Illinois Pension Reform

[ripper1]

Quote:

Originally Posted by ziggy29 Just a word of advice: if you want the public (especially those who *had* private pensions and lost them) to come around to your point of view, unsympathetically dismissing their legitimate concerns and not even trying to understand why they feel like second class citizens getting shafted by the system probably isn't the best way to go. Why would you expect them to want to prop up your retirement benefits at their expense when all you do is make them sound like a bunch of jealous whiners who don't have any legitimate reasons for feeling as they do? I know y'all don't *want* to lose your pensions and I don't want to see anyone else lose them, but I think if you *had* lost yours already you might understand a little better why some people are pretty pissed off.

All right, Ziggy, I apologize. I don't think I am referring to posters here but there is a lot of bashing that goes on elsewhere where public employees are demonized. And I don't expect taxpayers to prop up the system either. I think Gov Quinn pretty much said this would not fall on the back of the taxpayers. Hey, as a retiree I am willing to sacrifice some by perhaps losing the COLA entirely. Whatever it takes to keep the system solvent for everybody.

[ripper1]

Quote:

Originally Posted by MichaelB I was just looking at some numbers. Illinois GDP is around $650B. Over 20 years that would be $13T. The PV of the pension shortfall is around $65B. So 0.5% of the GDP over the next 20 years would be needed to completely shore up pension obligations. Voters and political leadership may still conspire to take a negative path, but the state certainly has the resources to meet this obligation.

Taxing the pensions and altering the COLA would probably do the trick.

[youbet]

Quote:

Originally Posted by ripper1 Hey, as a retiree I am willing to sacrifice some by perhaps losing the COLA entirely. Whatever it takes to keep the system solvent for everybody.

While a system saving sacrifice is noble, I think what Illinois public retirees really need to look for are modifications to the system which make it sustainable over the long run without further diminishments to already earned benefits. It's one thing for active employees and current retirees to think they are/were working for some level of pension benefit and then have some of that taken away after the benefits have vested. It's another to have it occur again and again. I'm not seeing much in the proposals to obligate the state to keep up their end of the bargains such as having the state contribution be mandatory instead of "suggested."

The political climate in Illinois is not one where trust or integrity are important words. Some of the politicians are crooks. There is a culture of one-up-man-ship concerning ploys to cook the books. And there is an unrivaled skill set in the area of diverting responsibility. For example, TRS members have faithfully paid in their 9%+. It was the politicians who diverted state contributions (except to the pension plan they belong to!) bringing the system to this point. Yet, new, suggested plans seem to fret over having employees pay more. Shouldn't they also give at least a tiny amount of thought to having the state meet its obligations in the future? Maybe just a little, you know, until all this fuss blows over and we can get back to buisness as usual?

So, yes, sacrifice and collect less than the plan you vested under promised. But look for some hint that the next sacrifice won't be just a few years down the road.

In my own view, I'd like to see state employees become members of SS despite the state claiming they can't afford the employer's contribution. Then have local taxing bodies such as school districts, municipalities, townships, etc., offer 401k's with matching. The matching level can be whatever they need to offer to attract employees in their particular area. No DBP beyond SS. No pools of money, pension funds, for the politicians to lust after. Just send the employer's SS contribution to the Feds and allow local hiring agencies to provide 401ks.

Quinn's head will explode. But it'll be fun to watch.

EDIT: The title of this thread is "Illinois Pension Reform." And "reform" is what I'm looking for as opposed to limiting change to quick patches involving sacrifices by retirees but with zero change to the employer's responsibility.

[Bestwifeever]

Quote:

Originally Posted by ripper1 Taxing the pensions and altering the COLA would probably do the trick.

+1.

[ripper1]

Quote:

Originally Posted by youbet While a system saving sacrifice is noble, I think what Illinois public retirees really need to look for are modifications to the system which make it sustainable over the long run without further diminishments to already earned benefits. It's one thing for active employees and current retirees to think they are/were working for some level of pension benefit and then have some of that taken away after the benefits have vested. It's another to have it occur again and again. I'm not seeing much in the proposals to obligate the state to keep up their end of the bargains such as having the state contribution be mandatory instead of "suggested." The political climate in Illinois is not one where trust or integrity are important words. Some of the politicians are crooks. There is a culture of one-up-man-ship concerning ploys to cook the books. And there is an unrivaled skill set in the area of diverting responsibility. For example, TRS members have faithfully paid in their 9%+. It was the politicians who diverted state contributions (except to the pension plan they belong to!) bringing the system to this point. Yet, new, suggested plans seem to fret over having employees pay more. Shouldn't they also give at least a tiny amount of thought to having the state meet its obligations in the future? Maybe just a little, you know, until all this fuss blows over and we can get back to buisness as usual? So, yes, sacrifice and collect less than the plan you vested under promised. But look for some hint that the next sacrifice won't be just a few years down the road. In my own view, I'd like to see state employees become members of SS despite the state claiming they can't afford the employer's contribution. Then have local taxing bodies such as school districts, municipalities, townships, etc., offer 401k's with matching. The matching level can be whatever they need to offer to attract employees in their particular area. No DBP beyond SS. No pools of money, pension funds, for the politicians to lust after. Just send the employer's SS contribution to the Feds and allow local hiring agencies to provide 401ks. Quinn's head will explode. But it'll be fun to watch.

