A town in California is broke. The city had been warned several times over the last...

A town in California is broke. The city had been warned several times over the last few years that it did not have enough money to pay out future pensioners. There is a law that says the town must pay promised benefits. The town says that it cannot, no money. You be the judge. Who wins here? The town or the pensioners? Why did they win and what did you cite for the reasons?

Expert Solution

As per the law that states that the town should pay the promised benefits and the individuals have already contributed through the necessary deductions to the city government. Then, the judgment should go in favor of the pensioners. These pensioners win because these people followed the rules and contributed to the social security schemes. It was the failure on the part of the city management or government to channelize the funds to produce the wealth that could be paid back as pensions. So, defaulting on the promises made by the city government at the time of issuing a pension, will create chaos in the society and it will create a conflict between the city and the people.
The other prominent reason is the responsibility of the city to protect its old age people as they cannot earn for themselves. Not helping them, will create an additional burden on other programs such as health care and Federal programs. So, failure of the city government to effectively manage the contributions made by the individuals, cannot be used as an excuse to not to issue the pensions.
Here, the city can do to modify the deduction rates, reorganize the way the funds are invested and spending patter is modified to meet the future obligations. Laws related to the issue of the pension, can also be modified to facilitate the issues of the changing environment.

keosha answered 8 months ago

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