The 16 States That are Killing Their Pensions: 24/7 Wall Street

For decades, public employees have had pension plans identical to those provided by most large American companies. These are defined benefit plans that pay workers a fixed sum each year after they have retired based on the amount of years they have worked and their salaries at the time of retirement. The trouble this causes for governments is that these funds often do not grow as quickly as the obligations they have to pay out, creating a budgetary crisis. It is not unusual to for a plan to have an obligation to offer its members a guaranteed level of growth which allows retirees to be able to rely on future payments, no matter how the funds perform financially. During a period like the market collapse of 2008, the value of many large pension funds plunged. Pension fund obligations also crippled many large corporations such as General Motors so badly that they filed for Chapter 11 bankruptcy to escape their obligations.

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