Warning! Gov. Pension Smoothing Scam, Stealing Your Retirement.


thorne   A Ct Patriot First… A Guest Blogger Hope you find this as Interesting as I do…

 

  sista thorne         Sista Thorne

Aug 1, 2014

 

 

 

Traffic passes a construction zone at the interchange of U.S. Highway 65 and Interstate 80 on May 30 in Altoona, Iowa photo: Charlie Neibergall/AP

 

 

highway pic (1)

PENSION SMOOTHING – THE LATEST GOVERNMENT TRICK TO STEAL YOUR MONEY WHEN YOU NEED IT MOST… IN RETIREMENT

 

Have you ever heard of an innocuous term called “pension smoothing”?  If you haven’t you’re not alone. And for those of you who have and don’t get the “concept”? Don’t worry. You, too, are not alone. As a former pension benefits administrator for a major metropolitan city I’ll do my best to explain why this is huge problem. Both companies and government agencies are being allowed to forgo their current pension contributions for some time in the future.  Here’s the catch: contributions will be at a higher rate.  You see, delaying, or postponing, the contribution doesn’t make the obligation go away. It only puts off the obligation for a later time in the future at a rate that will be higher than what it would be in the present. In other words, when contributions resume they must include all back interest and cost of living adjustments (COLI), also known as inflation, in order to be made current. Or I’ll just let Jon Stewart explain it in this clip from, “The Daily Show with Jon Stewart” on Comedy Central. http://thedailyshow.cc.com/videos/46mu9k/shabby-road An article posted on Forbes site titled, “Pension Smoothing is a Sham” by Len Burman, explains pension smoothing like this “Companies can postpone contributions to their pension funds. This means that their tax deductions for pension contributions are lower now, but actual pension obligations don’t change, so contributions later will have to be higher—by the same amount plus interest.” (http://www.forbes.com/sites/beltway/2014/07/09/pension-smoothing-is-a-sham/).

 

imrs

 

