California proposal for pension reform

[Gatordoc50]

Maybe Im blinded from the fact that I have DB, but I dont think it is that sinister. I believe that things just move slower as far as change at the government level ( many reasons for that, as we all know). Reform is definitely occurring, and some plans are going hybrid or defined contribution already. I wouldnt be surprised that 10 years from now, there will be significant change mirroring more the private sector. The percentage of private DB plans is shrinking fast and soon a lot of those receiving pensions will start to die off from old age. My humble guess is the percieved, if not actual, imbalance between private and public will force change.

Perhaps I'm being too cynical. My underlying point is that there isn't any mathematical or scientific thinking involved with DB plans. Trying to provide certainty given uncertain variables is impossible.

 

[Gatordoc50]

Perhaps I'm being too cynical. My underlying point is that there isn't any mathematical or scientific thinking involved with DB plans. Trying to provide certainty given uncertain variables is impossible.

Well, trying isn't impossible. Achieving certainty is. lol

 

[Spanky]

The percentage of private DB plans is shrinking fast ..

IHMO, defined benefit plan in private sector is nearly not in existence.

 

[Spanky]

My underlying point is that there isn't any mathematical or scientific thinking involved with DB plans.

or any thinking at all.

 

[Spanky]

IMO the real problem is that contributions don't change when benefits rise. I don't object in principle to a pension system increasing benefits retroactively, provided the contribution level is also changed as required to pay for the increase.

How will this be implemented? What are the sources of increased contribution levels, current workers or the public?

 

[flyfishnevada]

I don't know about other states, but once retired, I cannot return to any job covered by the state pension system for 30 days. After that, there is a limit to the number of hours on can work before losing pension dollars. So for most of us, once retired, that's it except for some possible part-time work to help with things like medical expenses.

I can't ever work for a public employer in the system (most of them here in Nevada), an not lose my pension while I'm working there. I know a guy who's doing it, but the agency claimed a severe shortage of talent and got a waiver. Still, he isn't padding his pension, just collecting his pension while getting another salary.

We also can't take a job with consultants or contractors for two years after we take our pension. There are ways around it, but for the most part it makes getting a sweetheart deal from a former consultant or contractor difficult.

I think it is a win-win. It might be real money to a few employees near retirement if it applied to them, but the proposed bill affected only new hires.

It's a win-win because the pension system will likely be rescued by these reforms. Even if current retirees or soon to be retirees had to endure some kind of reform (say reduced COLA's or instituting the highest 36 rule), that's better than California telling them in a few years that they aren't going to get a check.

I don't have any problem with these reforms as long as the employee is hired knowing what the rules are and the they stay that way. Changing the rules in the middle of the game is just plain wrong unless the employee agrees to the change.

So many people get mad at the employees for these Cadillac plans, but its the politicians that had to vote them into place. It's easier for politicians to change the rules and blame unions and employees than to stand up and say that they screwed up and tell their constituents that they have to raise taxes to keep their crazy promises. Whether its pensions or SS, we made a promise t people and we need to keep it. We might need to change the rules for the new hires, but for people that are vested, no way. Otherwise, nothing anyone promises means anything.

 

[Chuckanut]

I agree that the abuses such as spiking need to be stopped. Also, the retire and hire back system seems to me to abuse the idea of a pension even if it is legal.

What is legal is not always right. I hate to think that every employee would have to be a lawyer in regards to compensation so that they don't get robbed at some future time. Despite the worst case scenarios that make the headlines, most of us don't retire at 55 with 120% of our highest pay, fully indexed to inflation, fully paid medical, and the chance to double-dip. We end up with closer to 50% of our pay, limited or no COLA, no paid medical, and working part-time at Big Box Building Supply to help out with expenses. Sounds a lot like many working stiffs in private industry. Better than some, worse than some others.

Maybe we need to add reform to our pension laws along with reforming our financial laws. Maybe our Congress could do something about this mess if they stopped worrying about political gain. Maybe we do have the best government money can buy!!!! :-(

 

[youbet]

but its the politicians that had to vote them into place. It's easier for politicians to change the rules and blame unions and employees than to stand up and say that they screwed up and tell their constituents that they have to raise taxes to keep their crazy promises. Whether its pensions or SS, we made a promise t people and we need to keep it. We might need to change the rules for the new hires, but for people that are vested, no way. Otherwise, nothing anyone promises means anything.

