A quest to better fund city cop and firefighter pensions collided with a quest to hire more female and minority-owned investment firms, putting two unrelated issues on the same table.
The collision occurred Thursday at the monthly meeting of trustees for the Policemen & Firemen’s Pension Fund in City Hall.
At the meeting, representatives for the police and fire unions tried to block a proposal to recruit smaller investment firms to manage their retirement accounts — at least, until the city deposits the rest of this year’s payment to the pension fund.
The move was a gambit, essentially, using small businesses that are often owned by minorities, women and veterans as a bargaining chip to spur the city to pay now.
The two issues are unrelated: When the city makes its payments to shore up the fund has little to do with who then invests the money. But the union reps tried to tie them together. By tacking an amendment onto a new “emerging manager” policy, they tried to force the city to cough up nearly $9 million in promised contributions that it hadn’t produced as the state’s budget crisis thinned their cash reserves.
The maneuver failed in a 3-2 vote that split along racial lines, with the two white union reps who serve as fund trustees voting against the mayor and two African-American trustees.
An Emerging Strategy
“Emerging managers,” as they’re known in the investing field, are smaller firms that don’t yet have a track record of managing funds for public agencies and other large clients. The Harp administration is seeking to actively recruit more of them, diversifying the multi-manager system that divvies up pension investments. Mayor Toni Harp learned about that strategy at a national pension conference last year.
At Thursday’s City Hall meeting, trustees for the Police & Fire Pension Fund (P&F) suggested adding new language that says emerging managers should be considered in any new hiring. Defined as firms with less than $3 billion in assets or a shorter track record, those emerging mangers wouldn’t be allowed to manage more than 20 percent of the fund. Similar language was adopted last June by the City Employees Retirement Fund (CERF).
“Morgan Stanley does not have the full Rolodex,” Controller Darryl Jones said. “It’s our responsibility to go out and find these emerging managers. At the end of the day, I’ve seen only two women walk in here in four years. And how much money has been doled out in the last four years? I personally believe women think differently and could do a better job.”
Emerging managers, often racial minorities, women or former service-members, are routinely overlooked by public pensions. Even if the money manager personally has a long résumé, trustees fret about the risk of a turning over millions in public funds to an untested company.
But several white papers on emerging managers say they generally outperform their larger peers. Quantitatively, they’re more likely to win higher returns, especially in a bear market.
Northern Trust Global Advisors, a financial-services company, for instance, found that from 2005 to 2010, as the Great Recession hit, firms managing less than $3.6 billion in assets gained 0.67 percent each year from their large-cap equities, while the S&P 500 index was down -0.80 percent over the same period. That rate of return beat out the household names managing more than $124 billion, who roughly broke even.
The real difference, Northern Trust’s analyst found, was that emerging managers outperformed the markets by an average of 0.72 percent during quarters when stocks went down — far ahead of the 0.22 percent average that the big firms notched in those bad months.
Northern Trust’s study also put the difference another way: If fund managers of all sizes are ranked by performance, the emerging managers make up 44 percent of the top quartile and 28 percent of the bottom quartile, even though they make up 36 percent of the total pool. In other words, they’re more likely to be among the top money-makers and less likely to be among the losers.
Other studies, though, suggest that the higher returns are almost a form of beginner’s luck. In a 2009 study, researchers at the University of Minnesota and University of California at Irvine found that the emerging managers do best in their first year, earning 4.31 percent above than the market index. But the gains wear off, dropping to 1.10 percent by the second year.
Anecdotally, reviewers explain, the emerging managers make more money because they’re creative in their picks, nimble in their staffing, and ambitious in their plans. They have something to prove that the big guys don’t, and because of their size, the employees often take home a bigger chunk of the commission doing it, adding a personal incentive to strike it rich.
That has led reputable pensions like CalSTRS, CalPERS and the Teachers Retirement System of Texas to create platforms for emerging managers.
