Proposed pension limits will lead to UC’s decline

Sacramento Bee ^ | February 18, 2016 | James Vernon

[artichokegrower]

Plan would cap University of California faculty pensions at $117,000

Many faculty members whose pensions will not be affected oppose plan

Deal struck in private shows no respect for tradition of shared governance with faculty

[Liberty Ship]

When I was in school, I hated teachers. Trust your instincts.

[Tymesup]

“Defined benefit plans are a blight on society, perpetrated by economic illiterates and charlatans, and should all be abolished.”

Defined benefit plans can be a good way to spread longevity and investment risk.

[The_Reader_David]

Defined benefit plans invariably end up under-funded — there is always pressure from whoever has control of the resources to fund them to make the actuarial assumptions used rosier than is realistic, and the case of government-funded plans usually irresistible pressure to simply ignore actuarial reality and assume sufficient tax revenues will be available to pay the promised benefits, an assumption which is unfounded and has resulted in unfulfillable promises by virtually every unit of government in the U.S.

[Tymesup]

Three additional reasons plans tend to be under-funded:

The benefit limits for qualified plans are relatively low, so executives receive a lot of their benefits from non-qualified plans. These executives no longer have the incentive to ensure the plans are well-funded.

There are potential excise taxes if a plan is too well-funded.

If a plan is underfunded when it terminates, the Pension Benefit Guaranty Corporation insures plan benefits. Why fund a plan any more than necessary?

All three of these reasons came about from the government trying to fix one problem, and creating another.