This begs the most obvious of questions: how does pension smoothing save money and raise revenue? According to Congress pension smoothing should raise at least $6.4 billion in so called revenue.  However, Burman clearly states, or shouts for that matter, with much frustration, “THIS $6.4 BILLION REVENUE PROVISION RAISES NO REVENUE OVER THE LONG RUN!!!” Another article posted on Business Insider’s website titled “Congress Is Using Its Favorite Budget ‘Gimmick’ To Avoid A ‘Highway Shutdown,’ But Everyone Else Hates It” (http://www.businessinsider.com/highway-trust-fund-pension-smoothing-bill-offset-2014-7) by Brett Loguirato, stated its “nothing more than an accounting gimmick that might not end up raising any revenue and could hurt workers.” Wait a minute, this won’t change anything and hurt workers instead? So why is Congress hell bent on allowing this high stakes gamble with the incomes of millions of future retirees? Because the Federal Highway Trust Fund, which handles all monies used to maintain our roadways and infrastructure, will supposedly be completely bone dry by August 2014. Don’t excise taxes paid at the pump, road use charges (tolls), along with local and municipal taxes go to highway maintenance you ask? Yes. However Congress claims raising taxes isn’t a popular idea. In fact excise taxes on gasoline haven’t risen since 1993, “which means that the tax on gas has actually fallen 39 percent over the last 21 years after you adjust for inflation” according to New York Times article “This Road Work Made Possible by Underfunding Pensions” by Josh Barro, (http://www.nytimes.com/2014/07/13/upshot/this-road-work-made-possible-by-underfunding-pensions.html?_r=0). But I suppose gambling with the retirement futures of millions of people is?  What kind of nonsensical tactic is this? BESTPIX  Homelessness Reaches All-Time Record In New York City Pension smoothing as an “offset”? Pension smoothing was used as an “offset” by both political parties. Democrats used pension smoothing in order to reintroduce another extension to unemployment benefits earlier on in 2014. And “Republicans included it as part of a provision that would repeal the Affordable Care Act’s tax on certain medical devices” during the last government shutdown. This nonsense isn’t an “offset”. Future Profitability and Future Time Value of Money The premise of this egregious bill is that companies will have made enough profits to replenish pensions.  How does Congress know this?  And if profits decrease, then what? Oops?! Aside from pulling such nonsense out of thin air, what accounting method did Congress use in order to “project” future corporate profits? And what about the future time value of money? Anyone with half a neuron knows a dollar today will not be worth the same tomorrow due to inflation. How will future inflation affect current pension contribution shortfalls?   A May 2011 brief titled, “Economic and Budget Issue Brief” published by the US Congressional Budget Office (CBO) states the following:   “According to the Public Fund Survey of 126 state and local pension plans, which account for about 85 percent of pension assets and participants in state and local pension plans in the United States, those plans held roughly $2.6 trillion in financial assets in 2009 but had about $3.3 trillion in liabilities for future pension payments.” In other words, as of 2009 pensions were in the red by $.7 trillion. From 2009! We’re in 2014 so pensions are further in the red meaning they can’t meet future obligations. “That share of liabilities covered by assets in 2009 was the lowest percentage in the past 20 years (see Figure 1).”(http://www.cbo.gov/sites/default/files/cbofiles/ftpdocs/120xx/doc12084/05-04-pensions.pdf).   Isn’t it illegal to not fulfill pension obligations?  No. That is at the sole discretion of State and local governments.   “Most jurisdictions have guidelines or laws that call for additional contributions to their pension plans when assets are less than liabilities, but no federal laws or regulations govern how states and localities are to respond when plans are underfunded. Actuaries for the plans determine each year how much contributions would need to rise (above contributions for “normal costs”—those resulting from benefits accrued during the current year) in order to eliminate (amortize) the shortfall of assets relative to liabilities steadily over a period of time, generally 15 to 30 years. However, payments by many states and localities have been lower than called for by their guidelines—especially in times of budgetary stress.”  All that paragraph states in a nutshell is future retirees are screwed!   But isn’t there a Federal Depository Insurance Corporation (FDIC)–like entity that “protects” pensions? images Yes. The Pension Benefit Guaranty Corporation (PBGC) (http://www.pbgc.gov/). It works on the same principal as the FDIC: it doesn’t cover the whole pension, but only up to a certain amount and varies by age, and marital status. But don’t take my word for it. This table showing the highest amount per month guaranteed by PBGC is on their site for the world to see.  For example, the monthly pension amount insured by PBGC for a 45 year old retiree as of the current calendar year 2014 is $1,235.80 ($14,829.60/ yearly) or if you are married with a survivor your monthly benefit is $1,112.22 ($13,346.64/yearly). (See Table below).

PBGC Maximum Monthly Guarantees for 2014
Age  2014 Straight-Life Annuity 2014 Joint and 50% Survivor Annuity*
75 15,027.27 13,524.54
74 13,662.95 12,296.66
73 12,298.63 11,068.77
72 10,934.31 9,840.88
71 9,570.00 8,613.00
70 8,205.68 7,385.11
69 7,365.34 6,628.81
68 6,623.86 5,961.47
67 5,981.25 5,383.13
66 5,437.50 4,893.75
65 4,943.18 4,448.86
64 4,597.16 4,137.44
63 4,251.13 3,826.02
62 3,905.11 3,514.60
61 3,559.09 3,203.18
60 3,213.07 2,891.76
59 3,015.34 2,713.81
58 2,817.61 2,535.85
57 2,619.89 2,357.90
56 2,422.16 2,179.94
55 2,224.43 2,001.99
54 2,125.57 1,913.01
53 2,026.70 1,824.03
52 1,927.84 1,735.06
51 1,828.98 1,646.08
50 1,730.11 1,557.10
49 1,631.25 1,468.13
48 1,532.39 1,379.15
47 1,433.52 1,290.17
46 1,334.66 1,201.19
45 1,235.80 1,112.22
*  Above  J&50% amounts apply only if both spouses are the same age. Different amounts apply if that is not the case.

