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March
10, 2010 – Norman, Oklahoma Still Want To Talk? The
Solution to California Public Employee Retirements I realize you are impatient and your busy schedule does
not permit any drawn out pontification. I will not waste your time.
Fire the actuaries. Fire the investment gurus. That's it?
Well, there is a little more, but that is the most important. Are
you convinced now? Convinced that I am out of my mind? At least we can
continue with a mutual point of agreement. The old traditional pension comes with the dreaded taboo
of finance - risk. In government there are few risk takers when it comes to
money. Everyone shuns economic perils. There are not many James Bonds
among you. "When you were young and your heart was an open book Paul McCartney Four things can and do go awry with a pension promise that
will be collected many years out. 1 - Mortality rates 2 - Market returns 3 - Turnover rates 4 - The 9th Circuit Court of Appeals Here is the plan 1 - Determine the long-term actuarial assumptions and
stick to them. 2 - Use the long-term contribution rate (ignore the value
of the plan's assets) 3 - Force contributions equal to current cost, good years
and bad years 4 - Treat underfunding due to increases in benefits as a
separate item 5 - Amortized this type of under-funding as a separate
matter (15 years) 6 - Let the janitor do the investing (stock index fund) Listen, all of those California pension plans are sitting
on a mountain of money. Who cares if the money to pay pension benefits
20 years from now is in the bank today? Strike everything I have said so far. I am going to
be completely candid with you. The real solution is going back to
"pay as your go", but that would be no fun, would it? Even
the city council could understand what was occurring with that funding plan.
Think about this -. a pension plan with no gurus, no actuaries, no
financial prophets. Okay listen up. This the most important thing
to remember: A 90% pension requires an annual contribution of 25% -
every year. Are you listening Mr. Finance Director? Make
your payment every year and you will not be eating Tums when your
investment advisors go into the drink. It's easy. A 90% pension
needs a 25% contribution each year. Just make the payment every year,
It is easy. 25% minus your employee’s contribution. I know, you are still not satisfied. You want
me to shoot one of my own guys, just to prove that I am not with the
"enemy." What sacrifice do you require? Okay, I will
concede "spiking". I hate doing that, but here goes.
Aaron Hanson is fighting that battle tonight in Omaha. However, there
are places where an employee can manipulate the size of his pension through
overtime and buy backs during the measurement period. To the police
officers in this country - "That has to stop." And before you
go off half-cocked, think about this - who pays for "spiking"?
Everyone in the department. The employer is not eating the windfall
that is received by the few who manipulate the system. Every single
benefit that is not paid directly to you in your paycheck is nothing but a
payroll reduction plan. Want fully paid medical insurance? Fine,
you can have it and we will lower your paycheck. Oh, something else, it
is done on a socialistic basis. Everyone shares equally. That guy
that retired last month with a 150%, even though the stated maximum is 90%?
He gamed the system. Did you hear the mayor complaining the other
day on the radio about that matter? Pretty funny wasn't it. Screw
him! By the way, who do you think will pay for that inflated pension?
Hey, you quit laughing. Not so funny now? Now for the good news. Grab your reigns and hold on.
The economy is about to explode into a period of extended recovery.
Sorry Lou and Keith, it is out of your control. You will just
have suck it up and endure the good economic news. |
A publication of POLICEPAY.NET – Norman, Oklahoma (405)
701-8616