[FoRK] Chart of the Day...

J. Andrew Rogers andrew at ceruleansystems.com
Tue Jun 8 23:48:34 PDT 2010


On Jun 8, 2010, at 8:57 PM, Ken Ganshirt @ Yahoo wrote:
> The pension fund (defined-benefit) I'm part of is funded by both employee and employer contributions. Not some funny promises but actual monetary contributions by both parties. Actuaries figure out, using whatever voodoo computations they use, how much needs to be contributed in order for the fund to be self-sustaining until the last eligible member dies. That's how the total contributions are established in any year. 


So..."fully funded" is based on the idea that you know some fellows with "voodoo computation" models that can precisely predict the distant future using a bucket of rather thin assumptions. What could possibly go wrong? 

I would think that there would be some cognitive dissonance considering your oft-stated objection to "speculators" that engage in far less speculation than what you are proposing. In reality, most pension funds only stay nominally solvent via Ponzi schemes or augmentation with taxpayer dollars. This is not a surprising result, it requires some indefensible assumptions for the math to even have a prayer of working out in the vast majority of cases.

It is plausible to have a defined-benefit plan that is not a scam, but it is so expensive to implement one that you rarely see it in the real world.






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