Illinois Pension Reform

[ripper1]

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Originally Posted by Chuckanut +1!! Amen! So Say We All!!

Where does this 90% of pay come in at 30 years for anybody. The highest you can get with the municipal of chicago is 80% after 33 years at age 50. But how many people started at age 17 and got this incredible amount.

[Texas Proud]

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Originally Posted by youbet Thus most private employers have gotten out of the pension game. Our esteemed politicians came up with a pretty good set of rules and regs for private employers to back out of pension plans while still giving reasonable protection to employees. But they forgot to write a set of rules for themselves in the public sector leaving situations like this where folks are trying to brainstorm some unique solution to facilitate change. Public employees need to be on SS with a 401k (match to be determined by competitive needs). But there is no defined path to get from where we are to there as was provided for private employers. An alternative would be a hybrid plan such as Wisconsins which seems to be muddling through the current tough economic times maintaining near 100% funding. The beauty of Wisconsin's system is that payouts vary with market performance down to a floor level. With the recent poor investment performance of their portfolio, prior increases have been partially withdrawn (annuitants are actually getting smaller payments) but if/when their portfolio recovers and grows, they'll get increases again. It flexes with the market. And Wisconsin has always funded the system per requirements.

We have that pesky thing called a Constitution to deal with.... so States get to do what they wish on their pensions.... if they don't fund them, so be it... it they put in laws to not allow any reduction in them.... so be it... it is not a federal matter....

And as long as my federal tax dollars does not go to bail out Illinois or any other state... I don't care one way or the other.... I just post to air my thinking and to get some other views... now if Texas wants to get more taxes out of me to pay some of the high pensions.... well, I will be screaming loud then...

[Chuckanut]

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Originally Posted by ripper1 Where does this 90% of pay come in at 30 years for anybody. The highest you can get with the municipal of chicago is 80% after 33 years at age 50. But how many people started at age 17 and got this incredible amount.

I realize that 99.999% of public employeers do not get anywhere near this percentage amount. I think it refers to certain people who take advantage of the system to pump-up their pensions in ways that, while technically legal, where not intended. For example, a while back we discussed some fellow who, if I recall correctly, almost doubled his pension by working 3-4 months on a special contract just before he retired.

[eytonxav]

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Originally Posted by Goonie The State is "supposed to" be making deposits into the pension funds. However, instead, the State acting as a bank robber, just misappropriates those funds for other projects. And the State, acting as the "guard", not only allows it, but encourages it! The State has full jurisdiction over the entire thing, and has completely ignored ALL of the Unions complaints about he matter. And yet the politicians and the media keep trying to spin it that somehow it's really not the State's fault, and they want the employees and retirees to make up for State's incompetence.

Good point, and it seems like the same could be said of the Fed gummit with respect to SS. How many politicians want to take credit for that?

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Originally Posted by Midpack Welcome to globalization...

Well, the middle class in this country certainly has gone down hill (courtesy of outsourcing ie globalization) while the lower classes in many other countries that have received the benefits of outsourcing has been on the rise. Same with tax dollars and ability to spend $ to support our own economy, they have been outsourced as well. Still seems to me that using the outsourcing band wagon to fix our cost control problems in various US businesses dating back to the late 80s and 90s is one of the key root causes of our current economic situation.

[ripper1]

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Originally Posted by Chuckanut I realize that 99.999% of public employeers do not get anywhere near this percentage amount. I think it refers to certain people who take advantage of the system to pump-up their pensions in ways that, while technically legal, where not intended. For example, a while back we discussed some fellow who, if I recall correctly, almost doubled his pension by working 3-4 months on a special contract just before he retired.

I know what you are referring to now. There has been a lot of pension spiking for employees who worked for the city and then became union officials for a few years at an exorbitant salary and then were rewarded outrageous pensions based on their work with the unions. Instead of getting 40,000 they were getting in the 100,000 and up range. Again these were a privileged few. You wonder why people are outraged.

[ziggy29]

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Originally Posted by ripper1 Where does this 90% of pay come in at 30 years for anybody. The highest you can get with the municipal of chicago is 80% after 33 years at age 50. But how many people started at age 17 and got this incredible amount.

It's mostly for police and fire, but yeah, google "3 at 50 pension" and you'll get a lot of hits. As far as I've read, these usually max out at 90% after 30 years at age 50+.