Source: Pension Benefit Guaranty Corporation. (http://www.pbgc.gov/wr/benefits/guaranteed-benefits/maximum-guarantee.html).     Conclusion Pension smoothing is a word play trick Congress uses to allow companies and government agencies to not fulfill contributions to retirement benefits and postpones this obligation for some time in the future. On the belief that pension smoothing raises revenue. As the articles above state this irrational, and thoughtless gimmick doesn’t raise any long term revenue. Instead, it creates a situation whereby a company, or government agency, severely underfunds a pension where benefit obligations will not be met for both future and current retirees along with their survivors.  Thus rendering the pension insolvent. foreclosure Pensions are protected against insolvency by the Pension Benefit Guaranty Corporation (PBGC) a government agency. And just like the Federal Depository Insurance Corporation (FDIC) doesn’t fully insure bank deposits, pension benefits aren’t fully guaranteed by PBGC. Only a portion is which translates to reduced benefits for recipients that will be highly dependent on these benefits when they need them most:  in their twilight, non-working years. Pension smoothing isn’t a viable option for either party; however, neither is raising taxes.  A more common sense solution would be cutting wasteful government spending, and eliminating do nothing agencies, and redirecting those funds to the Federal Highway Trust Fund. Which would probably be adequately funded for the next 20+ years. We elect our officials on the premise that they will make decisions with our best interest at heart. Not that of corporations. The social cost of a broken government and a complacent citizenry is just way too great to be ignored.  If this latest trickery doesn’t give way to urgency, then what will?     Bibliography Len Burman, Forbes, “Pension Smoothing is a Sham”, July 9, 2014,(http://www.forbes.com/sites/beltway/2014/07/09/pension-smoothing-is-a-sham/ Brett Loguirato, Business Insider, “Congress Is Using Its Favorite Budget ‘Gimmick’ To Avoid A ‘Highway Shutdown,’ But Everyone Else Hates It”, July 15, 2014 http://www.businessinsider.com/highway-trust-fund-pension-smoothing-bill-offset-2014-7   Jon Stewart clip “The Shabby Road, “The Daily Show with Jon Stewart” Courtesy of Comedy Central http://thedailyshow.cc.com/videos/46mu9k/shabby-road   US Congressional Budget Office (CBO), Economic and Budget Issue Brief, May 2011, http://www.cbo.gov/sites/default/files/cbofiles/ftpdocs/120xx/doc12084/05-04-pensions.pdf   Pension Benefit Guaranty Corporation (PBGC), http://www.pbgc.gov/

Leave a comment

No comments yet.

Comments RSS TrackBack Identifier URI

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

  • ctpatriots feed

  • an Edgy new school Conservative blog
  • FREE CtPatriot BUMPER STICKER

  • the lacs

  • KRS 1 On Obama and the New World Order

  • Follow me on Twitter

  • The Savage Nation

  • ctpatriots archives

  • Ronald Reagan on Socialism & Liberalism

  • Louis Farrakhan – “Murder by Injection”

    I can't bleiev it but he's right ...
  • Glenn Beck talks about New World Order with Ron Paul

    Is Glenn Beck yanking our chain or is he sincerely worried about the prospect of a New World Order and a One World Currency?

  • And Why does Rush Limbaugh Agree WIth Farrakahn??? Because its true?

    If  i can agree with them both  ... it makes too much sense

    Only in an Obamanation could this Occur.

  • Alex Jones The EndGame .. full version

  • Blog Engage Blog Forum and Blogging Community, Free Blog Submissions and Blog Traffic, Blog Directory, Article Submissions, Blog Traffic
  • The Obama Deception…full version

  • the Mike Church Show

  • “lil” Jimmy Norton Kills….

    How small is Jimmy???
  • Blog Catalog

    Conservative  Blogs - BlogCatalog Blog Directory
  • the Ron & Fez Show

  • RevueLink .com

  • Entertainment blog
  • Dr. Bill Deagle

  • Rense.com

  • Star Trek 2009

  • Dave Hodges: Common Sense Show

  • Submit URL @ OptionAdd Search.  
  • Follow A Ct Patriot's Blog on WordPress.com
  • Infowars.com

  • Jesus or Muhammad