Pension debt

It was early in my career as a financial planner that ERISA (employee retirement income security act) was passed and I was interested in pension planning so I became quite familiar with the act. The main thrust was to guarantee that the money put into pension plans was enough to cover the future needs of retirees. The people responsible for these plans were called fiduciaries and the law clearly stated that they would be responsible for any underfunded amounts, (shortages). Most pension plans at that time as are most public plans today were called defined benefit plans. These government agencies promised their employees that at retirement they would receive a percentage of their salaries. In addition most plans had a cost of living clause in them designed to offset the effects of inflation and therein lies the beginning of the problem. In the late 70’s and early 80’s the country experienced double digit inflation and this caused pensions to become underfunded. Added to that, was the bargaining power that public unions gained during the past 40 years. Public entities that did not have the money to offer current wage increases resolved contract issues by offering increased pension benefits. People today are alarmed when they hear things like student debt is now over one trillion dollars but most are unaware that pension debt is over 6 trillion. While the recent rise in the stock market has slowed the growth in debt it has not reduced the debt. How were these funds allowed to underfund when ERISA lays out rules to prevent this? They just projected a higher rate of return and then increased the benefits. While ERISA stated that conservative rates of return be used in calculating contributions to the plan states like Illinois and California used higher rates to meet their commitments. When bank CD”S were paying 1% California was planning on 8% return on investments. Will these fiduciaries be held responsible for these underfunded plans? Don’t bet on it.