While New Haven’s policies don’t explicitly prohibit emerging managers, the current investment guidelines state that applicants should be judged on their past experience, financial resources and staffing levels. In practice, that has meant that smaller firms often don’t get to make their pitch — even though the P&F fund could sorely use some strong returns.
Underfunded for Years
Created in 1958, New Haven’s pension for public safety employees is underfunded, both in the short and long terms, like many public pension funds.
Decades from now, the P&F fund won’t have enough money to pay out what employees are being promised, without more investment. According to a June 2016 valuation, the P&F fund meets only 43.2 percent of its liabilities — way down, just in the last decade, from covering 60.6 percent in mid-2008.
In dollars, the city is $398.3 million short on what it owes cops and firefighters. That’s more than halfway to New Haven’s debt limit of $749.1 million in unfunded pension liabilities, which represents three times the tax base.
New Haven’s P&F fund has been bleeding out money while not delivering substantial returns, according to the city’s own budget records. In FY 2015, the fund managers barely scraped together $410,000 in profits, while charging $171,000 in administrative expenses. In FY 2016, the fund managers lost $5.6 million on the markets, while charging $184,000 in administrative expenses.
Meanwhile, actuaries continue to move the city’s expected payout higher and higher. Recently, seeing the minimal profits, they lowered the expected rate of returns to a more conservative 7.75 percent. And, based on a review of six years of employee time-sheets, they estimated overtime will drive up costs further than expected.
This year the city allocated extra funds to start paying down that gap. Of the $15.6 million in increased revenue the city expected this year, the budget devoted more than half — $8.7 million, or 56 percent — to pension increases.
But so far, the city hasn’t had the cash on hand to make its full budgeted annual payment of $34.6 million to the P&F fund. “The situation changed, when we lost roughly $5 million in our aid from the state. We’re looking at ways to meet our obligations, not only to the pension but to everything else in the city,” Controller Jones explained. The city paid most of what’s owed, but about $9 million is still due by the end of the fiscal year.
That angered some public safety employees, their union representatives said. Jones told them not to worry. He cited the city’s track record of following through on actuaries’ recommended contribution every year since 1995, and said the city will do the same in the next six months before the year is out.
“Social Cause” or “Business Decision”
The union representatives said during Thursday’s meeting that they they wanted a guarantee, something “a little more stringent,” with “some checks and balances in place,” as Patrick Cannon, the fire union rep, phrased it. He suggested amending the new emerging manager policy to say the P&F fund can’t hire an emerging manager until the city deposits its full contribution.
“By lowering the standards of where our investments go, I’m concerned,” Cannon said. “I want to make sure that we don’t violate our fiduciary responsibility. We don’t want to change our guidelines and fall asleep at the switch here. Minorities, women, veterans, they’re a great cause, and I want to make sure we’re clear that we’re not lowering the guidelines for asset management, like the years of experience, for a social cause.”
Brian McDermott, the police union rep, said that he’d been hearing complaints from officers that the trustees were prioritizing the wrong issues.
“Police officers I’m here to represent bluntly say, ‘This is what you’re worried about? Money managers who make a lot?’” he said. “How do I look to these men and women of the police department, who know that we’re short, that the city hasn’t made its full contribution, that the pension is woefully underfunded, and say that’s what we spent our energy on in this meeting is investment managers who make three or four times what the highest NHPD officer makes? I’m concerned about them, and I’ll work very hard for the people I’ve been voted here to represent.” He added that the trustees shouldn’t be “looking out for Wall Street fat cats, instead of police and fire.”
Mayor Harp countered that Cannon’s amendment had nothing to do with the policy. “They don’t comport with one another,” she said. If the trustees voted to fire a manager and reinvest elsewhere, the opportunity to apply should be open to smaller firms, regardless of whether the city’s check has cleared, she argued. “It’s just allowing them in the door,” she said.
Police Commissioner Evelise Ribeiro added that trustees had a responsibility to hire the manager who could make the most money. “I heard the word ‘social cause,’ and I disagree with that term. I don’t think by looking at emerging managers, this is a social cause. It’s a business decision,” she said. “Just that, period.”
