More Pension Fund Trouble

[ERD50]

Don't worry Al, I understood every word you wrote. I don't get too wound up about punctuation on an internet forum either.

Here's a little something that was e-mailed to me a while back (allegedly from Cambridge University ):

Olny srmat poelpe can raed tihs.
I cdnuolt blveiee taht I cluod aulaclty uesdnatnrd waht I was rdanieg. The phaonmneal pweor of the hmuan mnid, aoccdrnig to a rscheearch at Cmabrigde Uinervtisy, it deosn't mttaer in waht oredr the ltteers in a wrod are, the olny iprmoatnt tihng is taht the frist and lsat ltteer be in the rghit pclae. The rset can be a taotl mses and you can sitll raed it wouthit a porbelm. Tihs is bcuseae the huamn mnid deos not raed ervey lteter by istlef, but the wrod as a wlohe. Amzanig huh? yaeh and I awlyas tghuhot slpeling was ipmorantt! if you can raed tihs psas it on !!

That is because it includes punctuation and capitals. Try again - why bother?

olny srmat poelpe can raed tihs i cdnuolt blveiee taht i cluod aulaclty uesdnatnrd waht i was rdanieg the phaonmneal pweor of the hmuan mnid aoccdrnig to a rscheearch at cmabrigde uinervtisy it deosn't mttaer in waht oredr the ltteers in a wrod are the olny iprmoatnt tihng is taht the frist and lsat ltteer be in the rghit pclae the rset can be a taotl mses and you can sitll raed it wouthit a porbelm tihs is bcuseae the huamn mnid deos not raed ervey lteter by istlef but the wrod as a wlohe amzanig huh yaeh and i awlyas tghuhot slpeling was ipmorantt if you can raed tihs psas it on


-ERD50

 

[harley]

Al, here is a well-meaning comment: It is a mark of respect for your readers to at least make an attempt at standard punctuation, capitalization and sentence structure. Your readers will appreciate the effort. Thanks.

looks like the internet grammar police is out on patrol

Since Al can't tell the difference between a politely worded constructive criticism and being put "up against the wall" by the grammar police, I can't see any reason to accept any of his other claims to knowledge either. They are usually of the "this is going to happen in 3 days" genre anyway. And anyway, Grep, did you notice that he put a period in his next comment? You must have made an impression.

I have no real problem with different styles of writing. Crappy personalities are a completely different issue. Ignore.

 

[Da Nag]

Al, here is a well-meaning comment: It is a mark of respect for your readers to at least make an attempt at standard punctuation, capitalization and sentence structure. Your readers will appreciate the effort. Thanks.

I think I speak for nerds everywhere, in stating your capitalization of "grep" is equally annoying.

 

[ERD50]

Since Al can't tell the difference between a politely worded constructive criticism and being put "up against the wall" by the grammar police, I can't see any reason to accept any of his other claims to knowledge either.

I'm getting that feeling also.

-ERD50

 

[clifp]

Actually, for the most part, federal pensions aren't a ticking time bomb and I haven't really been referring to federal pensions. It's mostly state and local pension plans that overpromise. I think the feds did a pretty good job of sensible pension reform a while back that balances decent benefits for federal workers without the potential for runaway costs that can't be managed effectively.

+1
The pension plan that TexArkandy described seems like a reasonable compromise between security and affordability. My BIL recently retired after about 20+ years as a DOD contractor at 65 and his pension is in that range.
I also like that the Fed have a great 401K-like plan (TSP), encourage people to use it, and educate them on it. Overall, moving all Americans to this model would be a step in the right direction. Pension, 401K, and Social Security = decent retirement add additional savings and a great retirement, no 401K and no saving= Spartan retirement.