Not sure about your state, but here in Illinois NO promise was made that there wouldn't be changes to the pension system going forward. Changes will require legislative action and, especially in a political machine state like Illinois, won't be easily done. But change is possible and would not violate any "promise." Change is public pensions mid-stream isn't any more of a broken promise than changes to SS.

We've already changed the pension system for new hires after 1-1-2011. Now some downstate legislators are looking at changes for active employess. These changes would impact their pensions going forward, but their already earned benefits would NOT be changed. For example, a 25 yr employee who works an additional 5 years and then retires with a total of 30 years would have a pro-rated pension based on 25 years of the current formula and 5 years of the "new" formula. Employees would also have the opportunity to contribute at a higher rate and keep the old system. The 25 year veteran could choose to contribute more and keep his/her current formula for the final five years. Thus senior folks would receive quite a bit of protection.

There just may be no choice but to do this. Despite a HUGE (67%) state income tax increase, we're still free-falling into deficit. The relief from new hires being on a somewhat less generous (but IMO still darn good!) plan will take many years to have much impact.

Or, perhaps the feds can bail out states like Illinois?

 

[Spanky]

We end up with closer to 50% of our pay, limited or no COLA, no paid medical, and working part-time at Big Box Building Supply to help out with expenses. Sounds a lot like many working stiffs in private industry. Better than some, worse than some others.

Most people from the private sector do not receive 50% of pay (average of the highest 3 years). In our case (DW & I), it will be zero % as the companies for which we work do not have a defined benefit or pension plan. We have to rely almost completely on 401K savings to fund our retirement.

 

[Spanky]

Or, perhaps the feds can bail out states like Illinois?

Who is going to bail out the feds?

 

[youbet]

Who is going to bail out the feds?

The printing press?

Inflation?

We'll sell our farmland and fresh water supplies to the Chinese?

Actually, I guess I don't know.

 

[Gatordoc50]

Not sure about your state, but here in Illinois NO promise was made that there wouldn't be changes to the pension system going forward. Changes will require legislative action and, especially in a political machine state like Illinois, won't be easily done. But change is possible and would not violate any "promise." Change is public pensions mid-stream isn't any more of a broken promise than changes to SS.

We've already changed the pension system for new hires after 1-1-2011. Now some downstate legislators are looking at changes for active employess. These changes would impact their pensions going forward, but their already earned benefits would NOT be changed. For example, a 25 yr employee who works an additional 5 years and then retires with a total of 30 years would have a pro-rated pension based on 25 years of the current formula and 5 years of the "new" formula. Employees would also have the opportunity to contribute at a higher rate and keep the old system. The 25 year veteran could choose to contribute more and keep his/her current formula for the final five years. Thus senior folks would receive quite a bit of protection.

There just may be no choice but to do this. Despite a HUGE (67%) state income tax increase, we're still free-falling into deficit. The relief from new hires being on a somewhat less generous plan will take many years to have much impact.

Perhaps the feds can bail out states like Illinois?

In the eight months between the pension change and actual implementation, Illinois hired 19000 new employees to get them under the wire and qualified under the old rules.

 

[ERD50]

... We end up with closer to 50% of our pay, limited or no COLA, no paid medical, and working part-time at Big Box Building Supply to help out with expenses. Sounds a lot like many working stiffs in private industry. Better than some, worse than some others.

Is that 50% available at 55 YO? If so, that makes it equivalent to 100% at 65 YO (the normal retirement age for private sector pensions). COLA about doubles the value again, so even 'limited COLA' is significant.


-ERD50

 

[kyounge1956]

IMO the real problem is that contributions don't change when benefits rise. I don't object in principle to a pension system increasing benefits retroactively, provided the contribution level is also changed as required to pay for the increase.

How will this be implemented? What are the sources of increased contribution levels, current workers or the public?

That would have to be settled by negotiation between all parties concerned. If they can't agree, then don't do it. It occurred to me that this is, in a way, what happened in the pension system I belong to, but it happened backwards. The floor COLA ordinance caused retroactive increases in the benefit (in other words the floor is raised for everyone, including people who retired before the ordinance was passed), then later, the contribution rate from both employer and employees was raised. The increase in contributions should have been before, or at the very least simultaneous with, the increase in benefits. I am not saying that pension systems ought to increase benefits retroactively, only that if a retirement system decides to do so, they should change the funding to match, not make increases as if the money to pay for them would appear magically from nowhere.