Joined by Fire Commissioner Rev. Steven Cousin, Harp and Ribeiro voted against Cannon’s amendment, shooting it down in a 2-3 vote. Then they passed the emerging manager policy, 3 to 2.
The pension fund returns are being eaten up by “investment fees” while the future liabilities are skyrocketing due to bad contracts and reckless overtime.
The solutions are:
1. Put *all* the money into low fee institutional funds that mimic the broad market, then step back and step away. New Haven doesn’t have the expertise to do better than that, and the folks that charge fees to “help” are interested in their fees, not in helping New Haven. The result is post-fee returns that suck. Let’s not do this.
2. Control overtime. Now. Severely. We can’t afford it, sorry.
3. Future pension contracts have to be non-insane. No extra pensions for over-time. None, nope, nada. We can let public safety employees fully vest in their old-age pensions at moderately young ages (as they are tough jobs), but employees should have to wait until they are *actually old* to actually collect their pension $$s.
posted by: Kevin McCarthy on January 19, 2018 3:35pm
The union reps would have a stronger case if the existing managers were doing a stellar job. They aren’t. It takes a special talent to lose money in a bull market.
posted by: opin1 on January 19, 2018 3:38pm
How is it that the fund, the green line in the chart, has remained flat since 2013?! The S&P is up 86% since then and the nasdaq 130%! what the heck have the trustees been investing in?
posted by: Bohica on January 19, 2018 3:52pm
“I personally think women think differently and could do a better job.” On it’s face that’s a pretty sexist comment coming from the city controller. As someone collecting a city pension I certainly hope more thought will go into this decision than the desire to hire more diverse money managers.
posted by: AverageTaxpayer on January 19, 2018 4:33pm
Might be a good time to remind everyone of the Silvestri scandal, from the late 1990’s. A good question is: What kind of finder fees are being paid out by the City’s investment firms, and to whom?
“Prosecutors said that Mr. Silvester, a former investment banker, demanded that in return for investments of state pension money, private equity funds pay tens of thousands of dollars in finder’s fees to his associates, who then returned part of the money to him. These fees were typically calculated as a tiny percentage of a huge investment.
“The charges against Mr. Silvester stemmed from finder’s fees on $500 million in pension money that he moved to five private equity funds between July and December 1998. Prosecutors said that Mr. Silvester used his older brother to ferry the kickback part of the finder’s fees—$60,000 in cash in one drop—and distribute some of the money to people who then made donations to his campaign of up to $1,500 in their own names.”
“Mr. Silvester’s successor as State Treasurer, Denise L. Nappier, touched off a huge investigation by the State Ethics Commission last week when she released information about more than $18 million in finder’s fees that had been paid by investment firms currently managing state pension money. Of the $18 million, $16 million had been paid since 1997, the year Mr. Silvester took office.”
“The fees, paid by fund managers to people who play matchmaker between the fund and state officials, are standard in the investment business. But Federal prosecutors are investigating whether the fees were paid to people who did no work, or whether any of the funds knew that some of the money was being kicked back to Mr. Silvester and his relatives.”
posted by: Noteworthy on January 19, 2018 4:59pm
Pension Scam Notes:
1. The Great Pension Scam has been going on throughout DeStefano administration and continues in the Harp House.
2. Promises exceed cash; the city budgets what 8% in the pension fund as a return when it brings in substantially less than that.
3. The minority firms may do better in the bear market - but we are in the middle of a bull market and have been for at least five years.
