We’ve spent a lot of time of late discussing the inevitable public pension crisis that will eventually wreak havoc on global financial markets. And while the scale of the public pension underfunding is unprecedented, with estimates ranging from $3 – $8 trillion, there is another taxpayer-funded retirement benefit that has been promised to union workers over the years that puts pensions to shame…at least on a percentage funded basis.
Other Post-Employment Benefits (OPEB), like pensions, are a stream of future payments that have been promised to retirees primarily to cover healthcare costs. However, unlike pensions, most government entities don’t even bother to accrue assets for this massive stream of future costs resulting in $700 billion of liabilities that most taxpayer likely didn’t even know existed.
As a study from Pew Charitable Trusts points out today, the average OPEB plan in the U.S. today is only 6.7% funded (and that’s if you believe their discount rates…so probably figure about half that amount in reality) and many states around the country are even worse.
It is my sincere desire to provide readers of this site with the best unbiased information available, and a forum where it can be discussed openly, as our Founders intended. But it is not easy nor inexpensive to do so, especially when those who wish to prevent us from making the truth known, attack us without mercy on all fronts on a daily basis. So each time you visit the site, I would ask that you consider the value that you receive and have received from The Burning Platform and the community of which you are a vital part. I can't do it all alone, and I need your help and support to keep it alive. Please consider contributing an amount commensurate to the value that you receive from this site and community, or even by becoming a sustaining supporter through periodic contributions. [Burning Platform LLC - PO Box 1520 Kulpsville, PA 19443] or Paypal
-----------------------------------------------------
To donate via Stripe, click here.
-----------------------------------------------------
Use promo code ILMF2, and save up to 66% on all MyPillow purchases. (The Burning Platform benefits when you use this promo code.)
States paid a total of $20.8 billion in 2015 for non-pension worker retirement benefits, known as other post-employment benefits (OPEB). Almost all of this money was spent on retiree health care. The aggregate figure for 2015, the most recent year for which complete data are available, represents an increase of $1.2 billion, or 6 percent, over the previous year. The 2015 payments covered the cost of current-year benefits and in some states included funding to address OPEB liabilities. These liabilities—the cost of benefits, in today’s dollars, to be paid in future years—totaled $692 billion in 2015, a 5 percent increase over 2014.
In 2015, states had $46 billion in assets to meet $692 billion in OPEB liabilities, yielding a funded ratio of 6.7 percent. The total amount of assets was slightly higher than the reported $44 billion in 2014, though the funding ratio did not change. The average state OPEB funded ratio is low because most states pay for retiree health care benefits on a pay-as-you-go basis, appropriating revenue annually to pay retiree health care costs for that year rather than pre-funding liabilities by setting aside assets to cover the state’s share of future retiree health benefit costs.
State OPEB funded ratios vary widely, from less than 1 percent in 19 states to 92 percent in Arizona. As Figure 1 shows, only eight have funded ratios over 30 percent. These states typically follow pre-funding policies spelled out in state law. Many of them also make use of the expertise of staff from the state pension system to invest and manage plan assets.
Looking at the problem on a relative basis, you find that several states have accrued net OPEB liabilities totaling in excess of 10% of the personal income generated within their borders.
Pew compared states 2015 OPEB liabilities with 2015 state personal income to show these liabilities in relation to the potential resources that states could draw on to cover the liabilities. The major ratings agencies and other financial research organizations commonly use personal income as a metric to illustrate untapped revenue sources and as an indicator of how flexible states can be in meeting their obligations under changing budget conditions. The research shows significant overall reported OPEB liabilities, but the relative size varies widely. (See Figure 2).
The primary driver for the variation in OPEB liabilities is the difference in how states structure health care benefits for retirees. As a percentage of personal income, the liabilities range from less than 1 percent in 16 states to 16 percent in New Jersey. Alaska, which has the highest ratio of liabilities to personal income at 42 percent, is a clear outlier among the 50 states because of generous benefit levels that can reach up to 90 percent of premiums for some retired workers. States that provide eligible retirees a monthly contribution equal to a flat percentage of the health insurance coverage premium report the largest liabilities—and could face the greatest fiscal challenges because their costs automatically increase as plan premiums do.
