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#1347820 --- 06/04/12 04:06 PM Re: 401 k versus state pension plan [Re: bluezone]
Hicks McFarmer Offline
Member

Registered: 07/29/07
Posts: 217
Loc: The woods
Originally Posted By: bluezone
Originally Posted By: Sketch
Originally Posted By: Fart in the Wind
Did You Know...
About 90% of funds used to pay NYSTRS benefits come from investment returns and employee contributions?
NYS's pension system is indeed one of the strongest and most profitable in the country, if not the best.


not for the taxpayers as they pay for 95% of the benefits for the state employees

Where did this number come from?
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#1347827 --- 06/04/12 04:52 PM Re: 401 k versus state pension plan [Re: Hicks McFarmer]
twocats Offline
Silver Member

Registered: 02/09/10
Posts: 11904
Loc: NYS
Don't bother. He makes it up as he goes along.
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#1347881 --- 06/05/12 08:33 AM Re: 401 k versus state pension plan [Re: twocats]
bluezone Offline
Diamond Member

Registered: 12/19/04
Posts: 32045
Loc: USA
Originally Posted By: twocats
Don't bother. He makes it up as he goes along.

your words

Originally Posted By: twocats
I did contribute 3% of my salary for the 1st 10 years



if you were making $45,000 in the beginning of your teaching career that would be about $15,000 that you 'contributed' to your pensions for the first ten years and there after you 'contribute' zero but when you retire you would get about $900,000 or $45,000 (60% of final pay) for over 20 years of retirememt


who made up the difference between the $15,000 that you paid into your pension and the $900,000 that you got during your retirement?

(clue=taxpayers)


Worksheet # 3. How much do I need to invest each month?

Goal (total amount I'd like to have) $900,000.00
Number of years 30
Annual percentage rate of return (e.g., 7.95) 7.5
Monthly contribution required $667.93

are you contributing about $700 of your money now per month?

Originally Posted By: bluezone
Originally Posted By: twocats
Originally Posted By: bluezone
Originally Posted By: twocats
Is the life expectancy 92 in bz world?

retirement at 55 to 85

Retire at 62 minimum--live to 78. That's 16 years. NOT 30.

age 55 for tier 4 and age 57 for tier 5


New York’s public pension plans are organized into benefit “tiers” based on hiring dates, as follows:

• Tier 1 benefits are available to all employees hired before June 30, 1973;
• Tier 2 covers all employees hired on or after June 30, 1973 and before July 27, 1976;
• Tier 3 covers employees hired on or after July 27, 1976, and before Sept. 1, 1983;
• Tier 4 includes all employees hired on or after Sept. 1, 1983, and before Jan. 1, 2010; and
• Tier 5 covers employees hired on or after Jan. 1, 2010.

current tier 4
retirement age 55
employee contribution 3% first 10 years

tier 5 retirement age 57
employee contribution 3% all years

original tier 4 retirement age 62
employee contribution 3% all years

Tier 5: A lost opportunity

On December 2, 2009, the New York State Legislature voted to create a fifth tier of slightly reduced pension benefits for state and local employees hired after Jan. 1, 2010. However, while benefits in the new plan are less expensive than those in pre-vious tiers, Tier 5 does not live up to the “significant pension reform” promised by Governor David Paterson when he originally proposed the law. As shown below, the Tier 5 changes for members of the New York State Employee Retirement System (ERS) restored most key elements of the original 1983 Tier 4 pension plan, before those benefits were repeatedly enhanced in the 1990s.

The most significant difference between Tier 5 and the original Tier 4 benefits for ERS members involves the use of overtime in computing final average salaries. Un-restricted in all previous plans, overtime for Tier 5 ERS members will now be subject to a $15,000 cap, “indexed” to grow at 3 percent a year.

Teachers outside New York City got a different Tier 5 deal: their minimum retire-ment age will be raised only two years, to 57. The employee contribution for Tier 5 members of the New York State Teachers’ Retirement System (NYSTRS) will be made permanent at a slightly higher rate of 3.5 percent.

Governor Paterson first introduced the Tier 5 bill in the spring of 2009, but he se-cured its passage only after making a series of costly concessions to labor unions in exchange for their agreement not to lobby against the pension changes:

• The state’s two largest unions, the Civil Service Employees Association (CSEA) and the Public Employees Federation (PEF) won an unprecedented no-layoff pledge from the governor. (Paterson later sought to renege on the deal by an-nouncing layoffs in late 2010—but no layoffs seemed likely to occur before he left office.)
New York State United Teachers (NYSUT) achieved its highest pension-related priority—a plan offering some teachers a chance to retire at age 55 after only 25 years of service. NYSUT also won the permanent enactment of a temporary law, annually renewed since 1994, that effectively allows its local chapters to veto any changes in retiree health benefits.



if the teacher is only putting 3% then who is making up the other 97%.......hummmmmmm

taxpayers????





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#1347882 --- 06/05/12 08:40 AM Re: 401 k versus state pension plan [Re: Hicks McFarmer]
bluezone Offline
Diamond Member

Registered: 12/19/04
Posts: 32045
Loc: USA
Originally Posted By: Hicks McFarmer
Where did this number come from?


Originally Posted By: twocats

I did contribute 3% of my salary for the 1st 10 years


is it no wonder the teachers do not want a 401k style plan where they have to contribute much more of their own pay to see the overly generous retirement pay that they see now


Originally Posted By: bluezone
Quote:
$42,000 per year
Originally Posted By: twocats
No Geneva teachers make enough to get that much in retirement.