4. There is nothing magical about skin color or gender in public pension fund management.
posted by: denny says on January 19, 2018 8:04pm
This article is a friendly reminder that the city, like the state, is bankrupt.
posted by: 1644 on January 19, 2018 8:10pm
The real problem here is Harp’s (and the Alders’) wildly unrealistic estimate of state aid, budgeting as if the Governor’s early, proposed budget would actually happen, and characterizing that very initial proposal as a “promise”. As any realistic person could have predicted, that budget was never going to be enacted, so New Haven is millions short on revenue. Here, the mayor continues her pattern of shorting pension funds, while wasting money on unnecessary positions like her personal drivers, BoE and legislative liaisons, and more. These re the folks who shorted New Haven by failing to submit paperwork for millions in LoCIP grants, and drive up costs to the city by taking months to pay vendors (forcing them to use factors).
posted by: new havener on January 19, 2018 11:22pm
these “20-years and out” pensions, where employees are retiring in mid-to low 40’s, and immediately collecting pensions for up to 40 years is what caused the mess. P&F employees used to customarily work into the 50’s…not to mention the BS H&H kickers.
posted by: olesailorman on January 20, 2018 6:38am
Many major well thought out and well run pensions simply hire one of the very low cost mutual fund companies like Vanguard or Fidelity to manage their assets, often at fees well under 1/2 of one percent of assets.
There is no need to politicize the pension management with ethnic, gender or social issues.
As a former officer in the Merchant Marine, I receive a pension that is largely invested by the trustees in Vanguard funds. Simple and effective…it’s currently funded at 105% of future liabilities.
posted by: Kevin McCarthy on January 20, 2018 8:14am
Bohica, actually it’s a variation of “two heads are better than one.” I’m a 63-year old white male. I consider myself to be a reasonably intelligent person. But on any given issue, there are plenty of women, POC, and younger people who know more than I do. Such individuals are often absent in decision-making processes. The motion merely facilitates their participation.
Noteworthy, you misunderstood the Northern Trust report. It covers a period of both bull and bear markets. During this period, the portfolios selected by the small managers had a higher rate of return than those selected by the larger managers and the market as a whole.
posted by: opin1 on January 20, 2018 12:26pm
Esbey and olesailorman 100% correct. Its unbelievable. They have a team of trustees that hires a team of advisors, and look at the results! Every Tom, Dick and Harry with a 401k has averaged double digit gains in recent years. Up the street David Swensen and crew are doubling the Yale endowment every few years and our tax funded pension fund has nothing to show for one of the best bull markets in history?! Seriously, knock on Swensen’s door and ask him to lend a hand, maybe out of sympathy they will loan us a summer intern who can give us some insight into how to actually grow your savings.
Newhavener points out the main problem. When is the city and state going to get rid of these ludicrous pensions which have bankrupted one of the wealthiest states in the country? Pay new city and state employees MORE while they’re working, and switch from defined benefit to defined contribution. Its absurd that public employees can work 20 years then retire and get paid full salary for the next 40 years.
posted by: THREEFIFTHS on January 20, 2018 12:49pm
posted by: new havener on January 19, 2018 10:22pm
These “20-years and out” pensions, where employees are retiring in mid-to low 40’s, and immediately collecting pensions for up to 40 years is what caused the mess. P&F employees used to customarily work into the 50’s…not to mention the BS H&H kickers.
What caused the mess is the looting and under funding the pension system by the city. As far as 20-years and out pensions,Do you homework.The major of people do not go out when they hit the 20 years.
My bad. You can always take the test to work for the city and then you would get the same benefits.
posted by: 1644 on January 20, 2018 2:29pm
Serious question: Do any of these trustees have any knowledge of finance? Have any been to “B” school? Worked in investment banking, financial advising, actually been hired to manage a portfolio? Most towns have Boards of Finance which act as trustees of their pension funds. The folks appointed to these boards are bankers & businessmen, people who understand a balance sheet. Yes, borrowing a summer intern from Swensen would greatly improve the level of expertise here. Also, the City employees’s pension fund is even more severely underfunded than the police & firefighter’s funds.
posted by: THREEFIFTHS on January 20, 2018 5:55pm
posted by: opin1 on January 20, 2018 11:26am
Pay new city and state employees MORE while they’re working, and switch from defined benefit to defined contribution. Its absurd that public employees can work 20 years then retire and get paid full salary for the next 40 years.
It can be done.Again I keep telling all of you public sector worker haters all they have to do is follow the New York State Model like other states are starting to do.
Eligibility You will be eligible for a service retirement benefit when you reach age 55 and have ten or more years of credited service.