I think for unions to go along with this the state's obligation to its contribution would definitely have to be mandatory. If there is no guarantee there than down the road they would be looking for more cuts.

[youbet]

Quote:

Originally Posted by ripper1 I think for unions to go along with this the state's obligation to its contribution would definitely have to be mandatory. If there is no guarantee there than down the road they would be looking for more cuts.

Remember, when the union boss and the politician get up in the morning, their feet are on the floor next to the same bed. How do you think we got into the current jam?

That's why I'd like to see the pension reforms involve going to SS and a 401k type situation. The Feds (if we can trust them.......) would be responsible for seeing that the employer's contribution is paid into SS. The 401k money, deposited with private brokerages such as Vanguard, Fidelity, etc., would always be the employee's without vesting or any way for the politicians to dip in for a tasty snack.

The most implicated in this whole mess are the politicians and the labor leaders followed closely by the pension fund managers and boards. Don't trust them. IMHO, that is.

[ripper1]

Quote:

Originally Posted by youbet Remember, when the union boss and the politician get up in the morning, their feet are on the floor next to the same bed. How do you think we got into the current jam?

Ouch...that hurts.

[ripper1]

It should be brought to a vote by all the members instead of them making the decision for you.

[Midpack]

Quote:

Originally Posted by youbet Why would you complain since you were treated with kid gloves? Freezing a pension is no issue. You're receiving everything you earned. And I'm glad you didn't lose any earned benefits in the change. But being treated well is nothing to complain about, so why would you?

Quote:

Originally Posted by youbet Was you pension actually "lost" Zig? Or was it frozen? I think we're getting pulled between the idea of having a pension frozen (happened where I worked too......) and having already earned pension benefits withdrawn or reduced.

You missed my point on complaining entirely.

I am glad to know "freezing a pension is [categorically] no issue," and that it's completely different than having already earned pension benefits withdrawn or reduced by a member posting here who has not yet retired. Still trying to reconcile that distinction...

My pension was frozen at age 40 after working 19 years, and the resulting lump sum at age 57 works out to 5% of our portfolio. The difference between frozen and lost outright isn't always much different.

[youbet]

Quote:

Originally Posted by ripper1 It should be brought to a vote by all the members instead of them making the decision for you.

That might help........

But what Illinois public employees need right now is an advocate with (1) no personal stake in the game and (2) who understands what happens when pension funds, machine politics, unions and greed blend together.

Unfortunately, the "reform" (what a joke that term is in this context) will include union involvement but not through rank and file referendums. It'll happen in smokey back rooms where politicians and union bosses will work out what will happen and who will win the next primaries. (Remember, in Illinois, primary elections are more important than the final elections since the winning party is fairly easy to predict.) If they agree that party survival is best supported by a short term pension funding fix, which will need to be revisited a few years down the road, then that's what it will be. They'll be retired and on state pensions themselves by then!

Anyway, as I've been saying, we didn't get in this mess overnight or by accident. And it wasn't the 3rd grade teacher in Peoria or the guy running the snow plow in East St Louis who were naughty. But, in the end, they'll pay the price before the wheels of this runaway bus ever get back on the road. I hope some of them join us on the ER board!

[Midpack]

Quote:

Originally Posted by youbet I'm missing ya here. Whatdaya talking about?

As usual we have several story lines going at once, but I'm at least as much to blame as anyone else. Some are talking about current retirees (and I think we all agree they should be last to be "harmed" if at all) and some are also extending "what we're owed" to active employees (from the public sector) who have not yet retired. Unfortunately they may have to accept higher retirement ages, reduced benefits/COLA, freezing and/or higher contributions just as (but not because of) many private sector employees have/will. Most of the responses here, including yours, seem to reflect a shared sacrifice in response - that's entirely fair.

[clifp]

Quote:

Originally Posted by Midpack You missed my point on complaining entirely. I am glad to know "freezing a pension is [categorically] no issue," and that it's completely different than having already earned pension benefits withdrawn or reduced by a member posting here who has not yet retired. Still trying to reconcile that distinction... My pension was frozen at age 40 after working 19 years, and the resulting lump sum at age 57 works out to 5% of our portfolio. The difference between frozen and lost outright isn't always much different.

Well put. There is no doubt in mind that vast majority of folks private system pension was frozen and/or converted into a defined contribution system got hosed.

It is completely different than being able to collect 41.8% of your final salary at age 62 like you would have been able to if you had worked for the State of Illinois and the same thing happened

[youbet]

Quote:

Originally Posted by clifp Well put. There is no doubt in mind that vast majority of folks private system pension was frozen and/or converted into a defined contribution system got hosed. It is completely different than being able to collect 41.8% of your final salary at age 62 like you would have been able to if you had worked for the State of Illinois and the same thing happened

I guess it's all an interpretation of levels of being hosed.......... Did ya get hosed, really hosed or hosed even some more? Maybe the dreaded triple hosing? But most everyone is getting "da hose."

