Sorry Andy-DB's are like the dinasouar-long gone-except in the public sector and those will be gone before long too.

Posted by Billy Bob Henry | reply to this comment
July 21, 2008 8:23 am

BBH: I am beginning to understand why other posters seem so frustrated with you. The National Electrical Contractors Association (NECA) is a PRIVATE, NOT PUBLIC, contractors' association. Our members have had a defined benefit in place for their employees for over 100 years. Despite 7 1/2 years of a Republican administration and the resultant stock market losses, our plan is still well over 90% funded. Our plan will still be in place long after you and I have left this planet. You may have also missed the post pointing out a solid percentage of Fortune 100 companies still have DB plans. And, no, those aren't just for CEO's. Just because you say it, doesn't make it so. The bottom line is that you can repeat a falsehood as many times as you want, it will still be false.

Posted by Andy Berg | reply to this comment
July 21, 2008 12:03 pm

Andy - Yes, I know about compound interest, and did respond later in the thread about just how unrealistic my example was about the 30 yr. salary and the 10% contribution rate. I want to address your point about a downside of DC plans being short term investment losses and how that negatively affects those close to retirement. True, but that person near retirmenet should not have so much money in equities to guard against a market downturn. It's not hard to do, I can change my allocation from the current (80% equities/20% bonds, which works for me b/c I'm not retiring for about 30 years) to 50/50, or whatever else I want with a few clicks of hte mouse button. Bottom line, if someone close to retirement hasn't rebalanced their portfolio to a more conservative allocation, it's their own fault

Posted by Pension Watcher | reply to this comment
July 21, 2008 12:36 pm

Andy - I have no issue with private companies that set up DB plans for their employees (unless I have to bail them out via the PBGC). What I really have an issue with is public employees getting them (even though my wife, brother and 3 uncles are teachers, and my father's a retired teacher) getting DB plans because I as the taxpayer have to kick in to make up the stock market losses. No one does that for me, nor do I expect them to do so. What should be done is for the govt. to eliminate their pay scale whereby employees are paid more not on performance, but on service time. Public employees should get higher salaries in exchange for switching to DC Plans (w/ an employer match of around 3-6%, which is comparable in the private sector in addition to giving up what ends up beinglifetenure.

Posted by Pension Watcher | reply to this comment
July 21, 2008 12:57 pm

Andy-if GM and the other big auto makers are bein CRUSHED by DB's, forced into BK because of them (we wont even go into the healthcare issue), then I think it is fair to say that a DB pension cannot work today. The problem with DB's is that they are underfunded and end up paying out too much. That is the problem with basically all DB's-if not today then in the future. A 401 cures that problem, it can never be under funded, intentionally or unintenionally, because it is self funded by the employee and employer. The 401 can be invested in the market the exact same way a DB pension can-but the risk is not on taxpayers. Who do you think ends up paying for a DB pension when the company or the fund go BK?? The TAXPAYER, that's who. Through the Pension Guarantee Benefit Corportion. Why_Should_I_Get_Stu

Posted by Billy Bob Henry | reply to this comment
July 21, 2008 1:02 pm

Pension Watcher: An employee who invests 10% of their salary at an 8% rate of return will end up with a good retirement. 10% is the amount most financial planners suggest you put away. City workers are currently contributing 16% of their salary. Is it any wonder they have what others are calling an "exhorbitant" monthly retirement income? As for re-balancing your portfolio as you get closer to retirement age, of course that is prudent - with one caveat: People are living longer and need their savings to continue earning a good rate of return even after retirement.

Posted by Andy Berg | reply to this comment
July 21, 2008 1:22 pm

BBH: "If GM and the other big auto makers are bein CRUSHED by DB's..", THEN THEY HAVE MISMANAGED THEIR PLANS. How else can you explain (or in your case, ignore) the number of major companies that have successful DB plans. And I know anything can happen in the future, but is the fact that my association has a 100-year history of paying promised pensions worth anything in your thought process? It also might surprise you to know that it is not the Taft-Hartley plans that are being bailed out by the PGBC, it has been the pension programs that are run strictly by management that have had the problems.

