation’s largest single disclosed expenditures. WNET spokesperson Kellie Specter confirmed to Pando that the huge sum makes Arnold the “anchor/lead funder of the initiative.” A single note buried on PBS’s website – but not repeated in such explicit terms on PBS airwaves – confirms that the money is directly financing the “Pension Peril” series.
Wealthy capitalists sucking down working peoples' retirement savings: "2 and 20" (aka, we screw you)
Study: Hedge Funds Taking Over Pension Fund Investments, Increasing Risk
In a bid to boost investment returns, public pension plans in the past several decades have shifted funds away from fixed-income investments such as government and high-quality corporate bonds. During the 1980s and 1990s, plans significantly increased their reliance on stocks, also known as equities. And during the past decade, funds have increasingly turned to alternative investments such as private equity, hedge funds, real estate, and commodities to achieve their target investment returns….
In short, increased investments in equities and alternatives could result in greater financial returns but also increased volatility and the possibility of losses on these assets. Even relatively small differences in returns resulting from investment performance or fees can have a major effect on the asset values of pension funds. A difference of just one percentage point in returns in a single year on $3 trillion equates to $30 billion.
How the Private Equity Industry Is Looting the Middle Class
A few weeks ago, a top official at the Securities and Exchange Commission reported on what he called a "remarkable" amount of potentially illegal behavior in the private equity industry -- aka the industry that buys up, changes and sells off smaller companies.
In its evaluation of private equity firms, the SEC official declared that half of all the reviews discovered "violations of law or material weaknesses in controls." The announcement followed an earlier Bloomberg News report on how the agency now believes "a majority of private equity firms inflate fees and expenses charged to companies in which they hold stakes."
At first glance, many probably dismiss this news as just an example of plutocrats bilking plutocrats. But that interpretation ignores how such malfeasance affects the wider economy.
One way to understand that is through the simmering debate over pension obligations in states and cities across the country.
Citing data from the National Association of State Retirement Administrators, Al-Jazeera America recently reported that the average amount of pension dollars devoted to private equity and other so-called "alternative investments" "has more than tripled over the last 12 years, growing from 7 percent to around 22 percent today." With public pensions now reporting $3 trillion in total assets, that's up to $660 billion of public money subject to the rapacious fees being exposed by the SEC. Those fees are paid through a combination of tax increases and pension benefit cuts.
Private equity shenanigans can also hurt the middle class by encouraging looting. For instance, as Crain's New York recently reported, in the last decade, private equity firms have collected $2 billion in so-called "transaction fees," which the business publication says "are bonuses the firms take for conducting their business of buying, managing and selling companies." This scheme has been called the "crack cocaine of the private equity industry."
As just one example of how it works, the New York Times recently examined a merger of two orthopedic implant manufacturers and how that merger resulted in a Wall Street jackpot. Indeed, according to the Times, the financial firms involved in the deal ended up extracted "a 20 percent share of gains from the sale, as well as management fees of 1.5 percent to 2 percent charged to investors" and "a share in an estimated $30 million in 'monitoring fees.'" The Times noted that "this deal will be a gift that keeps giving" to the private equity firms involved because "they will be paid millions more in fees for work that they are never going to do."
In other words, millions of dollars are taken out of companies creating tangible economic value and jobs. The money instead is sent to the speculators.
The good news, of course, is that we know how to curtail some of the worst effects of private equity's expansion. For one thing, the SEC can follow up its evaluation with fines and prosecutions.
Additionally, states can pass laws mandating at least some modicum of transparency in their pension funds' dealings with the private equity industry. And, as Eileen Appelbaum of the Center for Economic and Policy Research has written, the tax code can be changed to make sure that the fees claimed by private equity managers are no longer treated as capital gains and therefore taxed at a discounted rate.
The trouble is that these straightforward solutions all require political will, and American politics remain dominated by Wall Street money.
The question, then, is simple: How much more looting has to happen before that cash can no longer buy inaction?