Originally Posted By: twocats
So it's not FULL nor completely. It's fantastic


the article below states $42,000

Quote:
The new pension tier Cuomo outlined this week achieves two unlikely accomplishments: It creates large savings for public employers, yet remains generous to future employees.
The plan would offer a choice between a traditional pension and a 401(k)-style program, but only for future hires. Public employees in this state stay in the pension tier in place on the day they're hired.
Those who opt for the defined benefit in this new Tier 6 would get pensions 16 percent smaller than in the current system. For example, a worker in Tier 5 for 30 years who has a final salary of $70,000 gets a pension of $42,000 per year . In Tier 6, it would be $35,000, and unlike now, overtime and bonuses would not be used in setting the pension.
Tier 6 participants wouldn't be eligible for retirement at 62, as in Tier 5, but would have to be 65. And they'd have to kick in more; the current employee contribution is 3 percent, but Tier 6 employees would pay 4, 5 or 6 percent of their pay, with the highest-earning employees paying the most. The contribution level could also go up and down -- just as the pension bill does for counties and towns -- as the investment return of the pension fund soars or sinks.
New employees who opt for the 401(k)-type plan would get an automatic employer contribution of 4 percent of their pay, and as much as 3 percent more as a match if they contribute that much themselves. Their plans would also be portable, and vest after one year. Currently, pensions vest in 10.
Over 30 years, Tier 6 would reduce retirement costs by 50 percent, saving New York City $30 billion and public employers outside the city $83 billion. It would also allow prudent workers to enjoy comfortable retirements, though those who opt for the 401(k) would be wise to kick in at least the 3 percent their employers will match, just as they would into the traditional pension.
Experience has shown that people often mismanage their 401(k)s. But the frenzied opposition by union leaders is a huge public relations error. Tier 6 will offer public employees, via the pension or the 401(k), a far more generous retirement than most private sector workers footing most of the bill look forward to.
Many private-sector workers -- with little job security, no pension and either no 401(k) or a smaller employer contribution than this plan provides -- are weary of hearing about the "rights" of public workers. People are losing their houses because they can't pay the sky-high taxes that support the benefits of public workers. The tide has turned.

Tier 6 is a step toward bringing public retirement plans in line with the real world, and via the 401(k) portion, setting the state on a path to a retirement plan with predictable obligations. It may turn out be too generous -- and unions may view it more fondly when they're fighting Tier 7.



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#1347939 --- 06/05/12 06:18 PM Re: 401 k versus state pension plan [Re: twocats]
bluezone Offline
Diamond Member

Registered: 12/19/04
Posts: 32045
Loc: USA
• New York's Exploding Pension Costs - The Empire Center for New ...



... tax-funded annual contributions to the New York State Teachers ... inflation of future pension payments, and the permanent elimination of employee contributions for Tier …
http://www.empirecenter.org/Special-Reports/2010/12/pensionexplosion...




New York's Exploding Pension Costs
Complete report in PDF format
December 07, 2010
EXECUTIVE SUMMARY
Public pension costs in New York are mushrooming—just when taxpayers can least afford it. Over the next five years, tax-funded annual contributions to the New York State Teachers’ Retirement System (NYSTRS) will more than quadruple, while contributions to the New York State and Local Retirement System (NYSLRS) will more than double, according to estimates presented in this report. New York City’s budgeted pension costs, which already have increased tenfold in the past decade, will rise by at least 20 percent more in the next three years, according to the city’s financial plan projections.
NYSTRS and NYSLRS are “fully funded” by government actuarial standards, but we estimate they have combined funding shortfalls of $120 billion when their liabilities are measured using private-sector accounting rules. Based on a similar alternative standard, New York City’s pension funds had unfunded liabilities of $76 billion as of mid-2008—before their net asset values plunged in the wake of the financial crisis.

The run-up in pension costs threatens to divert scarce resources from essential public services during a time of extreme fiscal and economic stress for every level of government. New York needs to enact fundamental pension reform to permanently eliminate the risks and unpredictability inherent in the traditional pension system.

INTRODUCTION

In November 2003, the Manhattan Institute for Policy Research issued a report de-scribing New York State’s public pension system as “a ticking fiscal time bomb.”

The bomb is now exploding—and New Yorkers will be coping with the fallout for years to come.

New York’s state and local taxpayers support three public pension funds encompassing eight different retirement systems—five covering different groups of New York City employees, and three covering employees of the state, local governments, school districts and public authorities outside the city. Between 2007 and 2009, these funds lost a collective total of more than $109 billion, or 29 percent of their combined assets. Two of the three funds ended their 2010 fiscal years with asset values below fiscal 2000 levels; the third has barely grown in the past decade.

Meanwhile, the number of pension fund retirees and other beneficiaries has risen 20 percent and total pension benefit payments have doubled in the past 10 years. Tax-payers will now have to make up for the resulting pension fund shortfalls.

This report forecasts pension funding trends for the New York State and Local Re-tirement Systems (NYSLRS) and the New York State Teachers Retirement System (NYSTRS), which cover nearly every public employee outside New York City. It also summarizes official reports of funded status and projected costs over the next three years for the New York City Retirement Systems. Assuming the pension systems all hit their rate-of-return targets:

• Taxpayer contributions to NYSTRS could more than quadruple, rising from about $900 million as of 2010-11 to about $4.5 billion by 2015-16. The projected increase is equivalent to 18 percent of current school property tax levies.
• State and local employer contributions to NYSLRS will more than double over the next five years, adding nearly $4 billion to annual taxpayer costs even if most opt to convert a portion of their higher pension bills into IOUs that won’t be paid off until the 2020s.
• New York City’s budgeted pension contributions, which already have in-creased by more than 500 percent ($5.8 billion) in the last decade, are projected to increase at least 20 percent more, or $1.4 billion, in the next three years.

Pension costs would be even higher if New York’s state and local retirement funds were not calculating pension contributions based on permissive government accounting standards, which allow them to understate their true liabilities.

While New York’s two state pension systems officially are deemed “fully funded,” we estimate that NYSLRS is $71 billion short of what it will need to fund its pension obligations, and that NYSTRS has a funding shortfall of $49 billion, based on valuation standards applied to corporate pension funds.