Conversely, those states with fixed-dollar premium subsidies provide a smaller benefit and report lower liabilities. Their exposure to health care cost inflation is also lower, because a fixed-dollar subsidy does not rise with the plan premium. Lastly, the states that only provide access to a retiree health plan, with no subsidy, have the lowest liabilities as a percentage of personal income. Although these plans do not make an explicit monthly premium contribution to retirees, many offer retirees a reduced premium through a group rate, which is an implicit subsidy. The Governmental Accounting Standards Board (GASB), the private, independent organization that sets accounting and financial reporting standards for U.S. state and local governments, requires plans to recognize these implicit subsidies in plan financial reporting.
Meanwhile, the cost increases of healthcare premiums seem to massively exceed inflation and/or wage growth year after year.
In contrast, a number of states with higher premium contributions—including California and New Jersey—reported significantly greater liabilities beginning in 2014, reflecting increases in assumed future costs. California’s plan actuary attributed $7.1 billion of the state’s $7.9 billion liability increase to changing demographic assumptions to account for longer retiree life expectancy in that year.New Jersey’s 2014 hike included a 5 percent increase in liabilities caused by changes in its mortality assumptions and a 9 percent jump linked to changes in health care cost assumptions. For states with the largest year-over-year change in OPEB liabilities, changes in assumptions were the largest driver in increasing costs.
But we’re sure it’s OK, it’s not as if there is a massive wave of baby boomers that are about to retire and ask for these benefits to be paid anytime in the near future…
When I first started dealing with the State of Idaho dept that administers Medicaid to Idaho residents on behalf of the fed govt I thought I would eventually write a post about the whole experience. About three days later I discovered that I could write a twenty page post every single day and still never cover the inane bullshit I encounter almost daily. I’m dead serious.
How did my saga get started you might wonder? Well I did what any intelligent, honest, law abiding person who had absolutely no experience with Medicaid would do……….I called them to verify what the laws, rules and regulations were so that I could be fully compliant with “the system” right from the start. That was nine months ago. Big mistake.
I eventually got an attorney involved and he couldn’t get anywhere so he got the Idaho Attorney General involved and it’s STILL a fucking uphill climb even with the AG working on our behalf.
It’s fucking ludicrous. If they had simply done a proper assessment of my mother and her financial situation when I originally asked for it I would have turned over over $22,000 of her assets to the state but nope, they decided that they had some claim on the assets my father left behind when he died and ignored the $22k sitting on the table just waiting for them to take…..and they had every right to take the $22k. So, while they dicked around getting nowhere with my father’s assets (thanks to a simple $1500 living trust he set up……get one) I’ve been spending that $22k on “allowed expenses” and now they won’t see a dime of that $22k.
They will eventually get around to taking or controlling $2000/month of her income but at this rate it will be years before they actually focus on doing their job to make it happen. In the meantime they just blindly keep throwing shit at the wall in the hopes that something will stick. In the interim I’m spending $10k to repair a handicapped equipped Chevy Venture van that only books for $1750.00 on a good day.
I don’t even want to know how fucked up the public pension systems are.
Forgot to add that I had a conversation with a nurse assessor for medicaid this week and I felt my IQ actually drop. She assured she is working for me though! Yay!
The fix is simple and the POWERS THAT BE explained it quite simply : any personal income not yet confiscated is an untapped resource after that the cuts .
The attempt to take everything private citizens have accrued earned or saved over the years of a working life has been explained covertly for several decades . Any time I have ever brought this up the caned response is “THEY” can’t do that ! Yes well you ignorant stiff yes they can and will . There is a line of agencies filled with armed people ready to force you into the street with nothing and every fucking one of them will have their caned excuse : “JUST DOING MY JOB”
In the short run, everything that is visible (as wealth) will be fair game for confiscation.
