Thursday, February 02, 2006

Retirement Fund Accounting Fiasco

Submitted by Anonymous:
______________________________________

I would like to point out some important questions and issues regarding the computations that UC is proposing for separating out LANL retirement from the current UC fund.

My first point is related to how UC is computing the amount to go into the LANL retirement pot. In the field of accounting there is often more than one way to compute things -- but they have to be applied consistently -- something which UC is not doing.

Currently, with regards to retirement benefits, all workers at UC, including LANL and LLNL, are considered equivalent. If it were not for the future separation LANL from UC, all employees would have contributed based on the same UC-wide formula. The inconsistency arises in that UC is now proposing to divide the retirement pot using actuarial computations for the LANL population and not the UC-wide population. This means that the UC pot will be over-funded while the LANL pot is underfunded.

Of course, such a situation is more advantageous to UC's employees, in particular the UC management. This would appear to me like a big conflict of interest. Can a majority of employees of an organization be allowed to change the rules in midstream against a minority to further their financial gain?

I don't see how situation where the LANL retirement fund will start off with being approximately 10% underfunded compared to staying with UC meets the requirement of being "substantial equivalent".

My second point is that being initially underfunded does not meet the requirement of "substantially equivalent" in the RFP. LANL employees will have to make higher contributions in the future to keep the fund solvent than they would under the UC system. We do not know at this stage whether LANS will discontinue defined benefits to new employees. If they do discontinue, the situation will become worse for current employees. An actuarial study should be done to make sure that the above factors are included in determining what is "substantially equivalent" in the RFP. LANL employees will have to make higher contributions in the future to keep the fund solvent than they would under the UC system.

We do not know at this stage whether LANS will discontinue defined benefits to new employees. If they do discontinue, the situation will become worse for current employees.

An actuarial study should be done to make sure that the above factors are included in determining what is "substantially equivalent".

Comments:
Rather than objecting to the *details of midstream changes*, however objectionable they may be, our opposition should be directed at any midstream change at all, which IMHO is nothing more than illegal ex post facto manipulation. I think that debating the actuarial inconsistencies is tantamount to conceding the principal legal basis for our position.
 
We agree with Due Process. The actuarial details are some of the trees in the forest. We must keep our eye on the forest, which is the immoral, unethical, and hopefully illegal separation of LANL retirees’ (and others) funds from the UC pension fund.

Lee and Monica Brown
 
I have tried to faces on the people affected by the UCRP-LANL pension plan, and others have argued that those trying to effect this change do not care about the affected people. I have begun to believe that they are that uncaring and that they are also dishonest enough to manipulate data to make it look better than it is.

Remember - lies, damned lies, and statistics.
 
I think there are some problems with the logic of this post. I don't disagree that there may be an actuarial problem, but the separation that UC is talking about results in UCRP-LANL having no active employees after the LANS retirement plan is set up. All active employees will be moved to the new LANS plan. I'm not sure that the term "substantially equivalent" in the RFP has anything to do with the UCRP-LANL split as I understand it. The issue is whether the UCRP-LANL plan with only inactive and retired members after June 1 will be solvent in the long term with NO future employee contributions. This split should not be allowed to occur for precisely this reason. It makes the LANL component unequal to other UCRP members in the future if not now. Thus the split should not be allowed to occur because of this inequality. This is a little different than what this post is saying but has the same conclusion.
 
The real question on the LANL pensions is "who is responsible in the event that the fund runs out of money."

Who is the guarantor of our pensions?

Is it the DOE?
Is it the state of California?
 
The real answer is our children. Scary, no?
 
If one is smart they will be telling their children that there will be no form of retirement as we know it. They must not be dependent on any firm or form of retirement. They must make their own nest-egg starting at age 18, until it time to pull the plug. basically we are going back to the 1930's when non one retired at all. You will simply work until the day you are dead. Lifes easy that was. You have no expectations and no dreams. You just simply accept the fact that without a job you are homeless and that's the way it is. I do not believe that we can turn the clock back for two reasons. One is that a union will do us no good because corporate America continues to hire foreign nationals and illegals to do our jobs for 50% less. Therefore you have no bargaining power what so ever. So there we go. Be very glad that you have what you have. Now all you have to do is figure out how you are going to hold on to it. Things will never be the same and if you think a democrat is going to resolve the issue, forget it. All they will bring is more taxes in order to support the old. Typical socials agenda's to the max. That my friends is not the answer, unless you want to be Canada. We have only seen the beginning of the end my friends. It can only get worse from here, unless society accepts the facts that I have stated above, " You will simply work until the day you die absolving all hope and dreams of anything else". That's it in the nut shell. Aren't you glad you had children? Corporate America has finally made us all "equal", Yeap, "equally poor and a third world nation". Just remember, "It's all good".
 
b-ohica,

I feel your disappointment and pain, but I'm not as pessimistic about my children's future. I do believe their retirement will require, above all else, proactive ownership and management of their financial affairs. What we are hearing Big Brother say is, "Next time, no more Mr. Nice Guy." And Uncle Sam may not be able to help much, even if he would like to. The hardest part, IMHO, will be to accept the requisite mindset. The rest is just a matter of familiarization with the mechanics of long term investing, and discipline.
 
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