CalPERS gets dreaded decision: Judge rules Stockton can sever its city pensions

[freshwest]

47. I've thought about this myself more than once, Starry. It's maddening.

I'm wondering if the federal agency that takes up the slack when a company goes bankrupt will do this for CALPERS?

The Pension Benefit Guaranty Corporation (PBGC) is an independent agency of the United States government that was created by the Employee Retirement Income Security Act of 1974 (ERISA) to encourage the continuation and maintenance of voluntary private defined benefit pension plans, provide timely and uninterrupted payment of pension benefits, and keep pension insurance premiums at the lowest level necessary to carry out its operations. Subject to other statutory limitations, the PBGC insurance program pays pension benefits up to the maximum guaranteed benefit set by law to participants who retire at age 65 ($54,000 a year as of 2011).[2] The benefits payable to insured retirees who start their benefits at ages other than 65, or who elect survivor coverage, are adjusted to be equivalent in value.

During fiscal year 2010, the PBGC paid $5.6 billion in benefits to participants of failed pension plans. That year, 147 pension plans failed, and the PBGC's deficit increased 4.5 percent to $23 billion. The PBGC has a total of $102.5 billion in obligations and $79.5 billion in assets...

One reason Congress enacted ERISA was "to prevent the 'great personal tragedy' suffered by employees whose vested benefits are not paid when pension plans are terminated."[19] When a defined benefit plan is properly funded by its sponsor, its assets should be approximately equal to its liability, and any shortfall (including benefit improvements) should be amortized in a relatively short period of time. Before ERISA, employers and willing unions could agree to increase benefits with little thought to how to pay for them. A classic case of the unfortunate consequences of an underfunded pension plan is the 1963 shutdown of Studebaker automobile operations in South Bend, Indiana, in which 4,500 workers lost 85% of their vested benefits.[19] One of ERISA's stated intentions was to minimize underfunding in defined benefit plans.

Defined contribution plans — by contrast and by definition — are always "fully funded." Thus Congress saw no need to provide insurance protection for participants in defined contribution plans. The Enron scandal in 2001 demonstrated one potential problem with defined contribution plans: the company had strongly encouraged its workers to invest their 401(k) plans in their employer itself, violating primary investment guidelines about diversification. When Enron went bankrupt, many workers lost not just their jobs but also most of the value of their retirement savings. Congress inserted trust law fiduciary liability upon employers who did not prudently diversify plan assets to avoid the chance of large losses inside Section 404 of ERISA, but it is unclear whether such fiduciary liability applies to trustees of plans in which participants direct the investment of their own accounts.[3]

More details here:

https://en.wikipedia.org/w/index.php?title=Pension_Benefit_Guaranty_Corporation&printable=yes

The corporation I worked for began to send notices about the PBGC every few quarters a few years ago. After a few hair-rending notices that made me despair of getting a pension, the corporation set up a plan fund the pensions better despite being less profitable than in the past and less revenue to pay future retirees.

They made an offer to invest about $10 billion dollars to make it solvent again, pending approval by the US Department of Labor, as the pensions had been negotiated by union contracts over the years. I will receive my defined benefit plan with regular social security.

I paid in over a thousand a month IRS, FICA, etc, in my peak years, so I consider myself very fortunate for a long time to have that job. The Labor Department then reviewed and accepted the plan and we didn't have to hear about the PBGC again. I hope some provision of ERISA and the PBGC will be able to give those who counted on a CALPERS pension sufficient funds to live on, but suspect if the amount is less than they expected, they may be eligible for California's exchange for healthcare. I haven't read the full page on the PBGC, but there may be a solution there.

An well-known investment firm on Wall St. (boo hiss, huh) handled our pension money but they were careful with it. The company that I worked for was tight as hell in labor negotiations but still did the right thing by those who got disabled or are retired when they took control back from other firms managing the benefit plans. They had contracted them out for a while and they sucked.

I never wanted a government job, they are not as easy as some would make them out to be and really want the folks on CALPERS to get pensions.