For the full retirement benefit, you must be 62 years old at retirement. You may retire as early as age 55, but you will receive a reduced benefit. Uniformed court officers or peace officers employed by the Unified Court System that have at least 30 years of credit may retire with a full benefit as early as age 55.
The Benefit If you retire with less than 20 years of service credit, your benefit will equal 1.66 percent of your Final Average Salary (FAS) for each year of service.
With 20 to 30 years of service credit, your benefit will equal 2 percent of your FAS, multiplied by your years of credited service. For each year of credited service beyond 30 years, you will receive 1.5 percent of your FAS. Examples: At age 62, with 19 years of service and an FAS of $35,000: $35,000 × 1.66% × 19 years = $11,039 per year or $920 per month At age 62, with 20 years of service and an FAS of $35,000: $35,000 × 2% × 20 years = $14,000 per year or $1,167 per month At age 62, with 31 years of service and an FAS of $35,000: $35,000 × 2% × 30 years = $21,000 per year plus $35,000 × 1.5% × 1 year = $525 per year = $21,525 per year or $1,794 per month
If the earnings in any year included in the FAS period exceed the average of the previous two years by more than 10 percent, the amount in excess of 10 percent is excluded from the computation of your FAS.
See you can not use O.T.In FAS.
posted by: THREEFIFTHS on January 20, 2018 6:13pm
Part two. I worked for the state of NEW York for 30 years.Started in 1974 retired in 2004.
The New York State Common Retirement Fund (NYSCRF) is the third largest public pension plan in the nation with an audited value of $192.4 billion in assets held in trust for the retirement security of the more than one million members of the New York State and Local Retirement Systems (NYSLRS). As a long-term investor, NYSCRF has an investment approach which capitalizes on market opportunities and weathers market ups and downs. NYSCRF is widely regarded as one of the nation’s best-managed and best-funded pension plans.
$192.4 Billion in audited value as of March 31, 2017
It is a fact that the taxpayers under this model get profits on there tax dollars from the fund.In fact I just got a e-mail that says New York State Comptroller Thomas DiNapoli said that employer contribution rates for the New York State and Local Retirement System (NYSLRS) will decrease in fiscal year 2018-19 due to recent strong investment returns.
So like I keep telling all you Public Sector and Union Haters to tell the city and state to stop the under funding and looting of the pension fund.
My bad. How about the executive pensions for CEO executives in the private sector that steadily drained cash from the company’s coffers and manipulate pension plans for their profit to the detriment of the plan participants and retired pensioner I do not hear any of you Private Sector folks speaking about that.
posted by: THREEFIFTHS on January 20, 2018 6:44pm
switch from defined benefit to defined contribution.
That is a rip off.
Read this book.Great Wall Street Retirement Scam What THEY Don’t Want You to Know about 401ks, IRA and Other Plans
Look at what this person in the book wrote about his 401K
Back in the 80’s I was making $100,000+ a year. I funded a 401k like everyone else. I had half a million bucks when I retired in 1998. Today I’m almost broke. What happened?
$200k went to taxes; $100k was lost in the market down turn; most of the rest has been spent over the last 12 years. And, I paid between $10,000 and $20,000 in fees to wall street money managers that never told me they were charging my 401k these fees (by law, they didn’t have to tell me).Within a year or so I will have only social security to live on.Had I had the information in this book in 1980 I could have saved thousands in fees.So, keep funding those 401k’s suckers… and wind up like me.I wonder if McDonald’s is hiring?
Also did you know that Ted Benna, who is credited with inventing the 401(k) retirement plan said it fails many Americans.
You can always take the test to work for the city and then you would get the same benefits.
posted by: opin1 on January 22, 2018 12:32pm
3/5 - “Again I keep telling all of you public sector worker haters” / “So like I keep telling all you Public Sector and Union Haters” -No need to bash people with different opinions. I’m not a hater of either public sector or union workers. My mom was a public sector employee, and I believe strongly in the need for unions. That doesn’t change my opinion that the pensions - the way they are now - are killing the state’s and city’s financial well-being.