Defined benefit pension plans are abused by politicians to buy public sector votes and kick real costs down the road until they are someone else's problem. I totally support 401K matching as an alternative to public sector defined benefit plans. They are much more transparent and expense the cost in the year they occur. Real employment/contract costs for 2014 should be paid in 2014.
I know a TEXDOT engineer whose salary all his career has been dollar for dollar competititive with private firms but he gets to retire next year at 55 at essentially full salary for the rest of his life.
North Carolina is still suing Facebook, wants to pass law banning public from knowing what else it’s doing
In the last few months, there has been increasing pressure on public officials to stop hiding the basic terms of the investment agreements being cemented between governments and Wall Street’s “alternative investment” industry.
That pressure has been intensified, in part, by two sets of recent leaks showing how these alternative investment companies (private equity, hedge funds, venture capital, etc.) are using the secret deals to make hundreds of millions of dollars off taxpayers. It is also in response to the Securities and Exchange Commission recently declaring that many of the stealth schemes may be illegal.
And yet, as the demands for transparency grow louder, a potentially precedent-setting push for even more secrecy is emerging. Pando has learned that legislators in North Carolina — whose $86 billion public pension fund is the 7th largest in America – are proposing to statutorily bar the public from seeing details of the state’s Wall Street transactions for at least a decade. That time frame is significant: according to experts, it would conceal the terms of the investment agreements for longer than the statute of limitations of various securities laws.
In other words, the legislation – which could serve as a model in state legislatures everywhere – would bar the disclosure of the state’s financial transactions until many existing securities laws against financial fraud become unenforceable.
A growing scandal in North Carolina
If the North Carolina Retirement System and its sole trustee, Treasurer Janet Cowell (D), seem familiar to tech readers, that is because the NC system is one of the lead plaintiffs in the class action suit surrounding Facebook’s initial public offering. Additionally, as part of her career in the financial sector, Cowell was the marketing director for the tech-focused VC firm, SJF Ventures.
Like other states, North Carolina has been redacting and/or refusing to release the contractual terms of its pension fund’s massive Wall Street investments, even though the contracts involve public money and a public agency. In recent months, that practice exploded into a full-fledged political scandal when the State Employees Association of North Carolina released a 147-page report from former SEC investigator Ted Siedle.
The report asserted that under Cowell, up to $30 billion of state money is now being managed by high-risk, high-fee Wall Street firms, and that the state could soon be paying $1 billion a year in fees to those firms. The report also noted that the investment strategy “has underperformed the average public plan by $6.8 billion” and it alleged that Cowell has misled the public about how where exactly she is investing taxpayer dollars. The union has called for a federal investigation, while Cowell has publicly denied the allegations.
Following the report, (SEANC) is now pushing the legislature to adopt a simple two-page bill that would force the Treasurer to open up the state’s books so that taxpayers and public employees can at least see how their money is being invested. In response, Cowell sprung into action against the transparency initiative and on behalf of the financial and securities industries that have given her election campaign committee morethan$250,000 since 2008.
First, in an email obtained by Pando (embedded in full below), Cowell’s office told legislators that the transparency bill would violate previously undisclosed contractual provisions that Cowell agreed to. Those officials claim that “losses as a result of the breaking of these contracts is $1.8 billion.” Put another way: Cowell asserted that, unbeknownst to lawmakers and the public, she had already signed North Carolina taxpayers into secret deals with Wall Street firms – deals that allegedly aim to financially punish taxpayers if the public is ever permitted to see the details of the agreements.
At the same time, Cowell’s allies in the legislature filed a bill to serve as a replacement for the transparency legislation. Upon that replacement bill being introduced, Cowell issued a press releaseendorsing it. Proposed only days before the SEC sounded the alarm about a lack of transparency in the private equity industry, Cowell’s legislation claims to be about transparency, but weaves in provisions that seem designed to enshrine the exact opposite.