But in general State and Local pensions are overly generous, underfunded, and poorly run, with way to many loopholes (vacations, OT, being rehired as contractors, pension banking etc). They allow civil servants to retire in their 50s or at the latest 62 with retirement salaries (including SS) that are equal to their work salaries. I have some sympathy for cops and fireman, but teachers, university Profs., DMV employees, judges etc. these aren't bad, or dangerous jobs. We taxpayers can't afford them.

 

[Texarkandy]

+1
.....
I also like that the Fed have a great 401K-like plan (TSP), encourage people to use it, and educate them on it. .....

I would have to agree that TSP is "pretty good" - (perhaps that's because there's no salesmen or much profit motive on the part of the TSP itself.)

Not that it couldn't stand for some improvement. There some folks over at TSPTalk forum who try to actively manage their TSP accounts for better returns who are quite unhappy with the Thrift Investment Board lately.

It never ceases to amaze me how many fed employees I see within 10 yrs of retirement eligibility who don't contribute heavily to TSP & only check their fund once every year or two to see how they're doing. (& have new cars & 25 years left on their mortgages)

Seems many just assume when retirement age comes their fed retirement income will be near the same as working. Sometimes I'm asked a question about the retirement formulas, calculations, etc. Often the askers' eyes start to glaze over after less than two minutes, and the subject gets changed to football or something.

You can't convince them that FERS isn't quite the same as their Dad's old CSRS plan.

 

[Bimmerbill]

The 80% is possible under the older CSRS federal pension plan.
Also, FERS pensions are not reduced if you meet certain age or time in service restrictions. I think 30 years of service at any age results in no reduction of benefits.

Unfortunately for me, at 30 years of service I'll be 60, so it ain't exactly an early retirment!

 

[Texarkandy]

The 80% is possible under the older CSRS federal pension plan.
Also, FERS pensions are not reduced if you meet certain age or time in service restrictions. I think 30 years of service at any age results in no reduction of benefits.

Unfortunately for me, at 30 years of service I'll be 60, so it ain't exactly an early retirment!

I hope to be ER'd for 10 years at age 60 - with FERS no less.

 

[ziggy29]

Unfortunately for me, at 30 years of service I'll be 60, so it ain't exactly an early retirment!

I feel it's safe to say it's a LOT earlier than it will be for the vast majority of people relying almost exclusively on 401Ks and IRAs.

 

[MGYog]

This is a question that Goonie or utrecht might answer. If you qualify for a local or county pension, and also SS, doesn't the Windfall Elimination Provision apply?

 

[utrecht]

This is a question that Goonie or utrecht might answer. If you qualify for a local or county pension, and also SS, doesn't the Windfall Elimination Provision apply?

Yes it does. I dont know all the details and have never really looked into it because I do know Im not eligible to draw much SS at all. I think Im maxed out at $200 / month or something like that. I dont think I would get anything except for the fact that I paid into SS when in the military and in other previous jobs.

 

[Goonie]

This is a question that Goonie or utrecht might answer. If you qualify for a local or county pension, and also SS, doesn't the Windfall Elimination Provision apply?

Even though our pension fund is a "gov't" pension (covering tens of thousands of municipal, county, state, and school employees in IL), it's actually governed and operated independently by employee-, employer-, and retiree-elected trustees....not by gov't appointees or officials....thankfully!!! All participating employers, and their employees, are required to pay into SS also. That being the case, our pension is exempt from the WEP, so there's no decrease in benefits.

 

[jazz4cash]

Sometimes I'm asked a question about the retirement formulas, calculations, etc. Often the askers' eyes start to glaze over after less than two minutes, and the subject gets changed to football or something.

This is funny, Tex. I can imagine your co-worker asking a question and expecting an answer in 6 words or less...and there you go for TWO MINUTES talking about SWR, AA, etc., etc. I realized that people generally are not patient enough for an explanation...they just want the answer! I usually blow 'em off unless they are willing to invest some time.

I think TSP is better than "pretty good", mainly because the ER's are so low, and I agree FERS is one of th best 3-legged stools out there, and should be a model for others employers.

