What's the difference?
A defined benefit plan pays a retired employee a specific or defined benefit, based on years of service, If the stock market crashes and the pension fund struggles, the township has to dig into its own resources. Also, the payments continue until death. In contrast, a defined contribution plan is one in which an employee makes a defined contribution into a fund every year, which he can then draw down after retirement. The payments stop when the well runs dry. The employee also assumes the risk that the pension fund may perform poorly.
Township Commissioners also voted, at their March 16 meeting, to make different changes to the pension plans, mostly to enable gay married couples to participate.
I have mixed emotions about defined contribution plans, but as new employees will know it coming in, and it doesn't affect current employees it is hard to argue with it from the budget end of it.
ReplyDeleteRe same sex benefits, I do not agree with it as a moral principle, but as it is permitted in PA via the courts, the Twp has no other choice. And while I may have personal moral issues with it, I also subscribe to Jefferson's belief in the public arena: "The rights of conscience we never submitted, we could not submit. We are answerable for them to our God. The legitimate powers of government extend to such acts only as are injurious to others. But it does me no injury for my neighbour to say there are twenty gods, or no god. It neither picks my pocket nor breaks my leg. ... Reason and free inquiry are the only effectual agents against error."
Here's my question. How about domestic partners? People are getting married less frequently these days. All too often, couples live together without tying the knot. Should a domestic partner be entitled to participate in his or her significant other's pension or medical coverage? In many insurance matters, the answer is yes.
ReplyDeletePersonally I would say no. From a cold legal stance, whether hetero or homo-sexual, marriage is a legal contract. One would hope for the love, and the religion, but from the eye of the law its a contract. Common law marriage has not been recognized in PA since 2001-ish, which essentially is what a "domestic partner" is. So no, they should not be entitled.
ReplyDeleteOne more reason for people to tie the knot, i guess.
ReplyDeleteOnce again I must come to the discussion and explain the farce of this entire scam. There is no such thing as a "defined contribution" pension. It has no relationship to a real pension. It is a special purpose defined contribution savings account. It may provide some pre-tax benefits.
ReplyDeleteThe "defined contribution" is a product of the 1970's when very high paid executives needed to shield some of their compensation from the higher tax brackets they were in. The "new pension plans" gave them a great tax haven. They deferred some of their income when they were at the top of their game, so that they could take what was their when they retired and presumably had less income to tax. The idea that this was anything like a real and honest pension was laughable.
However, in the financial free for all of the 1980's, companies got help through changes in the law and started putting people into these so=called pension plans. Problem was and is, the original folks doing this in the 1970's were very well paid and very well taken care of in their golden years through their "golden parachutes". The "defined co9ntributuion" plans was pocket change.
It is not a real alternative for defined benefits pensions for people of average means.
So let us be up front and honest. A pension is by definition a defined amount a person receives at retirement for the rest of their lives. A defined contribution plan is a glorified savings account that offers no real amount of security in retirement.
Sad times in America. Bullshit reigns and money breeds more money for those who have it.
Last I recall is the DC plan was put into place for new hires over a year ago before the new Manager and other high ranking non union staff were hired. One of the last contracts also required new clerical staff to be on a DC plan for quite some time. Not sure why this is being rolled out now as something new??
ReplyDeleteThis type of plan was a master stroke by investment banks in the 1970's. You effectively transfer all of the funding AND the risk to the employee. Instead of the company managing a fund with experts, the worker needs to manage the fund and can be completely devastated in a market downturn.
ReplyDeleteThis is a way the system has fucked you. This is not good and embracing these plans for the good of the company is a farce perpetrated on the American worker.
Lighthouse - You morally object to equality and giving MORE rights to people? Sad.
ReplyDeleteI would prefer a defined contribution plan over the defined benefit plan for the simple reason that i am the one in control of my pension fate vs. the government or some other beaurcrats.
ReplyDeleteHow would you like to be the pensioners in Detroit or NJ who looked at their distributions cut or proposed to be cut due to the Government not holding up their portion of the deal?
Bernie was the same sex benefit vote unanimous
ReplyDeleteYes.
ReplyDeleteI would prefer a defined contribution plan over the defined benefit plan for the simple reason that i am the one in control of my pension fate vs. the government or some other beaurcrats.
ReplyDeleteHow would you like to be the pensioners in Detroit or NJ who looked at their distributions cut or proposed to be cut due to the Government not holding up their portion of the deal?
As opposed to the millions on inexperienced investors who lost significant amounts in the market collapse of 2008 A hell of a lot more people were effected by that than isolated mismanaged pension funds. Management of pension funds is done by experienced people who manage risk. Pension collapses are due to government bodies not paying into a fund or taking money out of a fund.
Upper Milford made this change a couple of years ago, no opposition at all. But then again, we don't have unions pumping $$ into campaigns to get puppets elected.
ReplyDeleteTypically a DC plan includes an employer contribution, and the $$ in the account belongs to the employee (subject to vesting requirements) and carries tax benefits. So I disagree with 458am, it's a retirement plan - the same setup as is in the private sector.
Finally, no, domestic unions should not be eligible for benefits. There is no legal connection between the parties. Yes to same sex benefits if the parties are in fact married.
The Banker
4:58 is spot on! The future retirees will be supported by ALL OF US in the form of welfare.
ReplyDelete4:58,
ReplyDeleteThere aren't enough rich people to blame for the fact that the math behind municipal pension plans doesn't work. That's why we are where we are today.
Bernie, your 1 am post is a nice gesture but a nightmare for the employer. What obligation does one have to another if they are 'domestic partners' too ambiguous and arbitrary .So I move in with my GRANDMOTHER should she count? ---OR Im shacked up with the new lady 3 nights a week but I tell my employer what ever I want and this Susie Rottencrotch get on public benefits and this gets out of control.Now I get fired ,lets say for.. smoke n dope in the salt hut -what are they to do with my domestic partner they have in the system ? .
ReplyDelete6:00 There was a time when most companies had defined retirement plans. You know the days when companies cared about workers. Now you are lucky if they even contribute. Sad
ReplyDeleteA defined contribution is a retirement savings plan, yes. A pension plan, no.
ReplyDeleteA goat is not a cow, even though they both give milk.
Do you believe everything the boys who brought you the great crash of 2008 tell you. Oh, yes you do.
I would always take a deal whereby I control my future, especially my financial future. This philosophy of promising cradle to grave benefits is an idea whose time has gone. Defined Benefit plans remind me of a pyramid scheme; in early enough= you win; get in at wrong time= "you lose". If getting a "guaranteed" check and not outliving the money is such a concern, there are different investments available including variable annuities that will allow for this. Making promises that you kids and grand kids have to keep is wrong.
ReplyDeleteVOR
ReplyDeleteThere aren't enough rich people to blame for the fact that the math behind municipal pension plans doesn't work. That's why we are where we are today.
It absolutely DOES work as long as the fund is funded (mostly by the employee) and isn't raided by politicians. The simple math of compound interest says it DOES absolutely work.
You've been sold a bill of goods. Enjoy scrimping on whatever you have to stretch out for 25+ years after retirement.
I would always take a deal whereby I control my future, especially my financial future. This philosophy of promising cradle to grave benefits is an idea whose time has gone. Defined Benefit plans remind me of a pyramid scheme; in early enough= you win; get in at wrong time= "you lose". If getting a "guaranteed" check and not outliving the money is such a concern, there are different investments available including variable annuities that will allow for this. Making promises that you kids and grand kids have to keep is wrong.
ReplyDeleteGood luck teaching these "investment strategies" to the overwhelming number of people ill-equipped to handle such responsibility.