Archive for Friday, December 16, 2011

KPERS facts

December 16, 2011

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To the editor:

The Kansas Public Employees Retirement System study commission claims extravagant employee benefits are driving KPERS into insolvency. They claim a defined contribution (DC) plan solves the problem. Let’s look at the facts:

Employee contributions, not taxes, are the main source of KPERS funding. Taxes contribute less than one-fourth the total.

Public employees have not missed a single payment. But, for 17 years, the Legislature has failed to fund KPERS to the actuarial recommended level. Instead, they’ve passed billions in tax cuts and exemptions.

The average yearly retiree benefit, around $13,000, is hardly extravagant. Alone, it‘s barely above the federal poverty line.

Those who blame public employees for the KPERS shortfall are lying. The real problem is legislative pilfering. By eliminating guaranteed benefits, a DC plan removes legislative accountability and makes pilfering easier.

Those who claim a DC plan fixes the KPERS shortfall are lying. Legislative research estimated the DC plan would increase costs by $1.2 billion. The KPERS consulting actuary testified that a DC plan would provide 60 percent less in benefits. Who really wins if we spend more for lower benefits?

KPERS is currently a single-management account covering about 280,000 people. A DC plan would create 280,000 separately managed accounts. That’s 280,000 opportunities for investment managers to siphon profits out of public employees’ retirement.

Who lobbies for a DC system? It is, almost exclusively, investment managers.  The DC push is a thinly-veiled attempt to enable greater pilfering from public employees and, ultimately, from all taxpayers.

Comments

mloburgio 3 years, 6 months ago

Comparing pensions

A legislator retiring with an annualized pay of $85,820.52, and with 10 years' service, would have an annual KPERS benefit of $15,018.60, for a monthly benefit of $1,251.55, according to KPERS. If the retiring legislator had 20 years' service, the annual benefit would be $30,037.20, and monthly, $2,503.10.

The News asked some KPERS retirees about their pension benefits. Their answers varied widely.

A state employee who was a supervisor for juveniles on probation retired after 34 years with an annual benefit of about $25,000. A municipal wastewater treatment plant superintendent, with 24 years' service, estimated the earned benefit at $2,300 to $2,400 monthly.

A state social services worker in a supervisory role retired in 1995 after 15 years and draws a monthly KPERS benefit of $524. That is equal to the monthly benefit for a county-level commercial appraiser who retired at 65, vested at nine years with KPERS.

'Insult' http://hutchnews.com/Todaystop/kpers-and-leg-2--2

tomatogrower 3 years, 6 months ago

The silence of the right wingnuts who usually post on this forum is deafening. No rebuttal to this letter? Are you all investment managers making a profit from 401's?

Ron Holzwarth 3 years, 6 months ago

tomatogrower, I have been constantly astounded at how some articles here attract a very large number of comments, but for others I'm the only commenter. I have never been able to figure out a pattern, except that perhaps for some articles a rather large and well rounded knowledge base is required in order to not sound like an idiot.

just_another_bozo_on_this_bus 3 years, 6 months ago

Is that all you got? If all you had to offer was "is not!!!" accompanied by a little name-calling, why did you bother?

just_another_bozo_on_this_bus 3 years, 6 months ago

My bad. I just assumed you didn't have anything worthwhile to say, and didn't read it very carefully.

I was right in assuming that you didn't have anything useful to say. I just guessed wrong in which way you would go with your so-called "logic."

voevoda 3 years, 6 months ago

mustrun80, So your solution to government misconduct is to privatize? As we have already seen, private companies are very willing to undermine retirement accounts, as long as the executives can make huge salaries and exorbitant bonuses. How many private companies have filed for bankruptcy in order to be free to cut wages for ordinary workers and get out of commitments to pay retirement pensions, while retaining outrageously high compensation for the corporate heads who created the mess? At least the people have some direct say over the government: we can vote for or against the legislators. They are required to inform us about what they are doing (open records/open meetings) and they at least keep up a pretense of being willing to listen to us. None of that is true about private businesses.
The letter-writer may be right: the goal of the privatization of state employees' retirement is to provide a huge windfall to private investment companies. Another case of channeling public funds--our tax money--into corporate welfare.

KSManimal 3 years, 6 months ago

Where do you read an argument for more of the same?

thebigspoon 3 years, 6 months ago

Mustrun

So, you agree that the system should not be changed, but, I assume, would like to see a believable system of "legislative accountability" in use in order to safeguard the fund. OK, then, instead of bashing the past system, why not agree that the KPERS system, when not being robbed blind, is good, and push for the accountability that we should expect from our legislature. There are so many billions of dollars at stake here that both Rs and Ds need to pulll together to let our legislators know that they can't "rob Peter to pay Paul", but that Peter and Paul need to work out their own problems without making the contributing worker the scapegoat.

