Companies controlled by PE firms use bankruptcy to shed pension obligations • Hacker News Board

Re: Companies controlled by PE firms use bankruptcy to shed pension obligations

#71

Post by eropple » Mon, Dec 31, 2018, 5:54 PM UTC

theandrewbailey wrote: post #63

pm24601 wrote: post #52

Earlier quoted context omitted.

> It should be a separate company that exists solely for the purpose of paying the benefits at retirement. Yes. S.O.C.I.A.L. S.E.C.U.R.I.T.Y. Look how well Americans will fight for and defend Social security benefits. We really should just force an expansion of Social Security like most civilized countries.

1. "S.O.C.I.A.L. S.E.C.U.R.I.T.Y." isn't a separate company. It's a US government program. 2. Social Security isn't doing much better. It will be broke in ~15 years, paying out exactly as much as it takes in. https://www.cnn.com/2018/06/05/politics/social-security-bene...

#1 - I think he knows that. Don't you?

#2 - Social Security needs work, but it's not going to be "broke". It can't be "broke". It's a required expense by law. It will be funded from other sources. And, not all that long after it hits that break-even point, we'll start seeing the demographic adjustment--i.e., the Baby Boomers dying off in quantity--begin to adjust that back towards the other direction.

As usual, when one finds oneself repeating things said by people who want to destroy institutions, one should look deeper into them for truth.

Re: Companies controlled by PE firms use bankruptcy to shed pension obligations

#72

Post by cityzen » Mon, Dec 31, 2018, 5:54 PM UTC

stevenwoo wrote: post #67

cityzen wrote: post #30

Just another illustration that the "America" you learned about is not the America™ we live in. As a parent I find it more and more difficult to try to teach my kids the reality of America without sounding like a conspiracy theory nut job. I do not want my kids growing up with blindly trusting that any institution (schools, corporations, government, etc.) have their best interests in mind. In a way I feel like selling…

The two most depressing books I have read recently are A People's History of the United States and Lies My Teacher Told Me and I wish I had read them when I was a child but YMMV.

thanks, I will put these on my list!

Re: Companies controlled by PE firms use bankruptcy to shed pension obligations

#73

Post by moltar » Mon, Dec 31, 2018, 5:56 PM UTC

stevenwoo wrote: post #65

moltar wrote: post #18

That’s why nobody shall rely on pension plan. Ya a scam. Just take the money and invest on your own terms.

Off the top of my head, what is the difference between these pensions and a.) public employee pensions like state/county/municipal employees or police/fireman pensions at full pay of last year of service b.) military retirement at half pay after 20 years of service? Those seem like a really good deal for the retiree ( that also look unsustainable in some areas for a.) at least)

I don’t know exactly how it works in all areas to be honest. But if there’s a pension deduction, and one is able to withhold it and invest on their own, I think it should be the default choice.

Military is a whole different story. They need to incentivize people somehow and it ain’t going to be ping pong tables and beer fridge.

Re: Companies controlled by PE firms use bankruptcy to shed pension obligations

#74

Post by eropple » Mon, Dec 31, 2018, 5:56 PM UTC

ChrisLomont wrote: post #39

olliej wrote: post #4

Still amazing to me that owners and equity firms get money before pension funds. The literal theft - a pension is part of your income, and being able to sell off a company without paying off pension debts literally means retroactively stealing wages from workers. Remember that banks, etc all have insurance on their debt, apparently that doesn’t matter - companies are simply stealing from money that is not theirs, and…

>a pension is part of your income It's usually part of a future worker's income. That is how they are underfunded. If the employee paid into a fund then these problems would happen less. The problem is it's a promise to pay future money to today workers in the future, and when future money does not pan out, there is no reason one debt holder (pensioner) should have absolute precedence over another (lender, who someti…

> there is no reason one debt holder (pensioner) should have absolute precedence over another (lender, who sometimes lends enough to get the company past bad times).

Yes, there is a reason: people matter more than companies. Lenders can price that risk in. If that makes lenders "stay away"? Then the executive teams that get their golden parachutes get screwed too, and I'm frankly pretty okay with that.

And let's be real: pensions are virtually never (you might find one large example; you won't find ten) destroyed to save a business. They're destroyed to make their assets worth more in a flip. We need not be dishonest in this discussion.

Re: Companies controlled by PE firms use bankruptcy to shed pension obligations

#75

Post by sillypuddy » Mon, Dec 31, 2018, 5:58 PM UTC

tome wrote: post #45

rileymat2 wrote: post #34

Earlier quoted context omitted.

No. The real risk is not in the present, the real risk is outliving your retirement savings. You can predict how long a population will live, you cannot predict whether a single person will need 5 or 40 years of retirement savings. Collective defined benefit plans mitigate this risk and are the only thing that really make sense. They also end up cheaper because instead of each person needing to save the amount needed…

In the UK you can buy an annuity with the proceeds of your pension fund at retirement. Is the same not true of a 401(k) in the US?

Yes, they're available. They're are also used to compare how much a fixed pension would cost in present dollars.

