State’s Pension Fix- Cash in on Untimely Deaths!



Before watching Michael Moore’s Capitalism:  A Love Story, I could not have imagined it would be legal for a company to take out a life insurance policy on their employees.  Even though you and I can not take out insurance on each other, companies, who the Supreme Court has decided are  people, can do just that.  If the employee then dies an untimely death, the company cashes in, and no they do not share it with the family.  Well guess what?  That is one of the new options for fixing Michigan’s pension system! 

On February 1st, a work group of eight Republican senators and representatives made recommendations on how to reform the Michigan School Employees Retirement System (MPSERS).   According to the report, the reforms are necessary because the system is 45 billion dollars in the hole.  This is known as an unfunded liability.  The reason that the system is in the hole is because the invested money has not “achieved the assumed rate of return” over the past 10 years.  Basically, the stock market stinks, and the money in the pension program is not growing fast enough.  The work group provides a bunch of options to fix the problem, none of which include raising revenue.  I guess this is when government should not be run like a business.  Anyhow, the first option they give is moving employees over to a defined contribution plan (401K) like most people are shackled with.   So while the stock market created the problem, their answer is to make their employees, instead of the state, be the whipping boys of a rigged market.  If you don’t believe the stock market is rigged, look up micro trading, read the book The Big Short, or read this blog post from the Rolling Stone’s Matt Taibbi.  Almost all the options the work group came up with shift the burden onto their employees.  One option is even more sinister though.  The work group suggests that the state “purchase life insurance on employees and and if proceeds outweigh the cost of insurance, use the potential proceeds to help pay off the unfunded liability.”  So the state is looking to make a bet that some of their employees will die an early and untimely death.  I guess this is what reinvention looks like when you are trying to run government like a Walmart. 

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