George Lippencott 3 years, 6 months ago

There is a whole aspect to this discussion that is lacking in this letter. The taxpayers of Kansas will foot a major portion of the unfunded future liability of the KPERS program. Most of those taxpayers do not have a program anywhere as generous as KPERS. In fact those that have a retirement program have a defined contribution plan similar to what is proposed for future government employees in Kansas. Some twenty years or so ago the feds decided to address the unfunded liability for their defined benefit program. They phased it in over time allowing older employees to continue in the existing program while newer employees were offered a defined contribution plan. After twenty tears many if not most of the employees under the old plan have now retired. Nobody was hurt. New employees are under the new program and there certainly does not seem to be a problem in finding new government workers. That is my understanding of what is proposed here in Kansas. New employees will have a defined contribution plan while older employees will be allowed to retire under the old plan. It will cost us more money upfront (feds faced that problem too) as we pay for the older plan (until all participants pass) while being forced to fund the newer plan on an annual basis. I fail to appreciate the dooms day scenario being offered in this letter. The long term costs to the taxpayers will be bounded, currently serving employees will not be hurt and future employees will have a program similar to that found in most private sector employment where there is a retirement program. Sounds like a big win-win! Of course, change can be frightening!

Matthew Herbert 3 years, 6 months ago

When I first started having KPERS contributions taken from my check involuntarily in 2006, I asked my employer and my employer's union representative if I could opt-out. I was given bad looks for even asking such a question and told I wasn't a "team player". When I go to retire many years from now and there is nothing left for me, and all the money I earned and had involuntarily taken away is gone, at least I can say I was a "team player". I just wish "team player" wasn't synonymous with "sucker"

KSManimal 3 years, 6 months ago

There is no "government healthcare" being "thrust on" anyone. Stop watching Fox News.

George Lippencott 3 years, 6 months ago

What the government gives the government can take away

Ron Holzwarth 3 years, 6 months ago

Having been an employee of a company that soaked the Kansas Public Employees Retirement System out of an amazing amount of money, many hundreds of thousands of dollars at least (as well as many other investors), I think that the investments that K.P.E.R.S. makes should be decided by a board of directors that are well educated on accounting, financial, and business matters that were very carefully selected by the employees themselves.

(However, I do wonder if the employees would be able to make wise decisions about whom to elect to be members of the board of directors. It should not be a popularity contest.)

That is, it should be done in a very similar fashion as the board of directors of Berkshire Hathaway and other publicly traded companies that are selected by a vote of the stockholders such as is done by any company that is publicly traded on the N.Y.S.E.

BRK has done very, very well, and I believe that the reason that it has done so is because the BRK-A stockholders (BRK-B carries no voting rights), in their own best interest, have done an excellent job in selecting the board of directors of the company. Of course, Warren Buffett's advice upon whom to elect always carries great weight in the stockholder's decisions.

But, I have to admit that I have my personal prejudice in the matter in that I believe that Warren Buffett has stated many things very well, he makes a lot of sense, and the company that he presides over is noted as being one of the most successful stocks of all time.

For instance, one share in BRK, an investment of approximately $11.50 in 1964, led to the following:

Berkshire's class A shares sold for $108,020.00 as of September 28, 2011, making them the highest-priced shares on the New York Stock Exchange, in part because they have never had a stock split and never paid a dividend, retaining corporate earnings on its balance sheet in a manner that is impermissible for private investors and mutual funds. Shares closed over $100,000 for the first time on October 23, 2006 and closed at an all-time high of $150,000 on December 13, 2007.

But, BRK-A has slipped a lot in the recent financial chaos, and as of today, is trading at only $112,445.00.

So, I wonder who makes the K.P.E.R.S. investment decisions. If I were to be in control of those decisions and known very much at all about the company that I was employed by, I would have never considered investing in it.

The company was a joke, but the only people that were laughing about it were the owners of the company, who made personal fortunes out of the deal.

Ron Holzwarth 3 years, 6 months ago

I really have to wonder why K.P.E.R.S. shows correctly, but the abbreviation for the New York Stock Exchange does not. That makes no sense.

nativeson 3 years, 6 months ago

Mr. Reber is missed the entire issue of KPERS. Defined benefit pension plans are not sustainable. They were a great benefit when the population was younger, but now more and more folks are retiring the the system is unable to support the itself.

A move toward a 401k style plan is essential.

Ron Holzwarth 3 years, 6 months ago

I can't argue at all with the point you just made.

A guaranteed future return on an investment, other than on a rather low yield on a savings account or a Certificate of Deposit, among a few other things, is one of the most notable hallmarks of a Ponzi scheme.

There are very large differences among profits, interest, and a return on an investment. But the distinctions among them are completely lost on many. Among the three, only interest is more or less guaranteed. But even then, some risk is involved, such as inflation, or the disastrous decision to not spread the savings among different banks so as to remain below the $250,000 F.D.I.C. guarantee. In the case of the K.P.E.R.S. investments, a very large number of banks would have to be involved in order to do that, so it might not even be possible. I suppose Treasury Bills, Treasury notes, or Treasury Bonds would be a possibility.

But, the very best one of all would be Treasury Inflation-Protected Securities (TIPS).

But, I do wonder who makes the investment decisions on the funds in the 401Ks. I am sure that there is someone that is reaping very handsome rewards out of the many 401K investments, and it could be any one of many individuals involved.

Damn, I should have majored in Accounting. It wasn't until I started working my way through a college textbook on it that I realized what a simple subject it really is.

Ron Holzwarth 3 years, 6 months ago

English, not so much. I still have a problem with the subject/verb agreement issue. I see my errors now, but they can't be corrected.

jafs 3 years, 6 months ago

They are sustainable in theory, if the contributions, investment returns, and benefits are calculated correctly.

Of course, they're not sustainable at all if the state doesn't contribute it's share, assumes an 8% return on their investments, and structures benefits too generously.

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