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Does this bother anyone else that the first public pension files for bankrupcy?

Headline in Investment News. In an apparent first, a public pension plan files for bankruptcy Northern Mariana Islands plan in deep trench, with $268M in assets, $911M in liabilities

Yes we have seen some corporate plans crash like airlines- Eastern, Delta and others.

This is a public pension. Feels like a shot has been fired over the bow of the ship.

Apr 25, 2012 by Scott from Maitland, FL in  |  Flag
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Hi Scott! Since you read Investment News, it sounds like you're likely aware of some of the factors that contributed to the problems many pension funds are facing, public and private. Those who under funded plans based on the feeling that high-return markets would continue forever maybe never took a course on how cash-flows affect investment returns in down markets. Some basic stress-testing may have been of some value, ya' think?

2 Comments   |  Flag   |  Apr 25, 2012 from Moorpark, CA
Scott Goodwin Thomas

Thanks Jim. Most actuaries I talk with say most corporate plans are maybe a little underfunded, however they say most governmental plans are way off. Here was the quote from Investment News "The public defined-benefit plan is in a big hole. At the moment, it's only 38.8% funded, thanks to low investment returns and a benefit structure that's been increased without raises in funding, according to the bankruptcy filing in the U.S. District Court for the Northern Mariana Islands, a U.S. commonwealth consisting of three major islands in the Western Pacific."

Flag |  Apr 25, 2012 near Maitland, FL
James Marion Lorenzen

Yup! The difference with govenment plans is that there's government involvement - and there's always some politician looking out for reelection. If they keep increasing the benefit liability while underfunding it using rosey projections, that's gotta be a recipe for something, doesn't it?

Flag |  Apr 25, 2012 near Moorpark, CA

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