Posted by Andy Berg | reply to this comment
July 21, 2008 3:47 pm

Andy - The SD public employees are forced to contribute 16% of their pay for their DB pensions? I didn't know that. That's far higher than any contribution rate I've ever seen (the most I can think of off the top of my head is about 9.5%. As to the caveat that people are living longer and thus need to stay more allocated toward equities, you are correct. But many govt. employees can retire at age 55, which is way too young. The minimum combined number for retrirement with full benefits should be about 95 or 100 (that when you combine years of service with age). Thus, someone working for the government for 35 years would have to be at least 60 or 65 to retire w/ fully bennys. Perhaps it could be lowered 5 years for police/firefighters, but that's about as far as I would go.

Posted by Pension Watcher | reply to this comment
July 21, 2008 6:21 pm

6. Andy Berg wrote on July 21, 2008 1:22 PM: City workers are currently contributing 16% of their salary. ... City workers are NOT contributing 16% of their pay, and in many instances they are not even contributing a single dime. The City has "picked up" the employees portion (on many contracts) as well as the Cities portion. The "average" government contribution is 13% total-both sides, employer and employee. As for GM and other large employers "mismanaging" their funds, that is not true-they were very well managed, they just could not keep up with the amounts being paid out on DB's, and longer living retirees.

Posted by Billy Bob Henry | reply to this comment
July 21, 2008 8:03 pm

Pension Watcher: You are correct that "Full" benefits should only be given at age 65. An employee should, however, be able to receive an actuarilly equivalent "leser" benefit at a younger age. The key to the health of a DB is how long the money stays in the plan. I also want to make sure I didn't mislead with a previous post: Currently, City employees contribute 10 percent of their own money to the DB and 6 percent to a DC (SPSP)for a total of 16 percent.

Posted by Andy Berg | reply to this comment
July 23, 2008 10:04 am

BBH: If the City chose to "pick up" the employees' contribution, then they made a polical decision that was potentially harmful to the retirement plan. If they further chose not to actually contribute the money, then they made a political decision that was devastating to the plan. If the DB plan had been based on a negotiated contribution and that contribution was made every pay day as I suggested in my first post, the plan would be healthy, but then we wouldn't be having this enjoyable chat.

Posted by Andy Berg | reply to this comment
July 23, 2008 10:37 am

BBH: I doubt the average government contribution (employer plus employee) is 13 percent since social security alone is 12.4 percent. If you, are correct, government employees certainly do not have the great retirement plans you claim they do.

Posted by Andy Berg | reply to this comment
July 23, 2008 10:48 am

Andy - Agree on those retiring under 65 being able to get an actuarilly lesser benefit. As to the 16% figure, it would appear from the City Employee Unions

Posted by Pension Watcher | reply to this comment
July 24, 2008 4:58 am

The system seems to have cut off the rest of Post #13 where I tried to insert a link to the city Employee union website. Anyway, it appeared from the website that the E'ee contributions are offset by employer contributions from 1.5% to 5.0% (depending on your job). Also, is the 6% contribution to the DC plan non-voluntary? And does the city have a "match" for the DC plan?

Posted by Pension Watcher | reply to this comment
July 24, 2008 8:56 am

To Pension Watcher; The City offset is one of a number of mistakes made in the administration of this DB plan. See my post #11. The current DC contribution is mandatory and is matched by the City. This was negotiated as a replacement for Social Security. The cost to the City and the employee is the same as SS was, but the hope was that the return would be better. The new agreed to plan cuts the DC to 1.25 percent mandatory with a City match - still no SS.

Posted by Andy Berg | reply to this comment
July 24, 2008 11:35 am

Thanks for the explanation Andy. As I said in a prior thread, as much as I blame public employee unions for unrealistic demands, I blame the politicians even more. They made the promises (because they were afraid for their jobs) knowing they weren't putting enough money in the plans, but leaving that for future generatations and future politicians. They are/were cowards, because they were afraid to tell the voters "Look, we made a promise to the workers and to fulfill it we have to put "X" number of dollars in teh pension fund every year, so we can't spend as much on things like parks, libraries, public works, etc. etc. etc." Like I said, the unions demands were insane, but we wouldn't be in the situation if the government had done the right thing and said "No way", or failing that, properly funded the plan to pay for theirpromises.

Posted by Pension Watcher | reply to this comment
July 25, 2008 4:38 am

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