Pension Buyouts?

This is a....novel concept we suppose:

• A new bill would give some police and firefighters flexibility with their retirement. State Sen. Robert Martwick, D-Chicago, filed Senate Bill 3404 which would make a “pension buyout” available to members of Chicago’s pension systems as well as downstate police and firefighters.

  Of the worst funded local pension systems in the nation, Chicago-area pensions take up seven of the bottom 10. In September, the city had to lend money to the firefighter’s pension fund to make that month’s payouts and avoid selling assets.

  A “pension buyout” allows government workers to take out a portion of the “net present value” of their pension – the amount needed today to fund a retiree’s lifetime benefit. After voluntarily “cashing out” all or a portion of their benefits at a 30-40% discounted rate, workers can roll the money into an IRA or 401(k)-style plan and control their money forever. In return, the discount equals savings for taxpayers.

Needless to say, anything with Martwick's name attached to it is suspect.

We imagine the calculations used to do this are a bit on the suspect side, too:

• The flexibility allows retirees to withdraw a larger amount at one time – such as using the funds to pay for housing or medical expenses – a vital option for some based on their circumstances, but one which they don’t currently have. Plus, a self-directed account can be willed to family while a pension cannot. Other retirees might desire to take the buyout because they are not confident in the stability of their pension funds.

No one has much confidence in Illinois pensions, that much is for certain.

Having confidence in politicians being able to solve it is probably even less. 

Opinions?