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Raiding Pensions to Pay for Healthcare
The New York Times' latest piece in their series on pension funds highlights the dangerous practice of using pension fund money to pay for retiree healthcare. Apparently, the booming stock returns of the late 90's provided governments enough "excess" in pension funds to start paying retiree health costs from the same pool of money. This worked well until the market crash and skyrocketing health care costs combined to jeopardize the financial health of these pensions.
The Chicago Transit Authority's pension fund represents one of the most dire examples: "A recent study showed that the plan, which covers nearly 20,000 people, could run out of money for retiree health care in early 2007 — and that the money to pay pensions could be gone by 2012."Pension managers are likely to try to solve this problem by putting more of their funds' assets in hedge funds. Let's hope they pick carefully and avoid the next Amaranth...
Other recent NYT articles on pensions
Pension Funds Face Billions in Shortages
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