The need for reform

The record-breaking investment returns of the 1980s and ‘90s lulled New York’s elected leaders into a false sense of complacency. State and local payrolls were expanded and retirement benefits were enhanced under the assumption that pension costs would remain near historic lows. The downturn of 2000-03 and its impact on pension costs should have come as a wake-up call to state officials. Instead, they responded with pension funding gimmicks and minimal “reforms.”

In the short run, assuming the state Constitution is interpreted as allowing no change in benefits for current workers, there is no financially responsible way to avoid the coming increases in pensions costs. However, state and local officials in New York can seek to contain the damage by reducing headcount where appropriate, and by exploring ways of saving money on employee compensation, including wage increases and health insurance benefits. A statewide public-sector salary freeze—which the Legislature has the power to impose, according to a legal analysis commissioned by the Empire Center1 —could help minimize the extent to which rising pension costs force service cutbacks, layoffs or tax hikes. But these will just be bandages covering a more fundamental problem.

The lesson is clear: the traditional pension system exposes taxpayers to intolerable levels of financial risk and volatility. New York’s existing defined-benefit (DB) public pension plans need to be closed to new members, once and for all. They should be replaced either by defined-contribution (DC) plans modeled on the 401(k) accounts that most private workers rely for their own retirement, or by “hybrid” plans, combining elements of DB and DC plans, that cap benefits and require employees to share in some of the financial risks of retirement planning.

This is not just a matter of financial necessity but of basic fairness to current and future taxpayers—the vast majority of whom will never receive anything approaching the costly, guaranteed benefits available to public employees.

1. PENSION FUNDING TRENDS


New York’s 1.3 million state and local government employees belong to defined-benefit (DB) pension plans, which guarantee a stream of post-retirement income based on peak average salaries and career duration. Pension (and disability) benefits are financed by large investment pools, which in turn are replenished by tax-funded employer contributions. Some public employees, depending on their hiring date and “tier” membership, also contribute a small share of their own salaries to pension funds (see Appendix).

While employee contributions (where required) are fixed or capped, contributions by employers fluctuate, based on actuarial assumptions. The rate of return on pension fund assets is the key determinant of pension costs to taxpayers. Since the mid-1980s, when pension funds began allocating more of their assets to stock investments, those rate of return assumptions have ranged from 7.5 percent to 8.75 percent; for most of the last 10 years, New York’s public pension plans have assumed their investments would yield an average annual return of 8 percent.





During the historic bull market of the 1980s and ‘90s, investment gains easily exceeded expectations, averaging in the double digits. The result, as shown in Figure 1: tax-funded employer contributions tumbled in the three state pension plans covering employees outside New York City. By 2000, employer contribution rates for members of these plans essentially had dropped to zero.2

Government workers shared in the market windfall. The state Legislature repeatedly increased pension benefits for targeted groups of employees during the 1990s. Those enhancements were topped off in 2000 by the state Legislature’s approval of cost-of-living adjustments in all public pensions, automatic partial indexing to inflation of future pension payments, and the permanent elimination of employee contributions for Tier 3 and 4 retirement system members who had been on the payroll for at least 10 years.3 Lawmakers essentially sold these changes to the public as a free lunch, assuming the stock market boom would continue indefinitely.

In fact, as elected officials should have recognized, the minimal employer contribution rates of 1990s were a historical anomaly. “Normal” contribution rates—assuming a hypothetical steady state of asset returns meeting investment targets—would have ranged from 11 to 12 percent for most non-uniformed state and local employees, including teachers, to nearly 20 percent for most police and firefighters in NYSLRS.

The decade that followed the enactment of the major pension sweeteners was characterized by extremely volatile—and ultimately stagnant—investment returns. Asset values dropped sharply between 2000 and 2002, recovered over the next five years, and then dropped sharply after 2007.

Despite the recent stock market recovery, the net assets of the New York City pension funds and the New York State Teachers’ Retirement System (NYSTRS) as of 2010 were still below 2000 levels, while the net assets of the New York State and Local Retirement System (NYSLRS) were up just 4 percent on the decade.* Meanwhile, total benefit payments doubled between 2000 and 2010. The year-by-year trends for the period are shown in Figure 2.





* NYSLERS includes both the State and Local Employee Retirement System and the Police and Fire Retirement System.

The combination of falling asset prices and rising benefit outlays meant the pension funds were developing huge shortfalls. Meanwhile, employee contributions into the state pension funds actually decreased during this period, as a growing number of Tier 3 and 4 members reached the 10-year seniority mark.4 Taxpayers were left to pick up the slack, as shown in Figure 3. In 2000, tax-funded employer contributions to New York’s pension funds totaled just under $1 billion. By 2010, they had risen to a combined $17.3 billion for the state and New York City systems.

But this was just the beginning of the pension explosion.





2. THE WRONG KIND OF “BOOM”

How hard will taxpayers be hit by New York’s coming pension explosion? To answer that question, we have projected employer contribution rates for NYSLRS and NYSTRS for each of the next five years. These projections are based on assumptions about future events, particularly the performance of fund assets, but also growth in employee headcount and salaries.

These projections represent our best effort to replicate the funds’ contribution rate calculations under the Aggregate Funding Method used by the pension system actuaries. Because the funds do not make public their expected streams of future cash flows, we must make assumptions about the path of changes in certain figures that form a part of those calculations, particularly the present value of the salaries that currently active employees are expected to earn. However, we believe that these projections represent a good estimate based on publicly available data, and can provide state and local governments with useful guidance about the path of pension costs in future years.

We projected contributions in three scenarios: “Base,” in which the pension systems hit their current investment targets (7.5 percent for NYSLRS, 8.0 percent for NYSTRS); “High Returns,” defined as 11 percent per year; and “Low Returns,” de-fined as 5 percent per year. We also estimated tax-funded contributions to NYSLRS over the next five years assuming that local employers opt to join the state in cap-ping pension contributions and amortizing excess amounts for a 10-year period.




