[Terpfen]

“Underfunded” is a spin term.

The correct description is “looted.” State governments looted the pension funds to pay for entitlement spending.

[Popman]

The correct description is “looted.” State governments looted the pension funds to pay for entitlement spending.

Bingo!!

[andy58-in-nh]

You are correct. Many state pension funds are, like the Social Security "Trust Fund", fictions of accounting. The requirements for state governments to maintain sufficient invested reserves to fund retirement liabilities are often ignored in favor of new spending. Deficits and interest on debt service result. Politicians then turn to the private sector for relief of the problems their own profligacy has caused.

It is also interesting to note that most private companies have shifted their retirement plans from defined benefit (formula-based and employer-funded) to defined contribution (employee-controlled and -funded, with a tax incentive for employer matches). These plans, of which 401(k)'s are the dominant type, are more efficient and shift responsibility for retirement funding to the individual rather than the employing entity.

Government employers at all levels have resisted any such efforts at reform because of state and municipal union pressure and the politicians' endless appetite for more spending and vote-buying. Many of these underfunded/looted IOU's will soon come due, and the results will not be pretty.