Pension Fund

The $36 billion stimulus package, the largest pension fund bailout ever, will provide about $100,000 to each pension fund beneficiary

Pension Fund - Last week, President Biden announced a $36 billion relief for the Central State Pension Fund, which is largely tied to the Teamster Union. Pension payments were expected to fall to between 50% and 60% from current levels due to the lower return on investment in the fund's assets.



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The $36 billion stimulus package, the largest pension fund bailout ever, will provide about $100,000 to each pension fund beneficiary. 


Biden will use his executive powers to reallocate the fund to help the economy recover from the COVID-19 pandemic under the $1.9 trillion US rescue plan that Congress passed in 2021.


The organization. The relief plan provisions are intended to support troubled specific pension fund schemes, nearly all of which are unionized.

Is the pension fund shortage related to Covid-19? No...but Biden and union officials argue otherwise. The main reason for this problem is the very low interest payments on bonds since the 2008 financial crisis (pension funds usually put too much weight on bond investments). 

Equity positions have remained flat over the past decade, increasing significantly since 2015, and tapering off in 2022, with the Central States Fund investing in commercial real estate through advisors. The actual deficit is due to a low interest rate environment, fiduciary errors in investment allocation and strategy, and a lack of member contributions.

Many large defined benefit pension funds also face this dilemma. Most trust agents for funds target an annual return of 7% to 8% on their investment portfolios, which would not have been possible in the low interest rate environment. 

With real estate investment yields now peaking and volatility in the stock market continuing, pension funds are under added pressure to maintain benefit payments. In fact, some defined benefit plans have already reduced annual benefits. European pension funds are particularly at risk. 

Government regulations mandate that 100% of funds be invested in government bonds, which have had negative interest rates for the past eight years.

The Pension Fund Guarantee Corporation (PFGC) was established in 1974 to provide payments to beneficiaries in the event of the bankruptcy of the fund or the bankruptcy of the legal entity overseeing the pension scheme. 

Over the past few years, PFGC has occasionally experienced losses, as debt has exceeded assets. However, through the American Rescue Plan, the PFGC has already set aside $10 billion to support other troubled pension programs and plans to provide at least another $75 billion in the future.

Currently, most employees do not participate in defined retirement funds, and a significant proportion of them do not receive any retirement benefits at all. Now, those American taxpayers got a tab for the Central State Pension Fund bailout and other defined plans through the PFGC. This ignites?

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