Pension “mitigation”: Cap and owe

Under a new law backed by Comptroller Thomas DiNapoli and approved as part of the 2011-12 state budget,5 the state government’s fiscal 2010-11 pension contribution rates will be capped at “graded rates” of 9.5 percent for the ERS members and 17.5 percent for PFRS members, instead of the billed rates of 11.9 percent and 18.2 percent, respectively.

Starting in fiscal 2011-12, the contribution rates used to calculate the state’s pension bill will be allowed to increase by only one percentage point a year, starting at this year’s capped level. Billed contributions above that amount in any given year can be spread, or amortized, over 10 years, payable to the pension fund at a rate pegged to interest on taxable bonds, generally in the neighborhood of 5 percent. As part of the deal, the minimum contribution level is permanently fixed at 4 percent. Local governments have been given the option of joining this “rate mitigation program,” and many are already choosing to do so.

Delayed payments will be counted as liabilities on employer balance sheets, and as receivable “assets” of the pension fund. The comptroller has strongly taken issue with any suggestion that this program is tantamount to borrowing from the pension fund. Semantics aside, however, there is no denying that the cap on pension payments simply transfers liabilities into the future—well into the 2020s, at a minimum. Assuming all local government employers amortize a portion of what they will owe the pension fund, and assuming the funds’ asset returns hit their 7.5 percent target, we estimate a total of $11 billion in state and local pension payments will be deferred over the next five years—stretching these costs into the middle of the next decade.

In any event, even employers choosing to amortize will experience a doubling of ERS contributions and a near doubling in total PFRS contributions over the next five years. If asset returns are high enough to drive down rates quickly after a few years, those employers will continue paying higher rates for a longer period. School districts paying into the NYSTRS, which has no amortization option, will see their contributions quadruple even under our rosiest scenario for asset returns over the next five years.

The impact of the projected base rates on total contribution amounts is depicted in Figure 4. The $3.6 billion rise in teacher pension contributions (from about $900 mil-lion in 2010-11 to $4.5 billion in 2015-16) equates to 18 percent of 2010-11 school tax levies, or an average increase of nearly 3.5 percent a year. This is well above the annual property tax growth that would be allowed under a 2 percent tax cap proposed by Governor-elect Andrew Cuomo.



The Big Apple’s bomb

Virtually all New York City employees (and some employees of the city Transit Authority) belong to one of five different municipal pension systems. The systems have different funding and contribution levels while pooling their assets in a common city pension trust fund.

The financing of these pension plans is arcane and complex compared to those of NYSLRS and NYSTRS. Crucial pension fund financial data for the 2009 and 2010 fiscal years has not yet been published, and the city Office of Management and Budget (OMB) uses an opaque process to generate the city’s official pension cost estimates.

The city’s pension contribution averaged about $1.4 billion during the late 1990s and dipped as low as $615 million in 2000. By 2010, the contribution had risen to an all-time high of $6.6 billion—and it’s still climbing. OMB’s official financial plan estimates of pension obligations are depicted in Figure 5.




These figures, which show the pension contribution growing from $7 billion in 2011 to $8.4 billion in fiscal 2014, reflect changes made by OMB in its November budget modifications in anticipation of a forthcoming revision of actuarial assumptions. Given the steep losses sustained by city pension funds in 2007-2009 (as shown in Figure 2 on page 4) and the underfunded status of the pension plans even before the downturn, the pension contribution is likely to grow significantly after fiscal 2014.

Measuring pension fund assets and liabilities

Parties obligated to pay an amount at some future date need to know the size of that obligation in today’s dollars, which will tell them how much money to set aside. That sum can be smaller than the principal amount due because it can earn interest until the due date. If, for example, you owe $10,000 in ten years, and your savings account offers an interest rate of 3 percent, you would need to set aside only $7,441 today. In this example, you have assessed your future obligations using a 3 percent “discount rate”—the rate at which the principal due is discounted over a given period of time to produce the loan’s net present value.

The discount rate applied to future obligations is a crucial determinant of a pension system’s necessary funding levels: the lower the rate, the larger the contributions required to maintain “fully funded” status, meaning the assets are sufficient to cover all promised pension benefits.

Private pension plans must discount liabilities based on what’s known as a “market” rate—typically, the interest paid on bonds issued by financially solid corporations. This is often much lower than the plans’ projected returns, but it reflects what the money would be earning if invested in lower-risk assets, matching the low risk tolerance of future retirees who are counting on their promised pensions.

Public funds, however, are allowed to discount their long-term liabilities based on the targeted annual rate of return on their assets—i.e., what they hope to earn from investments in a basket of assets dominated by stocks, which offer a chance of higher returns in exchange for higher risk of losses.


Until recently, all of New York’s public pension funds had pegged their target rates at 8 percent, like most other public systems around the country. In 2010, Comptroller DiNapoli, acting as sole trustee of the New York State & Local Employee Retirement System, adopted new actuarial guidelines reducing the target rate for state pension funds to 7.5 percent, along with other changes in actuarial assumptions concerning career duration, salaries and life expectancy. These are all factored into the system’s employer contribution rates going forward. The New York State Teachers’ Retirement System (overseen by a separate board of trustees) and the New York City pension funds will also be considering changes to their rate of return assumptions in 2011.

While most public pension managers continue to resist the idea, many independent actuaries and financial economists agree that the net present value of risk-free public pension promises should be calculated on the basis of low-risk market interest rates. Using this approach, for example, Andrew Biggs of the American Enterprise Institute has estimated that state pensions across the country are underfunded by $3 trillion, or six times the officially reported under-funding estimates as of 2008.6 This estimate doesn't even take into account the impact of the 2008 market downturn on pension fund asset values.

Indeed, sharp drops in asset values cause pension plans' financial statements to become even more misleading. When a pension plan underperforms its targeted in-vestment returns, it does not recognize the loss immediately; instead, it “smooths" recognition of the loss over a period of years, usually five. This means that most pension plans will not have fully recognized the stock market declines of 2008 and 2009 until 2014. For example, while ERS held assets with a market value of $94 billion as of March 31, 2009, it reported an actuarial asset value of $126 billion on that date—and that $126 billion figure underpins the plan's claim that it is 101 percent funded.

