pension plans

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How did so many state governments and companies get into the desperate situation of huge shortages of funds to pay pensions?

One part of it goes like this: The managers (corporate in the case of industry and politicians in the case of government) wanted to please their employees. They didn't want to spend the extra money though. So they hit on a bargain of the sort that appeals only to those whose approach to problems includes a willingness to avoid the issue. They promised the employees generous pension plans.

This would work fine if the company required (of themselves and/or their employees) that they put enough money into the retirement fund to pay for those benefits. Then there would be no misleading, no shortfall, no problem.

But, you guessed it, they were (and are) not doing that. That is a good part of why GM got into trouble, and Wisconson, and NJ, and California. (Also Greece, ...)

Why were they (execs and union leaders) willing to do that to themselves, their employees and us? Well, I won't speculate on their motives, but it sure gave them all an easy way out of dealing with their problems.

That gave the employer happy workers and more money immediately in company (or government) coffers. It was short term and carries a price later, but it made it appear that they were doing better than they were.

The employees also got the illusion of having more money immediately too. How? They saw their retirement as being taken care of and reasonably concluded that they didn't need to save as much as they might have. This made them feel that they were doing better than they were and so they spent more than they might have.

The sad part is that the day of reckoning for this kind of hustle is way into the future. When that point arrives you have a different set of managers and union leaders who didn't cause it and so they feel abused. The workers had a contract for (and paid for part of) that pension. If it is cut, then they feel abused.

It is the kind of sad thing that you expect from irresponsible people not organizations that are run by people who are supposed to know better.
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