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Old 03-24-2016, 02:21 PM
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Default Example of public plan paying less than vested accrued benefit?

Does anyone have an example of a public pension plan terminating and paying, or attempting to pay, less than the vested accrued benefit where the sponsoring entity was not going through bankruptcy?
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Old 03-24-2016, 03:25 PM
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MPC will find links faster than me, but there are some small town pensions that have done that.
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Old 03-24-2016, 03:28 PM
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Pritchard, Alabama
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Old 03-24-2016, 04:12 PM
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Quote:
Originally Posted by Don Quijote View Post
Pritchard, Alabama
While Pritchard stopped paying pension benefits in September 2009, they did file for bankruptcy in October.
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Old 03-24-2016, 04:16 PM
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Some of the plans, like Rhode Island, did not officially file bankruptcy.

But yes, they were financially strained.
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Old 03-24-2016, 04:17 PM
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And states can't file for bankruptcy for a variety of reasons.

By the way, Prichard's bankruptcy was disallowed. Give me a moment.
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Old 03-24-2016, 04:20 PM
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http://www.nytimes.com/2010/12/23/bu...hard.html?_r=0

Quote:
Alabama Town’s Failed Pension Is a Warning

PRICHARD, Ala. — This struggling small city on the outskirts of Mobile was warned for years that if it did nothing, its pension fund would run out of money by 2009. Right on schedule, its fund ran dry.

Then Prichard did something that pension experts say they have never seen before: it stopped sending monthly pension checks to its 150 retired workers, breaking a state law requiring it to pay its promised retirement benefits in full.

....
The situation in Prichard is extremely unusual — the city has sought bankruptcy protection twice — but it proves that the unthinkable can, in fact, sometimes happen. And it stands as a warning to cities like Philadelphia and states like Illinois, whose pension funds are under great strain: if nothing changes, the money eventually does run out, and when that happens, misery and turmoil follow.

.....
The city had already taken the unusual step of reducing pension benefits by 8.5 percent for current retirees, after it declared bankruptcy in 1999, yielding to years of dwindling money, mismanagement and corruption. (A previous mayor was removed from office and found guilty of neglect of duty.) The city paid off its last creditors from the bankruptcy in 2007. But its current mayor, Ronald K. Davis, never complied with an order from the bankruptcy court to begin paying $16.5 million into the pension fund to reduce its shortfall.

A lawyer representing the city, R. Scott Williams, said that the city simply did not have the money. “The reality for Prichard is that if you took money to build the pension up, who’s going to pay the garbage man?” he asked. “Who’s going to pay to run the police department? Who’s going to pay the bill for the street lights? There’s only so much money to go around.”

Workers paid 5.5 percent of their salaries into the pension fund, and the city paid 10.5 percent. But the fund paid out more money than it took in, and by September 2009 there was no longer enough left in the fund to send out the $150,000 worth of monthly checks owed to the retirees. The city stopped paying its pensions. And no one stepped in to enforce the law.

The retirees, who were not unionized, sued. The city tried to block their suit by declaring bankruptcy, but a judge denied the request. The city is appealing. The retirees filed another suit, asking the city to pay at least some of the benefits they are owed. A mediation effort is expected to begin soon. Many retirees say they would accept reduced benefits.

....
Last week several dozen retirees — one using a wheelchair, some with canes — attended the weekly City Council meeting, asking for something before Christmas [2010]. Mary Berg, 61, a former assistant city clerk whose mother was once the city’s zookeeper, read them the names of 11 retirees who had died since the checks stopped coming.


The money simply ran out. The bankruptcy protection was denied.

http://blog.al.com/live/2013/08/old_..._this_tim.html

Quote:
Prichard’s attempts to revolve its financial problems stretch back to 2009 when it first filed for Chapter 9 bankruptcy protection. Shulman dismissed the case in August of the following year on grounds that Alabama cities without debt from municipal bonds cannot file for Chapter 9 bankruptcy.

The city appealed that to U.S. District Court and Judge Kristi DuBose, after seeking an interpretation of Alabama law from the state Supreme Court, overturned the decision and reinstated the bankruptcy.

Martin-Harris suggested the city would be in a better position today if it had adopted her plan – which she called “Operation SOZO” – which would have cut employees’ hours and made other cuts to balance the budget and free up money for pensions.

In the bankruptcy case, the vested employees contend that it should be tossed out again, this time on grounds that state law prohibits city governments from eliminating or reducing pension payments.