In this report, we also present “market value” funding data for New York’s state and local pension funds, in addition to the more-commonly discussed actuarial funding basis. For the statewide pension funds, we calculated our market value funding calculations by using the most recent available data on market value of assets from the funds’ Comprehensive Annual Financial Reports. In the case of NYSLRS, the data are for March 31, 2009; for NYSTRS, the data are current as of June 30, 2009.7

We also adjusted the estimated pension liabilities to a “market value liability” calculation by using a discount rate based on high-quality corporate bonds, provided by Mercer Consulting as of September 2010. As is the standard practice for public sector pension funds, these funds’ actuarial liabilities are calculated by discounting future payments to a present value using discount rate equal to the funds’ expected rate of return: 7.5 percent for ERS and PFRS, and 8 percent for TRS. Our adjusted discount rate is approximately 5 percent, varying slightly depending on the funds’ mix of active and retired participants. This lower discount rate reflects the typical practice for private-sector pension plans, with a discount rate based on the risk experienced by pension beneficiaries.

For the New York City pension systems, market valuation measures are already included in official financial reports, so we simply reproduce those along with our estimates for the state funds, based on their latest published financial data, in Table 2. It should be noted that the city’s actuarial and market-based data in the table are for fiscal 2008, and do not reflect the fund’s losses in 2009.





As of their reporting dates in 2009 (March 31 for New York State ERS and PFRS, and June 30 for NYSTRS), each of the state systems reported an actuarial funding ratio of slightly more than 100 percent. But recalculating these figures on a market value basis shows a much worse funding situation: TRS was just 60 percent funded, PFRS 58 percent, and ERS 56 percent. The discrepancy has two sources: sharp stock market declines in late 2008 and early 2009 meant that the market value of these plans' assets was far below their actuarial value. And changing to a market value discount rate significantly increases the plans' measured liabilities.

Updated liability estimates

In the year following the last official actuarial reporting date, asset values rebounded somewhat. We estimate the New York State ERS and PFRS were 65 percent and 69 percent funded, respectively, using a market rate standard as of March 31, 2010. The market-rate unfunded liabilities for these two systems came to $71 billion, including $61.8 billion for ERS and $9.5 billion for PFRS, according to our calculations. NYSTRS was approximately 61 percent funded as of June 30, 2010, with a shortfall of $49.2 billion. Thus, the combined shortfall for the two systems came to $120 billion, while the official estimate of the shortfall in the city funds, measured on a market basis, came to $76 billion as of June 30, 2008.
_________________________
"OUR COUNTRY IS IN MOURNING, A SOLDIER DIED TODAY."

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#1347941 --- 06/05/12 06:31 PM Re: 401 k versus state pension plan [Re: twocats]
bluezone Offline
Diamond Member

Registered: 12/19/04
Posts: 32045
Loc: USA
Quote:


New York's Exploding Pension Costs, Page 2
Complete report in PDF format
December 07, 2010

3. REAL PENSION REFORM FOR NEW YORK

The investment losses sustained by New York’s pension funds in the past decade have created deep holes that must be filled. The resulting pension cost increases de-scribed in this report cannot be avoided in the short term. Unlike officials in some other states, such as New Jersey, New York officials cannot ignore the problem by skipping or under-funding required pension contributions—if only because New York’s highest court has made it clear it will not allow them to do so.8

Article 5, Section 7 of New York’s Constitution guarantees that pension benefits shall not be “diminished or impaired”—which is widely assumed to mean that employees cannot be required to help pay for the rising costs for their future benefits, even benefits they have not yet accrued. As a result, New York government employees are benefitting from what a leading commentator on retirement finances has called the “public pension straddle option,” which allowed workers to collect bigger benefits financed by excess investment gains in the 1980s and ‘90s, while forcing taxpayers to cover subsequent pension fund investment losses.9

But it doesn’t have to stay that way. The Empire State can—and should—ultimately eliminate the intolerable financial risks, volatility and unpredictability of the existing pension system. From the standpoint of employers and taxpayers, the best way to accomplish this would be to shift new employees to defined-contribution (DC) plans modeled on the 401(k) accounts now prevalent in the private sector, or the 403(b) plan available to State University and City University of New York employees.

Instead of a single common retirement fund, a defined-contribution plan consists of individual accounts supported by employer contributions, usually matched at least in part by the employees’ own savings. These contributions are not subject to federal, state or local income taxes until withdrawn. Funds in the accounts are managed by private firms and invested in a combination of stocks and bonds. In a DB system, the employer promises to finance a future retirement benefit for a large group of current and former workers. In a DC system, the employer’s obligation is discharged immediately, through regular contributions to the retirement accounts of each employee. The size of the ultimate retirement benefit generated by a DC plan depends on the amount of savings and investment returns the worker is able to accumulate over the course of his or her working life. The downside risk of unanticipated investment losses and the upside potential for unanticipated investment gains are both shifted from the employer to the employee.


While a growing number of states have been making changes to their pension sys-tems—including 11 in 2010 alone—pure DC plans so far have been mandated in only two states, Michigan and Alaska. In the wake of the November 2010 election, at least six newly elected governors in other states were “looking favorably at some form of 401(k)-style retirement plan for public employees, adding to the momentum building nationally for a shift away from traditional guaranteed pensions,” the Pew Center’s Stateline web site recently reported.10 The Michigan experience, which began earlier and covers many more employees, is particularly instructive (see below).

An alternative to a pure DC plan would be a “hybrid” combining elements of both DB and DC plans. A model for this approach was recently adopted by the state of Utah, which closed its existing DB plan to newly hired employees. State workers in Utah now have a choice between a pure DC plan or a combined DC and DB plan—but in both plans, the tax-funded employer contribution is capped at 10 percent of salaries.11 Thus, while employees share in the upside of investment gains, they must also share in the risk of investment losses.