I agree with you they need to stop looting and under-funding the pension fund. They agreed to these pensions so they cannot take them away from those who signed up to work with those promised benefits. That said, they need to change the system going forward for new employees. It’s obvious that its not sustainable. If you moved from defined benefit to defined contribution you would remove the temptation to loot the fund (bc there wouldn’t be a fund for politicians to loot). As long as there’s a fund to loot the politicians will probably keep looting it.
I’m not sure if your description of the NY state pension system is the solution but the way you describe it certainly sounds better than the way its done in CT and in New Haven. I’d still rather it move towards defined contribution (or perhaps hybrid of a small pension combined with 401k).
I don’t agree at all with your bashing of 401ks or your comment that switching from defined benefit to defined contribution “is a rip off”. Your argument sounds like its coming from someone who’s never had a 401k. The one anecdotal example you provided of “the person in the book” sounds like an outlier. Most people who have 401ks who contributed to them (say 10-15% of salary) for 25+ years will be in great shape. Most 401k fees these days are minimal or non-existent.
posted by: opin1 on January 22, 2018 12:34pm
(cont’d) I agree that the CEO and executive compensation in the private sector is obscene. However, that is a completely independent issue of public sector pensions which is what we’re talking about here. (I don’t really care what benefits private sector unions go after from their private corporations because those will be paid for by those private companies. I only care about the public sector pensions because we the taxpayers are paying for those).
posted by: 1644 on January 22, 2018 2:58pm
Re 401K’s vs. defined benefit plans: 1. 401Ks are your money, already in your pocket. 2. Defined benefit plus are no more than a contract to pay in future years. As the article says, those contracts can be broken in bankruptcy court. Many retirees have seen massive cuts to the benefits, particularly in the airline industry. but also in places like Central Falls. D Detroit retirees took a small hit compared to bandholders, but they still took a hit. 3. On retirement (and before), a 401K holder can avoid the risk of a market downturn by purchasing an annuity. In fact, if one wants to know how much money one should have saved for retirement, ask a life insurance company what the price of an annuity would be to generate the annual income you want. Annuties eliminate the possibility of outliving one’s savings.
posted by: THREEFIFTHS on January 22, 2018 5:13pm
posted by: opin1 on January 22, 2018 11:32am
That doesn’t change my opinion that the pensions - the way they are now - are killing the state’s and city’s financial well-being.
But you give the answer to your statement when you said I agree with you they need to stop looting and under-funding the pension fund. Case closed.All they have to do is stop looting and under-funding the pension fund.
I’m not sure if your description of the NY state pension system is the solution but the way you describe it certainly sounds better than the way its done in CT and in New Haven. I’d still rather it move towards defined contribution (or perhaps hybrid of a small pension combined with 401k).
If it was not the solution.Then why have other states are starting to use the NEW York State Model?
I don’t agree at all with your bashing of 401ks or your comment that switching from defined benefit to defined contribution “is a rip off”. Your argument sounds like its coming from someone who’s never had a 401k.
Do not have to have one.I read about them and People I know tell me about them and how they have fail them.Plus Ted Benna, who is credited with inventing the 401(k) retirement plan said it fails many Americans.In fact Check this out.
Limited flexibility: The plans offered by a large percentage of employers are noticeably short on options
Taxable income upon withdrawal: When a plan holder begins to withdraw money, it is taxed as additional income. There are also penalties for early withdrawal, with taxation up to 20% plus a 10% penalty if you withdraw before age 59 1/2
Required withdrawals at age 70 1/2: Plan holders must being receiving distributions by age 70 1/2. If you’re still working at that time, you may be subject to a higher tax rate than if you were retired.
posted by: THREEFIFTHS on January 22, 2018 5:30pm
I agree that the CEO and executive compensation in the private sector is obscene. However, that is a completely independent issue of public sector pensions which is what we’re talking about here. (I don’t really care what benefits private sector unions go after from their private corporations because those will be paid for by those private companies. I only care about the public sector pensions because we the taxpayers are paying for those).