Specifically, section 3(b) of the proposal says that if Wall Street firms demand secrecy, the law will automatically bar the public from viewing key information about public pension investments for 10 years after the investment is terminated. That includes, according to the bill draft, “information regarding the portfolio positions” of public pension fund investments; “capital call and distribution notices” sent to state pension officials by investment firms; investment firms’ “private placement memorandum and other offering and marketing material”; and, perhaps most important of all, “the investment’s contractual documents.”
According to the North Carolina House’s website, two of the lawmakers sponsoring the bill currently work in the financial industry – one is described as a “financial consultant,” the other is described on the website as “Vice President & Investment Officer – Wells Fargo Advisors.” The State Treasurer’s2013 report notes that Wells Fargo does brokerage business with North Carolina’s pension system. Additionally, documents from the North Carolina Secretary of State’s office (embedded below) show at least 22 financial firms and securities industry trade associations have registered lobbyists in the state capitol.
A license for Wall Street malfeasance
Critics argue that the bill is a license for Wall Street malfeasance because its 10-year secrecy mandate appears to exceed the statute of limitations of many state and federal securities laws.
For instance, the North Carolina Securities Act includes language outlining a three to five year statute of limitations. Similarly, a law firm specializing in securities work and a North Carolina insurance firm both point out that the statute of limitations in securities fraud is well shorter than the 10 year gag order being proposed by North Carolina legislators.
Meanwhile, the Securities Fraud and Investor Protection Resource Center reports that the federal law’s statute of limitations is “not more than five years after the fraud occurred.”
All of this means that if the secrecy bill passes, and if violations of existing securities laws are then uncovered only after the 10-years secrecy period, there may be no way for taxpayers and retirees to seek legal recourse. In short, Wall Street firms would potentially be able to bilk the pension fund knowing that the public would be statutorily barred from seeing what’s happening until it was too late to seek redress under state and federal law.
A possible precedent-setting move for secrecy
In recent years, states and cities have been moving more money into high-fee alternative investments – up to $660 billion by one estimate. With that kind of cash on the line – and with leaked documents and the SEC raising questions about the propriety of such investments – unions and watchdog groups like the American Civil Liberties Union and Common Cause have become more aggressive in demanding basic transparency.
The bill in North Carolina, however, may represent a precedent setting escalation in the fight against such transparency. Indeed, whereas most states up until now have relied on discretionary executive branch decisions and Attorney General opinions as a justification for secrecy, North Carolina is attempting to statutorily mandate secrecy through bill language that could easily be replicated in states across the country.
As one example of how that could happen, consider the Wall Street-alignedAmerican Legislative Exchange Council. That conservative group works in legislatures all over America and, according to the Center for Media and Democracy, the organization’s economic task force works closely with the trade group representing the banking industry.
Additionally, North Carolina’s House Speaker Thom Tillis (R) – whose fellow Republicans are backing the secrecy bill – has been both a board member of ALEC and has received large campaign contributions from the financial sector.
Indeed, data from the Institute on Money In State Politics show that 20 percent of his entire campaign fund in 2012 (or more than $345,000) came from the
Finance, Insurance & Real Estate industries. That is on top of the more than $47,000 he has received from the securities industry in his current run for U.S. Senate.
Last edited by boutons_deux; 06-13-2014 at 02:43 PM.
401Ks are "transparent"? you can see all fees?
and when the state pensions try to hold private equity funds accountable, they threaten to cut the states out of the action:
http://www.nakedcapitalism.com/2014/...a-request.htmlA new story on private equity secrecy by Mark Maremont at the Wall Street Journal started out with a bombshell, that of private equity industry kingpin KKR muscling a public pension fund to deny information requests about KKR’s practices:
KKR & Co. warned Iowa’s public pension fund against complying with a public-records request for information about fees it paid the buyout firm, saying that doing so risked it being barred from future private-equity investments.
In an Oct. 28 letter to the Iowa Public Employees’ Retirement System, KKR General Counsel David Sorkin said the data was confidential and exempt from disclosure under Iowa’s open-records law. Releasing it could cause “competitive harm” to KKR, the letter said, and could prompt private-equity fund managers to bar entree to future deals and “jeopardize [the pension fund’s] access to attractive investment opportunities.”
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