Pensions were not paid. The full pensions are still not being paid, afaik.
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Last edited by campbell; 03-24-2016 at 04:24 PM..
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Old 03-24-2016, 05:20 PM
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Quote:
Originally Posted by campbell View Post
Some of the plans, like Rhode Island, did not officially file bankruptcy.

But yes, they were financially strained.
I am having difficulty finding the details of the Rhode Island reforms. There is plenty about how people feel (ick ) about the reform, but all I can seem to find with respect to benefit changes are general comments like limiting, or freezing, future COLAs, transitioning to a hybrid plan and increasing future retirement ages. Here is the best article I have been able to find so far - http://www.governing.com/blogs/bfc/c...e-savings.html

It looks like it was primarily restructuring future benefit accruals and accrued benefits were unchanged. The only thing that wouldn't be allowed under federal law for private plans would be the increase in retirement age, but it looks like the normal retirement age was set at 62, so it was really just a cut-back on early retirement subsidies.

Did I miss something?
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Old 03-24-2016, 05:44 PM
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The main change is that COLAs were taken away until the plan was funded well enough

(note: it's far from their magical 80%)

http://www.providencejournal.com/art...NION/160329674

Quote:
According to a recent survey by the Rhode Island Retired Teachers’ Association, 93 percent of retired teachers feel they have been victimized by Rhode Island's so-called pension reform.

....
Retired teachers and public servants are directly suffering from what is supposed to be the temporary loss of their cost-of-living adjustment (COLA). According to AARP, “COLAs may be even more important to retirees who do not receive Social Security, because without their pension COLA they may have no retirement income that increases with inflation.” These are not raises, but the amount needed for retirees to stay even with the cost of living.
One retired teacher commented: “I made my decision to retire based on the 3 percent COLA. ... I don’t have the funds I thought I could count on.” This betrayal of trust is made worse by the fact that Wall Street fees and bad performance dim the likelihood of a COLA ever coming back.
The Raimondo plan only reinstates COLAs when the funded ratio of the plan gets to 80 percent. Last year, the funding ratio fell from 59 percent to 58 percent because of bad investment returns.
anyway, this passed in 2011, and I found links in the 2011 and 2012 threads:




http://www.nytimes.com/2011/10/23/bu...ml?ref=us&_r=0

Quote:
Retirees have mostly been off-limits, until now. In many instances, laws or legal precedent shield them. In the corporate sphere, they are supposed to bear losses only in bankruptcy. But those rules do not apply to states, which may not declare bankruptcy in any case. If a government homes in on retirees, a lawsuit is sure to follow, and the resolution will take years. But Ms. Raimondo says Rhode Island doesn’t have years. This isn’t a question of politics or law, she says, but of simple math. To get the numbers right, Ms. Raimondo quickly assembled a panel of experts that included academics, mayors and union officials. The goal was to figure out what a public pension should be and what Rhode Island could afford. Inflation protection every year, for people who in some cases retired in their 40s, started coming into focus.

Analysts also took a close look at the projected long-term investment return for the pension system: 8.25 percent. Everything rested on hitting that target, but the state’s actuary said there was less than a 30 percent chance that would happen over the next 20 years. The board voted to lower the assumption to 7.5 percent. (Given the recent run in the financial markets, even that figure may seem optimistic.)

As a result of that change, the state’s pension shortfall instantly rose to $9 billion from $7 billion. The unions said Ms. Raimondo had manufactured a crisis.
http://archive.boston.com/news/educa...pension_costs/

Quote:
RI gov. unveils plan to cut local pension costs

PAWTUCKET, R.I.—Rhode Island Gov. Lincoln Chafee on Thursday announced his long-awaited plan to give cities and towns greater power to reduce benefits to retired municipal workers -- something mayors across the state say is vital to restoring their fiscal health.

Chafee, an independent, also proposed giving leaders in the state's most distressed communities more oversight of education costs, an end to required teacher raises based on seniority, and relief from the requirement that safety monitors ride along on school buses.

The proposal would represent a sequel of sorts to sweeping changes made last year to the state-run pension system covering teachers, state workers and many municipal employees. But Chafee said more work remains because those changes didn't apply to city-run pension plans that face a combined $2 billion unfunded liability.

.....
awmakers voted in November to suspend automatic cost-of-living pension increases for at least five years, adjust retirement ages and give most current employees a new retirement plan that mixes a traditional pension with a 401(k)-like account. The changes were designed to save billions in future years. - See more at: http://archive.boston.com/news/educa....3TaR0R2U.dpuf
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