The federal government adopted the hybrid model in 1984, when it replaced its own traditional pension plan for civilian workers with a combination of a small DB pension and a DC supplement known as the Thrift Savings Plan (TSP).12



The downside of a hybrid plan is that, by retaining elements of the DB pension structure, it also retains opportunities for the kind of steady sweetening that occurred when funding levels rose in the current system. The actuarial and financial accounting involved in the DB system is dauntingly complex, inviting the kind of buy-now, pay-later options that politicians often are unable to resist.

There need not be a single statewide model of reform. The next Governor and Legis-lature could create a set of new retirement plan options for local governments, school districts and public authorities to choose from. Some might opt for a pure DC plan and some for hybrids, while others might decide to allow their employees to choose between the two.

Pension reform can be justified as a matter of fairness as well as financial prudence. Taxpayers last year kicked in an average of $8.24 for every dollar of employee con-tributions to the NYSLRS, $6.64 for every dollar of employee contributions to the NYSTRS, and $8.73 for every employee dollar contributed to the New York City pension funds,13 and those ratios will rise steeply in the next few years along with employer contribution rates.

Yet the vast majority of New Yorkers do not enjoy retirement benefits even approaching those available to public employees. Nationally, less than one in five private workers has access to an employer-sponsored DB pension plan; as noted, most of those who have access to any employer-sponsored retirement plan are dependent on 401(k)-style accounts. Where traditional pensions still exist, their benefits are usually smaller—and, of course, are not guaranteed if a plan sponsor goes bankrupt or otherwise lacks the assets to make good on its promises.


The average retirement benefit for all state and local government retirees in New York as of 2009 was $27,601—more than twice the average company or union pension of $13,105.14 While many private pensions are reduced by a percentage of Social Security payments, retired state and local employees in New York collect full Social Security benefits on top of their pensions, which are also exempt from state and local income taxes.

The cost of replicating a stream of income equaling a typical public pension would be prohibitive for a private sector worker approaching retirement. For example, as of 2009-10, the median retirement age for teachers in NYSTRS was just over 59, and the median annual pension benefit was $47,000. A male private-sector worker would need to save $860,000 to purchase a guaranteed lifetime annuity paying the same income stream starting at the same age.15 Teachers in New York City suburbs retiring in their mid-50s can qualify for a stream of pension income that would cost $1.2 million to replicate as an annuity.16 These figures do not include the value of heavily employer-subsidized health insurance coverage, which most teachers also continue to receive throughout retirement. Retiree health insurance coverage is now even more rare than DB pensions in the private sector.17

If public employees were instead covered by DC or hybrid DB-DC plans like those described above, they would still receive benefits superior to those available to most workers in the private sector. But they would at least shoulder downside risks as well as upside gains of long-term investments. Taxpayers would no longer be ex-posed to potentially open-ended liabilities. And a retirement plan requiring workers to share more equally in the costs of their benefits would discourage the seemingly limitless varieties of pension gaming encouraged by the existing system.

State officials should not settle for creating a “Tier 6” that incrementally adjusts some existing pension parameters while preserving a fatally flawed system that exposes taxpayers to potentially open-ended liabilities. As New York’s previous experiences with “pension reform” demonstrate, even an ambitious attempt to reduce the costs of traditional pensions (such as the Tier 3 plan of 1976, as further explained in the Appendix) is likely to be undone at the first sign of a market upturn—and the financial implications of such changes will be poorly communicated to and understood by the public.

Any pension reform should retain the existing Taylor Law provision prohibiting col-lective bargaining of pension benefits—and that provision should be expanded to cover other retirement benefits. This is an essential step towards getting a handle on more than $200 billion in unfunded liabilities for retiree health coverage currently promised (but not constitutionally guaranteed) by state and local governments.

“True North” transparency

The state's pension funds need to release more information about the true extent of the financial risk to which they have exposed taxpayers, who are ultimately respon-sible for backing up the constitutional guarantee of pension benefits.

Robert North, New York City’s chief pension actuary, has become a national leader in this area by reporting alternative measures of funded status for each of the city’s retirement systems, as cited in this report. Following North’s lead, all of New York State’s pension funds should be required by law to annually calculate alternative measures including their Market Value Accumulated Benefit Obligation (“MVABO”), an estimate of which was the basis for our own calculations of funded status for the NYSLRS and NYSTRS funds.

For the sake of improved transparency, New York’s pension funds should also be required to:

• Calculate the statistical likelihood that they will meet their average target rate of return over time horizons of five, 10, 15 and 20 years. Such calculations are essential to evaluating all of the potential risks and benefits of policy changes such as the NYSLRS amortization plan.
• Post their financial results in consistent formats on the Internet, allowing for “searchable” text and spreadsheet versions of numerical tables, including quarterly updates of investments.
• Calculate projected cash flows—i.e., the benefits they expect to pay over the next 15-20 years, prior to any discounting.

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#1347995 --- 06/06/12 07:42 AM Re: 401 k versus state pension plan [Re: bluezone]
bluezone Offline
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Posts: 32045
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Originally Posted By: bluezone

current tier 4
retirement age 55
employee contribution 3% first 10 years

original tier 4 retirement age 62
employee contribution 3% all years



why did you have them change tier 4 so the teachers would get a better deal?

you get to retire earlier and you have to put even less into your own retirement

are you not able to contribute to your own retirement as everyone has to do?

who just paid the 17% increase in your health benefits?
unlikely you....
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#1348112 --- 06/07/12 07:25 AM Re: 401 k versus state pension plan [Re: Fart in the Wind]
bluezone Offline
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. NYSTRS was approximately 61 percent funded as of June 30, 2010, with a shortfall of $49.2 billion. Thus, the combined shortfall for the two systems came to [b]$120 billion[/], while the official estimate of the shortfall in the city funds, measured on a market basis, came to $76 billion as of June 30, 2008.


and who makes up the $120 billion difference?

dinapoli only had a 5.5% return for the past 12 months even though he predicted at least a 7.5% return

who makes up the 2% loss?
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#1348555 --- 06/11/12 10:43 AM Re: 401 k versus state pension plan [Re: Hicks McFarmer]
bluezone Offline
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SAN DIEGO (AP) — Voters in two major California cities have overwhelmingly approved cuts to retirement benefits for city workers. Supporters are calling it a mandate that may lead to similar ballot initiatives in other states and cities that are struggling with mounting pension obligations.

