Thursday, September 1, 2011

US Military Pensions In Doubt?

A short and sweet comment. This morning I had an interesting discussion with someone on longevity risk and we talked about how pensions are quickly becoming the "crime of the century," overshadowing the Madoff Ponzi scheme. It seems everyone is making money -- Wall Street wolves, pension consultants, banks ripping off pensions, even senior pension fund managers -- except for pensioners. They're getting screwed left, right and center.

Well pensioners are fed up and now unions are fighting back. Bloomberg reports that New Jersey public employee unions are now seeking to block a law reducing pension and health benefits and are suing Governor Chris Christie and other state officials:
The legislation is a “classic bait and switch for current retirees,” Keshishian said in the statement. “They’ve already retired, and are living on a fixed income. Now they’re being told that the state is reneging on its promise.”
The legislation also raises the minimum retirement age to 65 from 62 and freezes annual cost-of-living adjustments. The overhaul is aimed at restoring the state pension system to 80 percent funding in 30 years, up from the current 62 percent.
Workers will pay from 3 percent to 35 percent of their health-insurance premiums based on income. Christie’s initial proposal sought to force all workers to pay 30 percent of the premium cost by 2014.
The state and other officials in addition to Christie are named as defendants in the lawsuit.
I wish unions good luck with that lawsuit but the truth is they have a point, pension promises are being reneged and retirees are waking up to a nightmare that their pension benefits might be cut.

But the story that really caught my attention on Thursday is how US military pensions might be overhauled (see embedded video below). My grandfather fought with the US army in WWI, and long after he died, my grandmother in Crete kept receiving a pension from the US army until she passed away. She was always grateful to the US government for honoring his service and paying her a pension, allowing her to be independent and live her later years in dignity.

But we no longer live in a world of honor. We live in a sick world where disabled vets and other persons with disabilities are facing a real scandal in unemployment and now they risk seeing cuts in their pensions. It really infuriates me watching Wall Street wolves make record bonuses while soldiers and the working class are struggling to make ends meet. Americans should be ashamed of this latest assault on military pensions. If they can find billions to spend on upgrading weapons, surely they can spare a fraction of that to honor military pensions. And the Vietnam vet in the video below is absolutely right: "...defined (benefit) pensions is what those guys need; 401Ks are tied to the stock market and you saw what happened to the stock market."

Update: CBS News reports, Military pension overhaul proposal delayed (HT: Pensiontsunami.com):
An update to a story CBS News broke earlier this month: a radical plan being considered by the Pentagon to overhaul military pensions and create a corporate-style 401k plan.
Now the Defense Business Board (DBB), the advisory board creating the proposal, says it will not be finalized for several weeks. A spokesman for the DBB advisors told CBS News that no changes would be made to the proposal, despite the delay.
"Nothing's going to change, we're not going to revise anything," a DBB spokesman said. The spokesman said the Board needs more time than it thought to have its report printed in a final form to present to Pentagon officials.