It seems to be particularly common in California. I used it an example of a pension plan policy that is unsustainable, like the other examples I pointed to (unreasonable expectations on returns, inadequate current funding, tolerance of spiking). Never claimed it was the norm for public employees (especially those outside law enforcement and fire protection).

As to your question, keep in mind that 33 years ago it was a lot more possible to get a decent, career-oriented job right out of high school than it is today, so they very well could have started there at age 18.

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Originally Posted by ripper1 I know what you are referring to now. There has been a lot of pension spiking for employees who worked for the city and then became union officials for a few years at an exorbitant salary and then were rewarded outrageous pensions based on their work with the unions. Instead of getting 40,000 they were getting in the 100,000 and up range. Again these were a privileged few. You wonder why people are outraged.

It certainly is the exception, but it's also a very visible example of a practice that feels corrupt and a big ripoff. This would seem to be "low hanging fruit" to pick in terms of pension reforms. Nobody, except the few people who take advantage of it, benefits from it. Most average pensioners are hurt twice by it: once by undermining the financial strength and sustainability of their pension plan, and again by turning public opinion against public sector pension programs. The former threatens its financial viability; the latter threatens its political survival.

[ripper1]

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Originally Posted by ziggy29 It's mostly for police and fire, but yeah, google "3 at 50 pension" and you'll get a lot of hits. As far as I've read, these usually max out at 90% after 30 years at age 50+. It seems to be particularly common in California. I used it an example of a pension plan policy that is unsustainable, like the other examples I pointed to (unreasonable expectations on returns, inadequate current funding, tolerance of spiking). Never claimed it was the norm for public employees (especially those outside law enforcement and fire protection). As to your question, keep in mind that 33 years ago it was a lot more possible to get a decent, career-oriented job right out of high school than it is today, so they very well could have started there at age 18.

I saw your example and I just want to say in Chicago the highest you can get from the pensions here is 80% with 33.5 years of service as long as you are 50 and over. The Police and Fire here are maxed I believe at 75%. Still, yes, I know a good deal.

[ziggy29]

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Originally Posted by ripper1 I saw your example and I just want to say in Chicago the highest you can get from the pensions here is 80% with 33.5 years of service as long as you are 50 and over. The Police and Fire here are maxed I believe at 75%. Still, yes, I know a good deal.

Understood. As I said, the "3 at 50" deal seems to be a much more common practice in California. And that's also where a disproportionate number of municipal governments are teetering on the brink of insolvency -- with pension liabilities being a pretty common contributing factor. And compounding it was the fact that in many of these plans, only your last year's compensation was factored in (as opposed to the average of last 3 years or last 5), AND bonuses, overtime, unused sick leave and vacation as well as salary increases from 11th hour sham promotions could be included in the compensation calculation. This resulted in some people getting more -- occasionally much more -- in a pension than they ever made in base pay.

Even most advocates of maintaining and propping up ailing public pension plans would agree that this is a practice that fails the smell test and needs to be reformed, even if they agree on little else.

[Midpack]

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Originally Posted by DFW_M5 Still seems to me that using the outsourcing band wagon to fix our cost control problems in various US businesses dating back to the late 80s and 90s is one of the key root causes of our current economic situation.

How would you have fixed the "cost control problems in various US businesses dating back to the late 80s and 90s?"

[ripper1]

At the Laborers and Annuity Benefit Fund of Chicago it works this way. The multiplier is 2.4 x yrs of service. Age 60 with 10 yrs of serv would be eligible for an annuity of 24%. Next level at age 55 with 25 years of serv would get 60%. Age 50 with 33.3 years would get 80%. These are minimums to qualify for an annuity at these age points. Of course at any age above 50 if you work 33.3 you would be eligible for the max of 80%. The Fire, Police, and Municipal have varying degrees based on this. The deductions include federal tax and a city subsidized health premium of about half. I currently pay 815 for my health deduction monthly for my plan. These pensions are not taxed by the state but I believe they should be and would go a long way toward shoring up the current debacle.

