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Entries in Pension (2)

Thursday
Jun232011

Postal Workers Alarmed Over Retirement Cuts

Siri Stafford/Lifesize/Thinkstock(WASHINGTON) -- A U.S. Postal Service decision to suspend employer contributions to a postal worker retirement account is causing alarm among its employees.

"It was sheer chaos on the work floor when everybody found out about it this morning," said Clarice Torrence, who has worked for the Postal Service for 32 years.  "How long is this going to go on?  Are they going to play catch-up?"

The Postal Service announced Wednesday it will suspend the $115 payment it made every other week to the Office of Personnel Management's retirement system beginning June 24.  Cutting the payments to the defined benefits of the Federal Employees Retirement System (FERS) is expected to save the Postal Service approximately $800 million this fiscal year.

The FERS account had about a $6.9 billion surplus, according to the Postal Service.

Torrence, a 60-year-old postal worker in New York City, said though her employer has said current or retired employees will not be affected, she is concerned.  While her children have grown and left the nest, most of her co-workers still need to support their families and children in college.

While the Postal Service has said this is a temporary measure, the president of the American Postal Workers Union said he is not assured that employees will not be negatively affected.

"We will take every step necessary to ensure that retirement benefits are protected.  We are currently evaluating the best course of action," union president Cliff Guffey said in a statement.

Dave Partenheimer, a spokesman for the Postal Service, said that this is "not a long-term solution" and Congress must pursue legislation allowing for major changes, including a five-day delivery week.

Moving to a shorter delivery week could save the Postal Service $3.1 billion each year, Partenheimer said.

Over the past four fiscal years, the Postal Service has reduced by 110,000 career positions and now has a total of 563,000 career employees, according to Partenheimer. That saved $12 billion in costs.

The Postal Service has also closed some post offices, while expanding retail outlets such as those in drug stores and office supply stores.

Copyright 2011 ABC News Radio

Monday
Jan242011

Bankrupt States Could Trim Pensions

Photo Courtesy - Getty Images(VALLEJO, Calif.) -- Under existing law, a state cannot go bankrupt.  That's not because the action is forbidden.  Not the U.S. Constitution nor any other piece of paper says a state cannot.  The bankruptcy code simply does not address the possibility.

Now lawyers, politicians and other ingenious folks are looking for a way around that problem -- a fact that should come as no surprise, given the perilous financial health of California, Illinois and other states encumbered with crushing debts.  The 50 states have spent collectively, in the past two years, half a trillion more dollars than they took in as taxes.  Their pension funds, by some estimates, are underfunded by another trillion.

Arizona has sold off its state capitol.  The investment group that now owns the Supreme Court building and the chambers of the house and senate is graciously leasing those buildings back to the people.

California, facing a $19 billion shortfall, must now spend more on pensions for its public employees than it spends on the University of California system.  U.C., to avoid having to make deeper cuts than it has already made, hiked tuitions 32 percent in November 2008, igniting student protests.  The Golden State's credit rating has sunk almost to junk status.

What a tonic, then, if these states could toss off their obligations, as one might a heavy coat.  By declaring bankruptcy, states could start life anew and go skipping down the street.  Orange County, California, did it.  Vallejo, California, did it.  Harrisburg, Pennsylvania, is said to be thinking about doing it.  They used Chapter 9 of the bankruptcy code, which applies to municipalities.

Law professor David Skeel of the University of Pennsylvania said he sees no reason why Chapter 9 could not be tweaked to apply to states.  Doing so would be easy, he said: "You'd just have to change Chapter 9's definition of permitted entrants.  Basically, you'd change the entrance requirements."

That change, of course, would require legislative action -- a process "always uncertain."  An alternative would be to use Chapter 8, "which isn't currently taken," and use it to create something entirely fresh and new, exclusively for states, he said.

If and when states do grope their way to bankruptcy, the consequences would be most dramatic for state pensioners and for holders of state bonds.

Once a state has entered bankruptcy, Skeel said there could be sales of assets -- something akin to a corporate liquidation sale.  Creditors, including bond holders and unions, would be compelled to make concessions.  With court approval, a state could rewrite its union contracts.  Vallejo, California, has done just that.

It's possible, too, though legally less clear, that a state might re-negotiate its existing pension benefits -- a prospect that pensioners, understandably, find abhorrent.

Copyright 2011 ABC News Radio







ABC News Radio