Re: Companies controlled by PE firms use bankruptcy to shed pension obligations

#76

Post by ddingus » Mon, Dec 31, 2018, 6:01 PM UTC

pm24601 wrote: post #50

lefstathiou wrote: post #27

To me the bigger culprit is the unfunded pension as a tool of retirement planning. Unfunded pensions are failing or on the brink of failing almost everywhere they are tried. It's a huge scandal and deeply immoral IMO. I read the other day that NYC alone has over $100bn in unfunded pension liabilities. There is simply no budget to pay that down. Unfunded pensions taking down numerous economies in Europe. There is a co…

Fully funded pension plans are assets that a PE firm uses as collateral for the loan to do a hostile takeover of the firm.

Those should not be allowed as collateral.

Re: Companies controlled by PE firms use bankruptcy to shed pension obligations

#77

Post by RestlessMind » Mon, Dec 31, 2018, 6:07 PM UTC

fatbird wrote: post #38

lefstathiou wrote: post #27

To me the bigger culprit is the unfunded pension as a tool of retirement planning. Unfunded pensions are failing or on the brink of failing almost everywhere they are tried. It's a huge scandal and deeply immoral IMO. I read the other day that NYC alone has over $100bn in unfunded pension liabilities. There is simply no budget to pay that down. Unfunded pensions taking down numerous economies in Europe. There is a co…

Why isn't it a solution to simply require pension funds to be fully funded, perhaps under a separate legal entity that's protected from raiding by PE firms? Why is it that the "unfunded pension" crisis always makes people question the second term in the phrase instead of the first?

Why? I can think of multiple reasons.

Some essentially boil down to human nature - short-term thinking, preferring politicians who make rosier promises ("assume high rate of return on pension investments and lower the taxes") against honest politicians ("increase taxes since current levels are unfunded"), etc

Some are about societal changes no one can honestly predict - avg lifespans increasing (avg life expectancy in the US was 61 when social security was enacted), pensions were promised in 70's / 80's before globalization wave hit forcing Western companies to either die or compete with leaner overseas firms, internet and e-commerce bringing b&m retail apocalypse, etc.

To find out true cost of funding a pension, try buying an annuity for the similar level of monetary coverage where seller has to do more due diligence. And that will show you the true cost, and my guess is that there is very little appetite to bear that cost in our society.

Re: Companies controlled by PE firms use bankruptcy to shed pension obligations

#78

Post by ddingus » Mon, Dec 31, 2018, 6:09 PM UTC

michaelt wrote: post #16

late2part wrote: post #12

Earlier quoted context omitted.

We the people of the United States of America elect the people that write the laws. If we don't like what they're doing, vote them out and vote in people that will write the laws we want.

To do that should I vote Democrat, Republican or Independent?

Vote Progressive, small money politics. 7 of those people got elected this last cycle. There will be a small caucus in the house. It's a start.

Re: Companies controlled by PE firms use bankruptcy to shed pension obligations

#79

Post by pessimizer » Mon, Dec 31, 2018, 6:10 PM UTC

fatbird wrote: post #38

lefstathiou wrote: post #27

To me the bigger culprit is the unfunded pension as a tool of retirement planning. Unfunded pensions are failing or on the brink of failing almost everywhere they are tried. It's a huge scandal and deeply immoral IMO. I read the other day that NYC alone has over $100bn in unfunded pension liabilities. There is simply no budget to pay that down. Unfunded pensions taking down numerous economies in Europe. There is a co…

Why isn't it a solution to simply require pension funds to be fully funded, perhaps under a separate legal entity that's protected from raiding by PE firms? Why is it that the "unfunded pension" crisis always makes people question the second term in the phrase instead of the first?

Because pensions tend to be things negotiated (usually with unions) in return for generally lower than prevailing wages, immediate pay cuts, or cuts in wage growth. Ultimately, it's exchanging $1.00 for $1.00 interest-bearing IOUs (that rise with inflation) - which is why business offers them. If they actually funded the IOUs, there would be no current benefit at all in deferring worker compensation.

Under a government that allows pension debt to be discharged by bankruptcy, pensions are made to be ducked out on.

Re: Companies controlled by PE firms use bankruptcy to shed pension obligations

#80

Post by mundo » Mon, Dec 31, 2018, 6:14 PM UTC

tome wrote: post #44

fatbird wrote: post #38

Earlier quoted context omitted.

Why isn't it a solution to simply require pension funds to be fully funded, perhaps under a separate legal entity that's protected from raiding by PE firms? Why is it that the "unfunded pension" crisis always makes people question the second term in the phrase instead of the first?

I'd like to know the answer to that. I'm curious how it's legal to call something a "pension" without legal guarantees and professional oversight. Otherwise it's less a "pension" and more a "vague promise".

A pension is a lot like a loan - a promise to pay someone something with your future earnings. The problem is not that people sometimes fail to repay loans when they go broke, it's that they sometimes manage to weasel out of paying them despite not being broke, and then pocket the money they were supposed to use to pay the debt.