[ripper1]

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Originally Posted by ziggy29 Understood. As I said, the "3 at 50" deal seems to be a much more common practice in California. And that's also where a disproportionate number of municipal governments are teetering on the brink of insolvency -- with pension liabilities being a pretty common contributing factor. And compounding it was the fact that in many of these plans, only your last year's compensation was factored in (as opposed to the average of last 3 years or last 5), AND bonuses, overtime, unused sick leave and vacation as well as salary increases from 11th hour sham promotions could be included in the compensation calculation. This resulted in some people getting more -- occasionally much more -- in a pension than they ever made in base pay. Even most advocates of maintaining and propping up ailing public pension plans would agree that this is a practice that fails the smell test and needs to be reformed, even if they agree on little else.

New employees after 1/2011 pensions here in Chicago are based on the last 8 yrs average. When I retired it was based on best 4 consecitive out the last 10. This usually was your last 4 years average.

[eytonxav]

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Originally Posted by Midpack How would you have fixed the "cost control problems in various US businesses dating back to the late 80s and 90s?"

How did Southwest Airlines thrive while companies like AA floundered?

No simple answer, but it would involve better leadership/processes/technology/market understanding/quality/innovation and working to keep workers pay/benefits at reasonable levels vs shipping their jobs overseas. Same could be said about execs that gouged their shareholders/employees with bogus pay for performance schemes to the detriment of their company.

[Chuckanut]

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Originally Posted by ziggy29 It's mostly for police and fire, but yeah, google "3 at 50 pension" and you'll get a lot of hits. As far as I've read, these usually max out at 90% after 30 years at age 50+.

I used to work with a lady whose father was a prison guard. As I recall she told me he had retired at 52. The policy was clear: guards worked 20 years and retired. The reason was the high stress level of the job.

[eytonxav]

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Originally Posted by Midpack You want to choose an example from an industry protected from foreign competion? Foreign airlines are essentially not allowed to fly domestic routes, only international. Choose an industry that has faced foreign competition since that's a large part of what forced domestic companies to reduce costs drastically to survive over the past 3-4 decades - like autos, consumer electronics, shoes & apparel, etc. And just Google to see what domestic airlines think of allowing foreign airlines to handle domestic routes. Unfortunately much higher labor wages & benefits and (to a lesser extent, only because it's a relatively smaller group) excessive exec compensation indeed played a role. Do you think "leadership/processes/technology/market understanding/quality/innovation" should have been able to overcome US labor costs at 10-20X labor in Mexico, China, etc. That's what we faced, as did many basic industries in the US. While there are legitimate (partial) solutions in your answer, as someone confronted with foreign competition who had to actually face gut wrenching cost reduction decisions throughout the 80s, 90s, 00s - it's hard to believe that no one in autos, consumer electronics, shoes & apparel, etc. was smart enough to find that magic combination that would have kept the US viable. Bottom line: we/the US needs to do better and we can, but it's way more challenging than many people want to believe. Some of the industries we've lost may never come back...

As I indicated there are no easy answers, but the US has always been known for its ingenuity and industrialization. Back then, outsourcing seemed to be the silver bullet (eg quick fix) to overcome cheap foreign labor, however I am not sure anyone envisioned back then what the end game would become after years of outsourcing. If they had, I suspect other approaches would have been pursued more vigorously before throwing in the towel to the outsourcing craze. I also suspect the govt could have done more to prevent dumping in our market.

[ziggy29]

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Originally Posted by DFW_M5 As I indicated there are no easy answers, but the US has always been known for its ingenuity and industrialization. Back then, outsourcing seemed to be the silver bullet (eg quick fix) to overcome cheap foreign labor, however I am not sure anyone envisioned back then what the end game would become after years of outsourcing. If they had, I suspect other approaches would have been pursued more vigorously before throwing in the towel to the outsourcing craze. I also suspect the govt could have done more to prevent dumping in our market.

I think many areas of IT are done for in terms of offshoring and won't come back. It is, and will always be, prohibitively cheap to move billions of zeroes and ones per second around the world. The "cost" to deliver a couple gigabytes of code from India to Silicon Valley is almost zero and probably always will be.

Manufacturing may make a partial comeback depending on what happens to energy prices. If energy prices continue to skyrocket, at some point the extra costs of shipping manufactured goods to the US from China could offset the savings in labor costs enough to encourage a reduced by viable manufacturing base to return.

