Why we need to dissolve GERS and move on
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At what point do you stop throwing money at a bottomless liability?
GERS is a lot of hungry elephants in the room no one wants to acknowledge. Sadly, I know real people that the very suggestions I am outlining here will potentially be affected negatively either way it goes as a total liquidation or a slow diminishing cash flow death.
Let me be clear. GERS pensioners did nothing wrong here.
Previous elected officials, department heads and agency leaders robbed them of their future pensions, in my opinion.
How? By willfully and with full knowledge of their actions choosing not to remit contributions or voting not to pay in their part as agreed. Not one person in this collective conspiracy have I seen held accountable for their deliberate withholding of funding that will financially devastate so many over time.
Here are six reasons that 2014 is the time to sell off assets and disperse all proceeds to pre and post retirees participating in GERS.
1. Wishful thinking: GERS will always be there paying out earned pensions.
Reality: GERS is essentially already bankrupt. It is projected to be empty in less than 10 years.
2. Wishful thinking: We can have current employees and the government pay in a lot more starting now.
Reality: With a reported current one worker for one retiree coupled with future staff reductions, which appear likely, this ratio will be less than one worker to one retiree in a growing pension eligible aging baby boom population.
3. Wishful thinking: The federal government will step in and bail us out.
Reality: GERS is not covered by any pension insurance plan I can find. The federal government does not go around replacing lost pensions because company owners or leaders did not fund them correctly.
4. Wishful thinking: I will have this money every month for my lifetime.
Reality: When the checks stop coming, you have no income from GERS.
5. Wishful thinking: We can catch up the shortfalls "in time."
Reality: We have no foreseeable budget means to put in to GERS the estimated $180 million dollars - each and every year - for the next 10 years to make it solvent based on the reported $1.8 billion dollar shortfall numbers. The current contributions are not paid on a timely basis either.
6. Wishful thinking: Someone must be managing the assets.
Reality: A lot of people and firms are supposed to be doing this. There are not enough assets to manage that will earn enough to overcome the fact it is grossly under funded.
I suggest that all the assets be liquidated and sold immediately, converting them into cash. I know that is drastic. The situation required drastic action. Using qualified professionals, figure out how to get it accomplished.
Pick a calculation date to be used for all participants. Use a preset formula that gives points for years of service, less any years that have already been paid out in pension income streams. Have points based on a participant's age. Use the last year of salary as a formula component. Come up with an easy to follow point system that applies to everyone in the system. Once you know the total number of points from the calculation date, you divide the assets by the points and this is what each point is worth, like it or not, to calculate your share of the proceeds that are left after all the years of accumulated mismanagement.
Any outstanding GERS loans would come off the top of any payout and would be deemed taxable distributions if they are not repaid before the first distribution is sent. If the deduction of the loan causes a negative payout number, then the participant will need to pay GERS back the difference.
Financially painful? Absolutely. In these cases the participant had use of the money for all that time so they did indeed receive that value, in full, in times past.
All participants with a positive calculation will be paid out a lump sum so they at least have use of what is left of their money. It may need to be paid in a couple of disbursements over the course of no more than one year as assets are turned into cash.
There is no need to drag this process out any more than necessary. Not everyone will like the amount they get. Be grateful to receive more than the zero that is coming sooner than you may think.
The recipient could choose to take the lump sum and pay the taxes all at once or roll it into an IRA and defer the taxes to a later time of withdrawal. The recipient could invest the funds to draw income or take lump sums as needed or annuitize it with an insurer if a level lifetime amount was desired. Remaining balances at death could go to named beneficiaries listed as heirs or a favorite charity. Recipients could also blow it all at once if they choose to.
The GERS accounting office would be closed and the funds needed to manage it no longer would be a budget issue.
A new payroll deduct savings plan could be instituted for any employee who wanted to voluntarily participate in saving for their future while controlling the destiny of their own funds.
Wishful thinking: We don't need to change status quo regarding GERS.
Reality: We have no choice now from past abuses but to dissolve GERS and move on.
- Amy Rose Herrick, St. Croix