Summer Is Coming!
05-25-2022, 08:28 AM
#51
Gets Weekends Off
Joined APC: Mar 2007
Position: Petting Zoo
Posts: 2,074
Originally Posted by CBreezy
They certainly changed it but it's disingenuous to say that they "pulled up the ladder." Yes, DB amount is lower for a member retiring at 20 years. But you also get a TSP match of up to 5% of your salary. This benefits both the people who will eventually retire AND finally recognizes the sacrifices of those who don't.
It was revoked eventually, but it passed once.
05-25-2022, 08:59 AM
#52
Gets Weekends Off
Joined APC: Mar 2008
Posts: 3,838
Originally Posted by GucciBoy
The concept of the defined benefit pension was conceived without any regard for the exponential growth of the population combined with ever-increasing life expectancy. It’s not a sustainable model for most organizations, especially those that allow you to draw the pension after as little as 20 years of service. The disappearance of the DB should surprise no one. That said, it’s not right to take it from those to whom it was offered (promised?).
I’m in favor of a DB restoration for those who choose it, and I’m willing to give up potential personal gain for it. You can’t have it both ways, though. If you were able to regain a DB pension, you should be required to return all DC monies (excluding growth) to the company.
I’m in favor of a DB restoration for those who choose it, and I’m willing to give up potential personal gain for it. You can’t have it both ways, though. If you were able to regain a DB pension, you should be required to return all DC monies (excluding growth) to the company.
ERISA requires that funding assumptions are based on ridiculously conservative investments. Not what the actually investments do, but forward looking. Basically long term interest rates...IOW CD rates.Those interest rates have been at historic lows for almost 13 years now. Counter to that, the plans get to recalculate every year based on actually fund performance, but that only looks at actual value. When you have a funding requirement based on forward looking profile centered around 0.5-1%, compounded, that would cripple any plan no matter what your demographics look like. The PPA allowed a slightly higher assumption, based, I believe, on an average corporate bond rate.
Just to rewind, how ERISA says your plan is funded at time X is not related to actual performance of the plan at time X+10, +20, +30, etc. Let that sink in.
Now, recalibrate yourself back to what a historically average long term interest rates look like, you get a completely different answer. Over 200 years, the average is just a skosh over 5%. Plug that value into the forward looking calculation, and surprise, surprise, things look much different. Furthermore, many entities have been funding their plans based on a much lower assumption (as required), so when you change the interest rate upward, you could wind up with over-funded plans.
A well established DB plan, with stable demographics, and ERISA funding assumptions in line with actual market performance, is actually less cost for a plan sponsor. Back in the late 90s, when funding assumptions were around 6%, and fund performance was probably in the 9s, you had funds that were self-funded, meaning the plan sponsors had no contribution requirements. OTOH, DC plans cost the sponsor real money every two weeks.
You can't look at the last decade and make any kind of historical assumptions about it, because it's an outlier.
Thread
Thread Starter
Forum
Replies
Last Post
matthewcahn
Flight Schools and Training
0
10-28-2018 12:33 PM
