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Pension pieces

July 13, 2013

Public Pension reform has been a repeated topic on the Sun-Gazette editorial page....

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(7)

mikekerstetter

Jul-13-13 3:39 AM

Apparently you missed the point of my letter. The point was, and is, that current 'solutions' offered do nothing to address the underfunding (the paying back) of the public pension plans. Further, it's my contention that changing to a 401k will make the problem worse, not better, when it comes time to pay for all of the current employees in the current system. And, as I pointed out, if allowed to work as intended, ACT 120 or 2010 addressed the problem and put in place real solutions to the problem, namely having new hires pay a higher rate into the funds and having the Government and School Districts pay back their share in an amortized schedule over, I believe, a 20 year period. The money has to be put into the funds to make it solvent, there is no getting around it. It's a law and it can't be changed. So they need a solution that will do that, not just one that makes people feel good.

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mikekerstetter

Jul-13-13 5:10 AM

In other words, Francine, they aren't fixing the problem.

At one point in time about a decade ago the pension funds were operating at about $125 of liability. They had more money than they needed. The Government purposely quit paying into the pension funds and allowed them to drop. Then came the stock market crash that exasperated the problem, they took a gamble that the stock market and employee contributions would sustain the funds. Had they left it alone and paid in their share all along we wouldn't be here today. So now, in essence, they have to pay back the money they didn't put in when they should have. The only way they are going to fix the problem is by putting the money into the funds that they should have put their in the first place.

Changing the pensions for new hires does nothing to address the shortage problem for current employees though.

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mikekerstetter

Jul-13-13 5:12 AM

That should be 125% not $125.

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Tgrammiex4

Jul-13-13 5:51 AM

I think one thing that is forgoten is that many of the folks working in the private sector don't get any kind of retirement plan but we keep paying higher taxes to furnish public employee ret. plans.Many private employers no longer have plans or don't contribute anything if they do have them. I know one employer that doesn't contribute and waits months to even send in the employee contributions.

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mikekerstetter

Jul-13-13 6:43 AM

tgrammie, true. Many people don't. But even if you do away with pensions for new employees, that doesn't change the fact that the current employees have to be paid what was promised to them as part of their compensation package.

The Public Pensions are a matter of law, put in place and governed by legislation. The PA Constitution says that the Governments must pay it's debts. There is no getting around it.

Whether pensions should be a part of a public employee's compensation package is a matter of debate. Paying those whom were told it WAS a part of their compensation package isn't.

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mikekerstetter

Jul-13-13 6:54 AM

I can't find the document I'm looking for, but a report on SERS stated that during the last decade the funding sources were 69% from investments, 21% from Employee Contributions and 10% from Employer (the Government) contributions. So it's not as if the employees are getting this for free.

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eriklatranyi

Jul-13-13 9:57 AM

Since the gov't spent the money elsewhere, the replacement of that funding should come from cuts, not from increased taxes.

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