 

[UncleHoney]

This is funny, Tex. I can imagine your co-worker asking a question and expecting an answer in 6 words or less...and there you go for TWO MINUTES talking about SWR, AA, etc., etc. I realized that people generally are not patient enough for an explanation...they just want the answer! I usually blow 'em off unless they are willing to invest some time.

I had one of those questions about our company pension just before I retired in 2007. The question was from a 42 year old that had about 18 years service.

The question was. "How much of your final salary does our pension replace?" My answer was straight to the point and I got his attention. My reply, about 41%.

You should have seen his face, it was priceless.
Then he got a little po'd at the company.

"Why those cheap SOB's", was all he could say.

That gave me a perfect opportunity to fill him in on the value of the 401K plan and IRA's. Then I filled him in on the 4% SWR, which didn't really sink in until I told him for every $40K he wanted in income he'd need about a million $ in the bank. That got a "HOLY COW" out of him. Not really, it was a HOLY S***.

I think I won a convert that day, we'll know in about 15 years or so. Ya gotta get the young kids attention first and then lay on the heavy stuff.

 

[randyman65]

NY has the same problem with the impending public pension timebomb. Unfortunately, downstate NY has hundreds of taxing authorities, each with their own employees feeding off the state retirement system. We also get lots of cute extras, including:

The local commuter railroad has an organized scheme for retirees to become disabled at the time of retirement, making them eligible for higher payout rates. For the past few years, 100% of retirees have been disabled.

Consultants for local governments and school districts get themselves on the public pension plan, despite working for private firms.

It is not uncommon for someone such as a highway commisioner to "retire", drawing a pension and go back to the same job the next day for the same salary. This is always explained that he was the most qualified for the job.

These are only a few of the infuriating practices that lead those of us with only DC contributions to say screw you to those who insiste on better DB pensions. Using my tax dollars to bail out GM's retirement plan only makes it worse.

 

[Goonie]

It is not uncommon for someone such as a highway commisioner to "retire", drawing a pension and go back to the same job the next day for the same salary. This is always explained that he was the most qualified for the job.

One of the nice things (IMHO) about our pension plan....If you retire under their Early Retirement Incentive (ERI) as I did, and you go back to work for ANY employer that participates in our pension plan, you're pension is IMMEDIATELY terminated, AND you have to pay back every penny that you received in pension payments. You are then also barred from ever participating in another ERI. You are still able to retire at full retirement age, and receive the appropriate amount of pension, but there's no way possible to draw a pension from them, and to also work for a participating employer. They made sure that all of the loop-holes and/or work-arounds were eliminated.

The only exception to the rule, is if you are elected to a public office. In that case your pension payments will continue as normal. However, as an elected official, you will not be allowed to participate in the pension plan in that position. IOW, you cannot start paying into the pension plan again while you're holding that office, and therefore you're not able to increase your pension payments in any way.

And I say that it's 'one of the nice things', in that it reinforces the fact that I won't go back to work!

 

[ziggy29]

One of the nice things (IMHO) about our pension plan....If you retire under their Early Retirement Incentive (ERI) as I did, and you go back to work for ANY employer that participates in our pension plan, you're pension is IMMEDIATELY terminated, AND you have to pay back every penny that you received in pension payments. You are then also barred from ever participating in another ERI. You are still able to retire at full retirement age, and receive the appropriate amount of pension, but there's no way possible to draw a pension from them, and to also work for a participating employer. They made sure that all of the loop-holes and/or work-arounds were eliminated.

This is one of the more common loopholes I'm aware of: retire early with a pension and retiree health insurance, then immediately hire back in as a contractor/consultant for double the hourly wage.

I used to work for a large aerospace company, and this was really common -- plus, many of them were also retired military, collecting two pensions, getting health insurance and $80-100 per hour as a contractor.

Nice gig.

