Skip to comments.What's in the Future? Massive Liabilities (Private and Public Pension Liabilities)
Posted on 04/21/2007 2:27:37 PM PDT by shrinkermd
AMERICA'S RETIREMENT FUNDS are a good-news, bad-news story. The biggest corporate pension funds are nearly fully funded for the first time in years. But the bad news is state and municipal pension plans face an unfunded liability of upwards of $1 trillion. And the worse news is the public sector has an additional unfunded liability half again as big for other post-retirement expenses such as health care, a staggering $1.5 trillion.
First, the good news from the private sector. The 100 largest corporate defined-benefit plans were nearly 100% funded on average in 2006, according to an annual survey by Seattle consultant Milliman. Boosted by strong stock-market returns and rising interest rates last year, these big retirement funds are in the best shape since 2001.
Early in the decade, pension funds were in the worst of all possible words. The bear market hammered the value of the funds' assets while the plunge in interest rates in the wake of the bubble's bust boosted the value of their liabilities. (The discounted present value of liabilities depend on the interest rate; lower interest rates results in a higher present value, and vice versa.)
At the end of 2006, the 100 biggest defined-benefit funds had an aggregate deficit of $4.3 billion, down $102.6 billion last year, and small amount compared to total assets of $1.3 trillion. So, no worries for Corporate America.
Would that the nation's largest states and cities could say that. According to a recent report by Moody's Investors Service, the 55 largest cities have seen their median actuarial accrued liability of $554 million in 2004, the most recent year for which data are available. That's up from $388 million in 1997.
(Excerpt) Read more at online.barrons.com ...
With regards to Social Serurity, if the retirement age can continue to be raised, early retirement be eliminated, and the earnings limit increased dramatically, than it will keep it solvent for a while. At the very least, it will give us time to figure out a way to restructure the system.
Hint: Never rely on a pension where someone has a choice to whether to fund it or not. Especially if they get to vote on it.