How did you come up with 41.8%? My reference is comparing a frozen but known pension with a pension where vested benefits are subject to change, even as the benefit is being paid. We don't know where the state of the Illinois employee would be at. I think you're assuming today's rules. I'm doubting that's going to happen. The funding numbers are really bad and there seems to be little interest in finding ways to make up today for missed employer contributions yesterday. I think it's all over. Let's just hope the "fix" involves SS and 401k's and no more politician - pension fund combos!

I will say that when my son, who spent a decade at the same MegaCorp I worked at, got converted to a cash balance plan, it worked in his favor. When he left with ten years under his belt, he got to roll over several $10k's to an IRA. Had this still been the traditional DBP, he'd have left with a frozen pension for 10 yrs service collectable decades later (with no inflation adjustment).

So I guess it depends on the circumstances. I don't trust anyone on pensions anymore and have gotten to the point where I'm always ready to prefer plans where the earned benefit is irrevocably turned over to the employee the moment it happens. Ie, your employer gives you a 401k match, it goes into a plan administered by another private entity, supervised by fed gov't regs and in an account totally under the employee's control.

As I said, I've been through the whole catastrophe. Traditional DBP to cash balance to 401k with match to 401k with no match to fired and booted into the parking lot by a burley security guard with no sense of humor.......

[youbet]

Quote:

Originally Posted by Midpack My pension was frozen at age 40 after working 19 years, and the resulting lump sum at age 57 works out to 5% of our portfolio. The difference between frozen and lost outright isn't always much different.

I should mention...... Congratulations! From reading zillions of your posts I was under the impression you did an outstanding job during your accumulation phase and retired well heeled. But it's great to see some relative numbers. Excellent! I'm a huge fan of folks who FIRE primarily based on portfolios. We're about 50 - 50 here as I've mentioned several times.

Those percentage numbers can vary quite a bit. When my son got his lump sum to roll over, and with only 10 yrs, it amounted to more than half of his portfolio. But he has some time to go and will perhaps eventually accumulate a portfolio where his lump sum will also only amount to 5%.

[clifp]

Quote:

Originally Posted by youbet I guess it's all an interpretation of levels of being hosed.......... Did ya get hosed, really hosed or hosed even some more? Maybe the dreaded triple hosing? But most everyone is getting "da hose." How did you come up with 41.8%? As I said, I've been through the whole catastrophe. Traditional DBP to cash balance to 401k with match to 401k with no match to fired and booted into the parking lot by a burley security guard with no sense of humor.......

I just multiplied the number of years worked by MidPack by state of IL multiplier 2.2x x years of service = 41.8%. One of the many differences between public and private pension is what happens to pension are modified or frozen. Typically in the case of public pension they still receive
the full benefit. So for example when a public pension plan changes the multiplier from say 2.2 to 2. The pension would be 19 years * 2.2 and if Midpack retired at 62 with 22 more years at 2% a year.

In the case of private pensions that get converted to a cash balance the benefit is based on current salary not the projected salary at age 62. So the private ends with a very modest lump sum at the end.

[youbet]

Quote:

Originally Posted by clifp I just multiplied the number of years worked by MidPack by state of IL multiplier 2.2x x years of service = 41.8%. One of the many differences between public and private pension is what happens to pension are modified or frozen. Typically in the case of public pension they still receive the full benefit. So for example when a public pension plan changes the multiplier from say 2.2 to 2. The pension would be 19 years * 2.2 and if Midpack retired at 62 with 22 more years at 2% a year. In the case of private pensions that get converted to a cash balance the benefit is based on current salary not the projected salary at age 62. So the private ends with a very modest lump sum at the end.

OK clifp. I thought that might have been what you were doing.

We're kind of doing apples to oranges. My comments were concerning the assumption that already earned benefits are withdrawn or reduced, as is being considered in Illinois. You did your calculation on the existing benefits as though they were ongoing or that benefits already earned were being maintained at the level at which they were earned. I think that's very unlikely.

Given what you did, I agree completely. It's just not what I was talking about.

And as I mentioned above, I'm quite familar with conversions to cash balance, freezes and such.

[ripper1]

For those of you who get channel 11 in Chicago (WTTW) there is a show called Chicago Tonight. There will be Union representatives and the Civic Committee of the Commercial Club of Chicago debating the issue at hand. Ought to be fun...

[ripper1]

I believe it starts at 7pm.

[Midpack]

Quote:

Originally Posted by ripper1 I believe it starts at 7pm.

Thanks, DVR set (can't watch live)...

[Midpack]

Quote:

Originally Posted by youbet I should mention...... Congratulations! From reading zillions of your posts I was under the impression you did an outstanding job during your accumulation phase and retired well heeled. But it's great to see some relative numbers.

Nice self serving spin thinly disguised as congrats...