Chances are your state and local pension systems are underfunded. Pension shortfalls have become a common theme across the country and public-sector employees are pushing back hard. The Wall Street Journal explains that even with record setting returns in the markets, pensions systems are still unable to cope with the shortfalls created by the recession. Look no further than Rhode Island for the perfect case study of pension fund mismanagement and overexpectation. See my R.I.P. map (Rhode Island Pension) by clicking here.
Many states and cities are facing pushback from workers as they seek cutbacks on pension entitlements to existing employees—not just new workers or retirees—as they try to control their budgets and fill pension gaps. But Memphis is particularly notable because workers have moved beyond rhetoric and into action. More than 250 police and firefighters have quit and new recruits are proving difficult to attract, after Memphis opted to end its traditional defined-benefit pension and cycle a portion of retirement benefits for many current employees next year into a 401(k)-style account.
Pension showdowns are brewing elsewhere, as a stock market rising to records isn’t closing funding gaps triggered by big investing losses from the 2008 financial crisis. New pension accounting rules show hundreds of billions in additional obligations.
U.S. public pension liabilities ballooned by 32.7% in the years following fiscal 2008 while assets increased only 14.4%, according to preliminary fiscal 2014 data from the National Association of State Retirement Administrators. That leaves public retirement systems with enough to cover 73.5% of future obligations as compared with 85.2% in 2008, according to the data.