 

[utrecht]

If they are paying other contractors $80-$100 per hour and have an opening for another one, then what difference does it make it they hire one from the outside, or they hire one of their own employees the day after he retires?

The company is paying the exact same amount of money.

The guy retires so they owe him his pension. They have to pay it no matter where he retires to.

They need a contract employee. They have to pay one no matter who it is.

Why cant it be the same person? There is no monetary difference to the company, but they get to hire a person that they already knows how to to a good job and arent taking a chance on some random person. Sounds like a win / win to me.

It would only be a loophole if the guy continued to accrue retirements benefits while working as a contractor and it doesnt sound like that would be possible.

 

[UncleHoney]

If they are paying other contractors $80-$100 per hour and have an opening for another one, then what difference does it make it they hire one from the outside, or they hire one of their own employees the day after he retires?

The company is paying the exact same amount of money.

The guy retires so they owe him his pension. They have to pay it no matter where he retires to.

They need a contract employee. They have to pay one no matter who it is.

Why cant it be the same person? There is no monetary difference to the company, but they get to hire a person that they already knows how to to a good job and arent taking a chance on some random person. Sounds like a win / win to me.

It would only be a loophole if the guy continued to accrue retirements benefits while working as a contractor and it doesnt sound like that would be possible.

Some companies abuse the system and force people into early retirement so they can collect benefits and then hire them back as a contractor. The take-home pay may be the same but the company saves in not having to pay any benefits like 401K matching funds, pension benefits, and healthcare.

At my Megacorp it is now a standing policy if you retire before FRA (65) they will not rehire you till you turn 65. They wanted no part of appearing to force someone into early retirement just to lower their costs. The customer got billed by the worker's job classification, not what they took home so the company stood to make more money by hiring contractors.

 

[ziggy29]

Some companies abuse the system and force people into early retirement so they can collect benefits and then hire them back as a contractor. The take-home pay may be the same but the company saves in not having to pay any benefits like 401K matching funds, pension benefits, and healthcare.

I've been at a Megacorp which has laid people off (or gave them early retirement incentives) and immediately rehired them as contractors. Seems kind of silly, I think, but it seems like an accounting shell game.

I don't understand how the math works, but I guess they prefer the cost-certainty of paying more upfront with no benefits than paying less now and be potentially stuck with indeterminate pension and health care liabilities.

 

[UncleHoney]

I've been at a Megacorp which has laid people off (or gave them early retirement incentives) and immediately rehired them as contractors. Seems kind of silly, I think, but it seems like an accounting shell game.

I don't understand how the math works, but I guess they prefer the cost-certainty of paying more upfront with no benefits than paying less now and be potentially stuck with indeterminate pension and health care liabilities.

It sure could be a shell game. When I retired my gross take-home pay was close to $50/hour. To cover all my benefits and make a profit the company charged the customer almost $150/hour. The math gets easy for the bean counters when the rehired employee's benefits come out of the pension fund. Plus they don't have to pay for vacation and sick leave.

 

[utrecht]

Now Im really confused. Ziggy, in this thread and others, youve been very critical of company pensions saying that taxpayers cant afford them.

You said workers were retiring and then coming back right away as a contractor and said it was a nice gig implying that they were cheating the system somehow.

Now youre saying with this "shell game" scenario, the company is doing it to save money. If they are saving money and the worker is getting a good deal also, then whats the problem?

Maybe the customer is getting the raw end of the deal, but thats not what youve been complaining about in reagrds to pensions for the past month or so.....and besides, the customer can go elsewhere with their business anytime they want.

 

[ziggy29]

Now Im really confused. Ziggy, in this thread and others, youve been very critical of company pensions saying that taxpayers cant afford them.

No -- I'm critical of public pensions that way overpromise, are too generous AND require additional taxpayer help when they are underfunded. That is certainly not the universe of pensions, and certainly not the well-run ones -- to say nothing of corporate pensions.