Ironically, your bank accounts will not be included; the money is already gone (loaned out, never to be repaid once the SHTF) so bank bail-ins are nothing other than an accounting recognition of that ALREADY PRESENT fact.
This process will eventually add impetus to a complete breakdown of consent to the federal government as we know it.
I imagine they’re going to seize your retirement accounts, because it’s not fair you saved up for your retirement and the state-supported unionista who retired at 55 didn’t bother to save anything for later.
Perhaps some day the govt will just send an assessor into your home to catalog your shit to see what you got, then print up his price tag for you to pay. Once you can’t pay, he just takes your shit to cover the debt.
“Sorry, son, those McDonalds Star Wars glasses all belong to Uncle Sam now. Have a nice day!”
Actually, I hear WV does this now. According to a friend, they will drive out to see how many cars and trucks and tractors you have, but apparently people find ways around it, claiming they’re owned by family, or some such thing.
What happens when all these future cash flows that are PROMISED cannot be funded?
Seriously. What?
My take is that what’s coming is the biggest “MONEY SHORTAGE” ever. It should be a monetary deflation far exceeding that of 1930-32. Those who endlessly howl that we’re on the brink of hyperinflation (which is a tsunami of money of rapidly diminishing purchasing power) should have to explain how we can have truckloads of money and no way to pay all those promises.
That view makes no sense at all. And the difference is critical, because trying to avoid the worst of it requires polar-opposite preparations.
The money has no value like the house with a $300k mortgage and a real world value , what people can or are willing to pay or $225k the holder of that $300k mortgage just had a fire hose shoved down his throat but tell you what I have a couple bottles of Jack Daniel’s sealed trade you 50 pounds of fresh killed meat for !
I fear that’s where we are heading !
A move to a Barter Economy would be Full-Out MAD MAX BEYOND THUNDERDOME.
Possible? Very small likelihood. There’s SO MUCH left yet to confiscate. That avenue will be thoroughly traveled before Plan D (the Zombie Apocalypse) becomes more probable.
In the meantime, we live in Plan A (The world as it is right now.)
In time we probably will live a while in Plan B (the Greater Depression.)
Eventually we might see Plan C (that’s Plan B plus the banks fail.)
There’s no pension crisis. They just don’t get any money.
The present is poverty.
The future will only reveal this.
Enjoy the last of our Plenitude while it lasts. The parallels of our times to the Antebellum South cannot be overstated.
Nyet. Romanovs. We live in the last days of the Romanovs. That’s why the restaurant I was in the other day advertized deep-fried oreos. And that’s why you can now hire people to cuddle with you in bed (no sex!) or to warm your bed for you in certain hotels.
It’s a sad state of affairs when you have to hire a pro to do the most that Dutchman’s robot will do. I hope the cuddler for hire is at least big and plump, no need for a bag o’ bones like Coulter.
If you want real love, get a dog. – Pangloss
Hi, Bea!
Iska, correct. At some point the payouts will be adjusted to the available monies. Simple simon.
It depends on the State you live in as to what the resolution will be.
If you live in a commie state the tax payer is getting fucked up the ass.
If you live in a state where people are fleeing to, the government drone is getting fucked.
In places like IL, real estate and business value will be driven into the dirt.
At some point, I expect the property tax bill on my house to be 25%, 50%, even 100% of its market value. This is why I own the minimum amount of property. Anything visible (and unmovable) will be subjected to confiscatory taxation, right up until the political crisis peaks.
We’re ruled by demons. This is what happens when collective insanity meets utter complacency.
I’ve been wondering if it might be smarter to own property through a trust, instead of directly. I see lawyers at gunshows selling gun trusts to try and protect gun owners from confiscation.