In San Diego, 66 percent voted in favor of Proposition B, while 34 percent were opposed. Nearly 97 percent of precincts were tallied by early Wednesday.

The landslide was even bigger in San Jose, with 70 percent in favor of Measure B and 30 percent opposed. All precincts are counted.

Supporters had a simple message to voters in San Diego and San Jose: Pensions for city workers are unaffordable and more generous than many private companies offer, forcing libraries to slash hours and potholes to go unfilled.
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#1348571 --- 06/11/12 11:27 AM Re: 401 k versus state pension plan [Re: twocats]
bluezone Offline
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Originally Posted By: Chicago Jesus
The end is near for public-sector unions
jeff jacoby


June 10, 2012|Jeff Jacoby



In retrospect, there were two conspicuous giveaways that Wisconsin Governor Scott Walker was headed for victory in last week’s recall election.

One was that the Democrats’ campaign against him wound up focusing on just about everything but Walker’s law limiting collective bargaining rights for government workers. Sixteen months ago, the Capitol building in Madison was besieged by rioting protesters hell-bent on blocking the changes by any means necessary. Union members and their supporters, incandescent with rage, likened Walker to Adolf Hitler and cheered as Democratic lawmakers fled the state in a bid to force the legislature to a standstill. Once the bill passed, unions and Democrats vowed revenge, and amassed a million signatures on recall petitions.



But the more voters saw of the law’s effects, the more they liked it. Dozens of school districts reported millions in savings, most without resorting to layoffs. Property taxes fell. A $3.6 billion state budget deficit turned into a $154 million projected surplus. Walker’s measures proved a tonic for the economy, and support for restoring the status quo ante faded — even among Wisconsin Democrats. Long before Election Day, Democratic challenger Tom Barrett had all but dropped the issue of public-sector collective bargaining from his campaign to replace Walker.

The second harbinger was the plunge in public-employee union membership. The most important of Walker’s reforms, the change Big Labor had fought most bitterly, was ending the automatic withholding of union dues. That made union membership a matter of choice, not compulsion — and tens of thousands of government workers chose to toss their union cards. More than one-third of the Wisconsin members of the American Federation of Teachers quit, reported The Wall Street Journal. At the American Federation of State, County, and Municipal Employees, one of the state’s largest unions, the hemorrhaging was worse: AFSCME’s Wisconsin rolls shrank by more than 34,000 over the past year, a 55 percent nose-dive.

Did government workers tear up their union cards solely because the union had lost its right to bargain collectively on their behalf? That’s doubtful: Even under the new law, unions still negotiate over salaries. More likely, public-sector employees ditched their unions for the same reasons so many employees in the private sector — which is now less than 7 percent unionized — have done so: Many never wanted to join a union in the first place. Others were repelled by the authoritarian, belligerent, and left-wing political culture that entrenched unionism so often embodies. \:\)
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#1348688 --- 06/12/12 08:47 AM Re: 401 k versus state pension plan [Re: Hicks McFarmer]
bluezone Offline
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Originally Posted By: Hicks McFarmer
Employees and retirees do not get free healthcare. it is taken out of there check. retirees may use unused sick time accrued over many years to pay for a portion of it.


but they do have healthcare at very little cost to them


Originally Posted By: Teonan

It would not be the end of health reform, just a chance to get it right

By Rose Ann DeMoro
The Huffington Post

June 5, 2012

If President Obama is now confiding to Democratic donors that he may have to "revisit" health care in a second term if the Supreme Court throws out his first attempt, as Bloomberg News reported June 1, maybe this time we can get it right.

Instead of trying to dress up our broken private insurance-based system, or resuscitating elements of a convoluted plan the court may overturn, it's time to try something different.

Fortunately, we have a well established, uniquely American model in place, one that meets the legal test. A program that already takes care of the 40 million Americans over 65. That has the added benefits of being universal in coverage and far more cost efficient than our present system.

It's called Medicare. And it's been working well for nearly 50 years, and remains wildly popular, even among those hate "Obamacare."

Even if the law is upheld, some 27 million Americans would remain uninsured by 2016, according to the Congressional Budget Office, families will continue to struggle with rising out-of-pocket health costs and un-payable medical bills and more employers will drop coverage or shift more costs to employees.


Over the past year, nurses have seen an alarming nexus between the economic decline and broad erosions in health status, such as stress-induced heart ailments, anxiety and "gut" disorders, health woes associated with poor nutrition, and illnesses traditionally seen in adults increasingly found in children. Nurses now routinely see patients skipping or delaying not just routine medical visits, but even cancer treatment and other life-saving or life prolonging care due to cost.

A library of surveys and studies document these worrisome trends.

A Centers for Disease Control analysis found a quarter of children age 17 and under were in families struggling to pay medical bills.

In 2010, 30 million Americans were contacted by debt collection companies chasing them to pay medical bills, a jump of 5 million people in just half a decade, the Commonwealth Fund reported. Unpaid bills as small as $250 were ruining credit records for many. Medical bills account for 62 percent of personal bankruptcies, and nearly 80 percent who went broke from health care had insurance.

Fifty million Americans still have no health coverage. Another 29 million are under insured with massive holes in their health plans, an increase of 80 percent since 2003, according to the journal Health Affairs.

