In Unprecedented Move, Dallas Pension System Suspends Withdrawals

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Zero Hedge: “The fund has about $729 million in liquid assets. It needs to keep about $600 million on hand, meaning the restrictions could have been coming at some point even without the mayor’s actions. The withdrawal requests this week alone would have meant the fund would dip below that level.

Perhaps future ponzi schemes pension systems will take note of Dallas’ current situation prior to guaranteeing 8% returns on retirees’ pension balances.  Who could have ever guessed that a decision like that could have backfired so badly?

Opinion: We did. In our post from May 28, 2015 titled “Kiss your Pension Plan Goodbye” (here) we quoted Martin Armstrong: ”

“The US Supreme Court ruled last week in the unanimous, 8-page decision in Tibble v. Edison holding that employers have a duty to protect workers in their 401(k) plans from mutual funds that are too expensive or perform poorly. That is simply astonishing since there is no constitutional requirement for even government to provide social benefits.”

Your mission, Mr. Phelps, should you decide to accept it: Make pension plans viable again despite the almost $2 trillion in bond losses since the election of Donald J. Trump.

The problem, Mr. Phelps, is that government and municipal pension plans were/are pegged to an 8% return. Since November 8, 2016 most plans are hemorrhaging from bond losses while pension managers are bound to strict asset allocation models as fiduciaries, and can’t sell the bond portion of the portfolios – even if they wanted to.

The plans are heading for disaster.

Making matters worse, many participants of the plans are poor savers since the overly generous incomes are guaranteed for life based on those 8% returns. If the Federal Reserve begins a massive interest rate tightening program, bond pension plan losses will only get worse.

The next Fed meeting on interest rates is Wednesday, December 14.

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