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I haven’t seen you write about the underfunded pension problems facing the country. Moody’s is guessing they are close to 2 trillion underfunded. Do you have any ideas about how this plays out. With me being completely paranoid and all, 2 trillion is a problem on the scale of the mortgage crisis. If people have pension and benefit cuts, they can’t spend, the economy is hurt. Is this problem going to be on the scale of the financial crisis or no?

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Posted by laskerfan12
Posted on 03/29/2017 8:49 PM
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I know how this “played out” with my mom and her co-workers at Kaiser Steel back in the 1980s.

Irwin Jacobs’ acquisition deals have become much bigger and more lucrative, and they have catapulted Jacobs to the top rank of such celebrated buccaneers as T. Boone Pickens, Carl Icahn, and Saul Steinberg. Last year Jacobs tried to acquire Kaiser Steel, Walt Disney Productions, and Avco Corp., losing them all and making, with his associates, over $90 million. The theme of these exertions seemed to be “how to succeed by failing—or, how to make a fortune through thwarted takeovers.” [This piece was originally published in Fortune on July 8, 1985.]

Carl Icahn bought the company then closed it down and confiscated the funds in the retirement plans.

“Around the mid-1970s, employment at the pipe mill and fabrication shop hit a peacetime peak of 1,700. Kaiser Steel was Napa County’s biggest industrial employer and the biggest private employer from here to the Oregon border.

In 1987, new owners (Icahn et al.), filed for bankruptcy and the Napa plant closed.”

Millions of dollars stolen from the retirement plans more than compensated for his purchase. When he let the employees go, then they had to go to Uncle Sam for help as he bankrupted the company. Retirement plans? No problem!

FYI: The Employee Retirement and Income Security Act, enacted in 1974 and commonly referred to as “ERISA,” seeks to protect and promote employee retirement benefit plans.

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Posted by Dennis
Answered on 03/30/2017 3:40 AM
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    I know how this “played out” with my mom and her co-workers at Kaiser Steel back in the 1980s.

    Irwin Jacobs’ acquisition deals have become much bigger and more lucrative, and they have catapulted Jacobs to the top rank of such celebrated buccaneers as T. Boone Pickens, Carl Icahn, and Saul Steinberg. Last year Jacobs tried to acquire Kaiser Steel, Walt Disney Productions, and Avco Corp., losing them all and making, with his associates, over $90 million. The theme of these exertions seemed to be “how to succeed by failing—or, how to make a fortune through thwarted takeovers.” [This piece was originally published in Fortune on July 8, 1985.]

    Carl Icahn bought the company then closed it down and confiscated the funds in the retirement plans.

    “Around the mid-1970s, employment at the pipe mill and fabrication shop hit a peacetime peak of 1,700. Kaiser Steel was Napa County’s biggest industrial employer and the biggest private employer from here to the Oregon border.

    In 1987, new owners (Icahn et al.), filed for bankruptcy and the Napa plant closed.”

    Millions of dollars stolen from the retirement plans more than compensated for his purchase. When he let the employees go, then they had to go to Uncle Sam for help as he bankrupted the company. Retirement plans? No problem!

    FYI: The Employee Retirement and Income Security Act, enacted in 1974 and commonly referred to as “ERISA,” seeks to protect and promote employee retirement benefit plans.

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    Posted by Dennis
    Answered on 03/30/2017 3:40 AM
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      Sorry, this keeps happening. Can’t you have an edit feature? Sometimes (sic) I misspell stuff.

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      Posted by Dennis
      Answered on 03/30/2017 3:45 AM
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        The Pension Benefit Guaranty Corporation (PBGC) protects the retirement incomes of nearly 40 million American workers in nearly 24,000 private-sector defined benefit pension plans. A defined benefit plan provides a specified monthly benefit at retirement, often based on a combination of salary and years of service. PBGC was created by the Employee Retirement Income Security Act of 1974 to encourage the continuation and maintenance of private-sector defined benefit pension plans, provide timely and uninterrupted payment of pension benefits, and keep pension insurance premiums at a minimum.

        PBGC is not funded by general tax revenues. PBGC collects insurance premiums from employers that sponsor insured pension plans, earns money from investments and receives funds from pension plans it takes over.

        In 2015, PBGC paid for monthly retirement benefits, up to a guaranteed maximum, for nearly 826,000 retirees in 4,800 single-employer and multiemployer pension plans that cannot pay promised benefits. Including those who have not yet retired and participants in multiemployer plans receiving financial assistance, PBGC is responsible for the current and future pensions of about 1.5 million people.

        The maximum pension benefit guaranteed by PBGC is set by law and adjusted yearly. For plans that end in 2016, the maximum guarantee for workers who retire at age 65 is $60,136 yearly ($5,011.36 monthly). The guarantee is lower for those who retire early or when there is a benefit for a survivor. The guarantee is increased for those who retire after age 65.

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        Posted by Dennis
        Answered on 03/30/2017 4:12 AM
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          Posted by Dennis
          Answered on 03/30/2017 4:38 AM
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            As a follow up question, along the lines of systematic risk, is there a way to know how many bank loans have been made against these at-risk pension incomes?

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            Posted by laskerfan12
            Answered on 04/06/2017 4:52 PM
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              It’s a big problem, but it’s not one that will create an immediate shock to the system. In other words, pensions will slowly realize over time that they can meet their expected payments. So they will adjust or simply not pay all the benefits in the future. This will put downward pressure on aggregates incomes, but it won’t shock the system like a financial panic does. This is more of a slow bleed effect.

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              Cullen Roche Posted by Cullen Roche
              Answered on 04/11/2017 12:02 PM
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                $65K is bullshit — only the Top 1% will get that. So the crisis may not shock the system, but it sure shocks the union members:

                https://www.nydailynews.com/new-york/n-y-retirees-struggle-survive-pension-fund-bottoms-article-1.2982399

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                Posted by MachineGhost
                Answered on 04/11/2017 11:04 PM
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                  Congress will have to bail-out the PGC eventually. Gotta love having a central bank and willing bondholders!

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                  Posted by MachineGhost
                  Answered on 04/11/2017 11:04 PM
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                    Dennis, not only Carl Icahn, but other corporate raiders, were responsible for the loss of a lot of good jobs. Everybody talks about automation and outsourcing. These people destroyed preposterous happy towns for their own profit https://www.npr.org/2017/02/06/513713606/glass-house-chronicles-the-sharp-decline-of-an-all-american-factory-town.

                    “After World War II, Forbes devoted almost its entire 30th anniversary issue to Lancaster, Ohio, of all places, and positioned Lancaster as the epitome and the apogee of the all-American town — a sort of perfect balance between large industry, agriculture [and] small businesses, like retail and merchants and so on. … And everything was in this state of almost Utopian equilibrium, and for the most part it really was like that.”

                    Many of the chronically unemployed and underemployed responded as many in the inner cities did, by taking drugs.

                    “In Fairfield County, 58 percent of the kids who are in the system, their parents used opiates. The county next door, Hocking County, it’s over 70 percent. So now you’ve got drugs in the community, which are an escape from all this sort of stuff. …”

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                    Posted by Lucas
                    Answered on 04/15/2017 5:59 PM
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                      It’s another reason why all this rhetoric about immigration policy changing is a load of BS. The solution will be more immigration. From a demographic POV, problems will reverse at ~2025-2030. It’ll be tough sledding for another ~7-12 years cuz the Boomers are at peak retirement basically right now.

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                      Posted by Suvy Boyina
                      Answered on 04/16/2017 2:22 AM
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