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#1348799 --- 06/13/12 08:10 AM Re: 401 k versus state pension plan [Re: Hicks McFarmer]
bluezone Offline
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Registered: 12/19/04
Posts: 32045
Loc: USA
Originally Posted By: Hicks McFarmer
The percentage is 3-6 percent dependeing on salary. the more you make the more you give in. tiers 1-4 contribute until the employee is vested at 10 years. tiers 5 and 6 are vested after 10 years bu must contibute for the duration of employment.

percentage of final salary varies on what tier and union they are in. most get 50%-60%. Tier 1 may get more but tier 1 employees are few and far in-between.



and how much would they have to pay in for the first ten years?
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#1349324 --- 06/16/12 06:21 AM Re: 401 k versus state pension plan [Re: bluezone]
bluezone Offline
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Posts: 32045
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Originally Posted By: Hicks McFarmer
The percentage is 3-6 percent dependeing on salary. the more you make the more you give in. tiers 1-4 contribute until the employee is vested at 10 years. tiers 5 and 6 are vested after 10 years bu must contibute for the duration of employment.

percentage of final salary varies on what tier and union they are in. most get 50%-60%. Tier 1 may get more but tier 1 employees are few and far in-between.



would the teacher pay in about $15,000 but get $800,000+ out for retirement?

all workers should get a 'deal' like this
do not get shocked when your loaf of bread goes up to $10

is it time to start your 2 month paid vacation?

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#1349408 --- 06/17/12 05:37 AM Re: 401 k versus state pension plan [Re: bluezone]
bluezone Offline
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Posts: 32045
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Originally Posted By: Hicks McFarmer
percentage of final salary varies on what tier and union they are in. most get 50%-60%. Tier 1 may get more but tier 1 employees are few and far in-between.


so if a teacher retires at a $75,000 final salary the retirement pay will an automatic $45,000 for the next 20-30 years when they only had to 'pay in' only 3% for the first ten years or about $15000

$45,000 x 20 = $900,000
$45,000 x 30 = $1,350,000

where can one only 'pay in' $15,000 and get $1,350,000 back?

make sure you add on the social security they would also get which would bring the teachers pension benefit close to their final pay or about $75,000

now tack on their overly generous healthcare coverage and you see why taxpayers are not getting a quality student performance for their dollars

everyone should get these overly generous retirement benefits if all 'costs' are covered by the 'teacher'


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#1349689 --- 06/19/12 09:21 AM Re: 401 k versus state pension plan [Re: bluezone]
bluezone Offline
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Registered: 12/19/04
Posts: 32045
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Originally Posted By: Hicks McFarmer
percentage of final salary varies on what tier and union they are in. most get 50%-60%. Tier 1 may get more but tier 1 employees are few and far in-between.


can you name any other entity that offers 50-60% pension with little contribution by the employee?
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#1349691 --- 06/19/12 09:26 AM Re: 401 k versus state pension plan [Re: Hicks McFarmer]
bluezone Offline
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Registered: 12/19/04
Posts: 32045
Loc: USA
Originally Posted By: Hicks McFarmer
percentage of final salary varies on what tier and union they are in. most get 50%-60%. Tier 1 may get more but tier 1 employees are few and far in-between.


the school taxes are skewed
only have the homeowners pay that have children in school as that would give everyone a true number of the dollars they are paying for the teachers overly generous pay and benfits

the school taxes for those with children would double or triple

time to convert to a 401k style retirement for the teachers and make them pay much more into their healthcare
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#1349921 --- 06/20/12 07:46 PM Re:1 trillion shortfall state pensions [Re: Fart in the Wind]
bluezone Offline
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Quote:
U.S. public pension plans face $1 trillion shortfall
Nationwide, all together, public pension plans are $1 trillion short ... "I don't think our children should have to pay for these high pensions that give us…CBS News· 28 minutes ago


hummmm...............
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#1349924 --- 06/20/12 07:54 PM Re:1 trillion shortfall state pensions [Re: bluezone]
bluezone Offline
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Originally Posted By: Fart in the Wind

Did You Know...
About 90% of funds used to pay NYSTRS benefits come from investment returns and employee contributions?


appears your information is incorrect
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#1350693 --- 06/26/12 07:01 AM Re:1 trillion shortfall state pensions [Re: bluezone]
bluezone Offline
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Registered: 12/19/04
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Quote:
U.S. public pension plans face $1 trillion shortfall
Nationwide, all together, public pension plans are $1 trillion short ... "I don't think our children should have to pay for these high pensions that give us…CBS News· 28 minutes ago



the money should be used to educate the children and not used to give the teachers a comfortable retirement

let the teachers pay into their own retirement like all others must do
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#1350873 --- 06/27/12 06:46 AM Re: 401 k versus state pension plan [Re: Fart in the Wind]
bluezone Offline
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Untouchable Pensions May Be Tested in California
Mar 16, 2012 ... With Stockton, Calif., facing bankruptcy and a $30 million a year pension bill, a provision in the state Constitution that forbids cuts in public ...
http://www.nytimes.com/.../untouchable-pensions-in-california-may-be-put-to-the-test.html?...





Rhode Island Cuts Benefits to Current, Future State Retirees
Tuesday, 26 Jun 2012 | 12:34 PM ET


With anywhere between $2 and $4 trillion in unfunded municipal pension liabilities nationwide, states have been looking for ways to close the gap, Gina Raimondo, Rhode Island’s General Treasurer, told CNBC’s “Squawk on the Street.”

The new law aims to save $4 billion over the next two decades and keep costs steady and predictable for taxpayers, Raimondo said. Slated to be implemented July 1, the law changed the investment assumptions for the pension plan and raised the retirement age.
Rhode Island’s reforms cuts benefits for both existing and future workers. But Raimondo believes it comes down to fairness. “There is an intergenerational fairness issue here,” she said. “I think it is unfair to fix the problem on the backs of only the young workers.”

“This is about reality, we decided it was time to just face the facts, make tough choices and move forward,” Raimondo said.

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