[ripper1]

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Originally Posted by Midpack I acknowledged some merit to your answer, however unspecific. But again, overcoming labor costs that are 10-20 greater than cheap labor offshore where lesser skills are adequate is beyond US ingenuity IME. Depends on the industry, but labor is a big part of cost for some industries. While countries with cheaper labor will lose some of their lower wage rates as they develop middle classes, parity in skills will only grow closer - we have our work cut out for us indeed. If we don't keep reinventing ourselves, we'll get run over (even more). And as Ziggy mentioned, one of the flip sides of higher transportation energy costs may actually partially offset our higher labor costs as long distance freight becomes higher for offshore producers.

I think this belongs in another thread. How does all this tie in with pension reform in Illinois. C'mon, moderators.

[Midpack]

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Originally Posted by ripper1 I think this belongs in another thread. How does all this tie in with pension reform in Illinois. C'mon, moderators.

You're right and I've removed my off topic posts that could still be edited, though it happens here all the time. Next time maybe use the report icon in the lower left corner so Mods readily see it...sorry.

[eytonxav]

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Originally Posted by ziggy29 I think many areas of IT are done for in terms of offshoring and won't come back. It is, and will always be, prohibitively cheap to move billions of zeroes and ones per second around the world. The "cost" to deliver a couple gigabytes of code from India to Silicon Valley is almost zero and probably always will be. Manufacturing may make a partial comeback depending on what happens to energy prices. If energy prices continue to skyrocket, at some point the extra costs of shipping manufactured goods to the US from China could offset the savings in labor costs enough to encourage a reduced by viable manufacturing base to return.

Yep, offshoring hit white collar jobs hard back in that same timeframe. Not just IT, but other back office functions as well and we could see more to come until we say enough is enough.

As to shipping bits around the world, yes its cheap, but I must say you get what you pay for. I have personally seen many complex software development projects and even not so complex ones go down hill as a result. Also, from the average Joe's perspective, who here enjoys talking to some call center located in Bangalore for support. I don't know whose standard of quality and customer sat that meets, but its not my of how to deliver great service and I hope to see this business model reversed in my lifetime.

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Originally Posted by Midpack I acknowledged some merit to your answer, however unspecific. But again, overcoming labor costs that are 10-20 greater than cheap labor offshore where lesser skills are adequate is beyond US ingenuity IME. Depends on the industry, but labor is a big part of cost for some industries. While countries with cheaper labor will lose some of their lower wage rates as they develop middle classes, parity in skills will only grow closer - we have our work cut out for us indeed. If we don't keep reinventing ourselves, we'll get run over (even more). And as Ziggy mentioned, one of the flip sides of higher transportation energy costs may actually partially offset our higher labor costs as long distance freight becomes higher for offshore producers.

Its not just transportation costs that will bring this about, but hopefully we will see some resurgence in manuf in this country and the gov't can certailny help facilitate that. You should not lose sight of the foreign auto companies that have brought their manuf to the US, as the US labor costs in itself was not something they could not overcome.

Based on your perspective of the world, have you given up all hope that this situation will remain indefinitely? I for one have not.

Sorry for the hijack, but this all started with Midpack's comment about globalization. Mods, please move or delete.

[Bestwifeever]

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Originally Posted by ripper1 I think this belongs in another thread. How does all this tie in with pension reform in Illinois. C'mon, moderators.

[mod hat on]Threads go off topic all the time and may or may not meander back to center--nothing in the Community Rules against that, so not really a moderation issue.

You can report a post and suggest the moderators create a separate thread, although it is usually difficult to pull out the off topic posts (especially in an 11-page thread) and still keep sense in both the original and the new thread. You can also start a new thread on your own.[/mod hat off]

[REWahoo]

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Originally Posted by Bestwifeever [mod hat on]Threads go off topic all the time and may or may not meander back to center--nothing in the Community Rules against that, so not really a moderation issue. [/mod hat off]

Yep, far from it. Note this quote from http://www.early-retirement.org/foru...org-53657.html:

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This thread also exemplifies another personality trait of the forum: thread hijacking. While many forums have specific rules prohibiting any attempt to vary from the initial subject, no such rule exists at E-R.org. “Threadjacking” is a high art form on the board with the underlying concept that if the subject bears discussing, thread participants will eventually steer it back on course. This free-wheeling, often irreverent approach, combined with the irrepressible sense of humor displayed by many posters, does occasionally irritate new members – until they understand this is merely part of the entertainment package provided by the forum – free of charge!