Michael McDaniel Oct 2008
Girard Miller documents the deepening crisis with tax payer funded defined benefit pension plans. What do horrible real estate, stock, corporate bond,and commodity markets mean for taxpayer funded defined benefit pension plans?
"Here's the ugly aftershock math: The average public pension plan was roughly 85 percent funded before this bear market in stocks got underway last October. Since then, equity market indexes have declined almost 35 percent on average through Monday's 900-point Dow rally. Stocks and other related forms of equity represented over 60 percent of most larger plans' asset allocations, so if the other asset classes offset each other (bond gains offsetting recent commodity declines, for example), the average decline in total investment value is probably 20 to 25 percent of the overall portfolio. In addition, the major public pension funds had assumed that investment returns would average 8 percent rather than actually losing money, so the actuarial shortfall is probably closer to 28 to 33 percent of the investment portfolio. Given that plans were 85 percent funded, this represents a roughly 25 percent decline in the average plan's funding ratio to a new level around 65 percent, marked to market."
Who can save these mis-managed "dinosaur plans?" You guessed it, Mr. and Mrs. tax payer.