Anyone smart on such things?
depends on how bad things get
your trust is only as good as the law enforcement and records behind it and if they want it bad enough the law ceases to matter
property taxes can be raised against the property regardless
IMO, the best defense is to be liquid, mobile if necessary, no debts, and have skills and a circle of friends that have complimentary skills.
When “the law ceases to matter”a environment that is growing daily works both ways,the person with nothing to lose has everything to gain.
Gun trusts are for NFA items, or am I misinformed? The whole point is to make it possible to transfer ownership (to family, etc.) without going through the BATFE again.
No, trusts do not protect against confiscation. Not unless your “trust” is in the Rothschild class.
Based on my conversations with the laywer at the gunshow-I am not an expert:
The gun trust thing started as a way to own NFA weapons and allow you and your designees access to them and, originally, avoid the in-depth background check because you aren’t purchasing them or owning them, just the trust, with you and your designees as the trustees. I believe Barry tightened that loophole last year. I was told the trust can also be used to hold normal weapons.
Any “trust” is only as effective as the rule of law is honored in the observance – that means you must be prepared to pay the lawyer long enough to defend your “ownership” of the particular asset in question in Court while you sell all other assets and move “offshore”.
Gilbert, I can’t speak to gun trusts but my father protected the proceeds of the sale of one home plus the home he lived in and a bunch of other assets through a living trust, then through his will spelled out the creation of a special needs trust that protected the assets further. In all he protected $5ook for about $1500 worth of paperwork. It’s mentioned in my comment at the top of the page. So far, even the feds haven’t gained access to his assets.
As far as guns go I like: The first rule of fight club is that you do not talk about fight club…..if you get my meaning.
barnum,
unless you plan to sell out and move out of illinois soon,why don’t you sell your house to an investor or a trust you control and lease it back for a guaranteed rate plus the annual increase in taxes/insurance?
What can’t be paid won’t be paid. We are going to have a dress rehearsal now in Puerto Rico. For years they have been pretending they can have an American lifestyle with a Third World society. Now the lights are off. The PR government runs the electric utility and both are bankrupt.
Puerto Rico is already defaulting on its existing debt and having to shut down schools, layoff teachers etc. and has been trying to limp along with an obsolete electric power system. Good luck trying to borrow money to rebuild after “Maria”.
The future is India, where preemies died because the hospital was too far in arrears on paying for its Oxygen.
No worries for the people of PR,they will just come to the states,what could possibly go wrong?
most of them already have james-there’s more in the states then there are on the island–
As a kid living in New England remember Polaroid going under and the pensions were just gone,game over.While I viewed this as very unfair as am sure other creditors got monies and am sure golden parachutes were popping up the end result,no pensions,same deal now.
My spouse has worked as a telecom accountant for about the last decade. Interestingly, despite the fact the company wasn’t making money much of that time, they paid incredible bonuses and special freebies to their executives, while not paying bonuses to the employees due to the downturn. They even stopped having Christmas parties for the drones. They did, however, pay to fly in the CEO from his home in Colorado every week and supplied him with a furnished apartment while he was around. He didn’t improve things for the company, though, and he was eventually fired, but don’t worry, he got a 3 year severance package. Someone powerful at the top must have liked him, because a few months later they re-hired him as a consultant. That’s a sweet deal if you can find it!
From what they told me, the bigger the company, the more money they waste.
This company was hemmorhaging cash. For instance, they would pay bills two or even three times. The vendors, of course, didn’t mind being paid 200-300% of their bill, so they were happy to take the extra money. They also told me the senior executives would do anything to rip off the company, claiming such legitimate travel expenses as booze and condoms. Even more surprising, whomever was in charge of authorizing these vouchers would accept them. Of course Mr. Important was working on company time when he was out at XYZ bar drinking and then needed a pack of rubbers to seal the deal!
Anyway, based on their story, I don’t expect many folks will be collecting on their pensions when things go all pear-shaped. I’m thinking of Enron, only much, much more widespread.