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State and local pension plans are underfunded, in many cases dramatically. Enough so that, in the next decade, many states will have to cut benefits or services, raise taxes, or receive some form of a bailout. Matt Taibbi’s latest in Rolling Stone blames the situation on a convenient villain — Wall Street.
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Defined Benefit (DB) plans
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Public Pensions Are Underfunded
States dont contribute enough to public pension plans.
Caused by legal constraints that keep them from contributing the full amount.
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One Third of State Pension Plans Can Only Pay 80% of What They O
Only one-third of state plans claimed they have enough assets to pay 80 percent of their promises.
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Public workers are promised that a fraction of their highest salary will be paid to them upon retirement and for the remainder of their lives.
By contrast, most people in the private sector finance their retirement with an account they manage themselves.