It is not a completely independent issue.How about my tax dollars that have help bail them out?
You can not get care about the public sector pensions because we the taxpayers are paying for those).
Public Sector Workers pay tax to.In fact the pew study on pension in this state told them to look at other pension fund models.
Most 401k fees these days are minimal or non-existent.
Who told you that.
Why high 401(k) fees are likely to stick around Judges dismiss cases against Putnam and Wells Fargo, although similar cases are still being brought against investment managers. The average total cost of a 401(k) was 0.97 percent of assets in 2014, down from 1.02 percent in 2009. Smaller plans are the most expensive: an average of 1.25 percent of assets.
Check this out.So look at how the taxpayers benfit from this.
The In-State Investment Program generates solid returns for the state pension fund and the one million members, retirees and beneficiaries who depend on it. As an added bonus, it spurs private sector investments and jobs—upstate and downstate—by investing in businesses that want to expand here. Since 2007, Comptroller DiNapoli has doubled the capital committed to this program.
Again the problem is the looting and under-funding of the pension fund.
Like the man said.So, keep funding those 401k’s suckers… and wind up like me.I wonder if McDonald’s is hiring?
posted by: opin1 on January 23, 2018 1:09am
Unfortunately, just because I agree with you that politicians should not loot the public employee pension fund does not mean “cased closed”. They paid for other services with the money they took from it. So even if they stopped looting it, the root of the problem is still there: the state (and city) expenditures EXCEED revenues!
Your comments on 401k plans just aren’t accurate in general. I don’t know what else to tell you. Some companies may offer 401k plans that aren’t very good - possibly bc they are small companies without negotiating power - and perhaps those are the ones you’ve heard about. But my 401k plan is great! There are plenty of options and index funds with expense ratios around .1% and no other fees. If the state were to offer a similar type of plan they would easily be big enough to negotiate so that the expenses were a non-factor.
Both the city and state have a harder and harder time each year balancing their budgets, and the pension expenditures are a primary reason why. You can’t dispute that. I don’t care whether you cut costs by switching to defined contribution or by reducing/putting more limits on the pension payouts (like the NY plan seems to do). Or a hybrid of a small pension plus a 401k. All I know is they can’t keep offering the same pensions that they’ve been offering up to this point.
posted by: THREEFIFTHS on January 23, 2018 9:15am
posted by: opin1 on January 23, 2018 12:09am Unfortunately, just because I agree with you that politicians should not loot the public employee pension fund does not mean “cased closed”. They paid for other services with the money they took from it. So even if they stopped looting it, the root of the problem is still there: the state (and city) expenditures EXCEED revenues!
Again under the New York Pension Model you can not loot or under fund the pension system.In fact that is the law.
Your comments on 401k plans just aren’t accurate in general. I don’t know what else to tell you.
Just look it up.
You can not get around it.Like I said more and more states are using the New York State Pension Model.And it is working.
posted by: opin1 on January 23, 2018 12:05pm
“Just look it up”. I already did, been studying it for years. Have an Economics degree, an MBA, and a series 7 license. I’m not commenting based off what “some of my friends told me”.
We are not in total disagreement. You are promoting the NY state model which appears to reduce benefits/costs compared to the way CT and New Haven do it - so you agree that CT and New Haven pensions are not sustainable as they are now. We both agree politicians should not loot a pension fund. And I have agreed with you that the NY model appears to be better than what we have here. The defined benefit vs defined contribution argument we can agree to disagree on.
posted by: okaragozian1 on January 23, 2018 11:16pm
I have read much of what has been said - but not all - and I agree that in a stock market that is making so much money for so many people it is ridiculous that the Pension Fund investments are sub-par. The idea of leveraging bad money management by saying police should get less pensions because pension funds got mismanaged is equally ridiculous. On the flip-side, regarding the City’s inability to fund pensions as required is something that is way over my pay grade. There are millions of dollars of uncollected fines and taxes that have gone unmentioned.