There are three classes of pension systems in the USA:
1) Pensions that are exclusively governmental. They apply only to government employees and are managed exclusively by government.
2) Pensions that are partly governmental and partly private. They serve employees of private employers but are managed by the government. Social Security is the prime example.
3) Pensions that, except for some government regulation, are completely private. They serve the employees of private companies and are largely managed by private entities.
Last week, in “Pension Panic,” I argued that financial problems facing the first class of pensions (cities like Detroit and Chicago and states like Illinois) were evidence of a growing problem confronting retired government employees: the purely governmental pension plans would be among the first to be “sacrificed” and looted by their former government employer, leaving the government retirees bankrupt.
This week, I’ll consider problems faced by the second class of pensions—those that are partly governmental and partly private—like Social Security.