Pensioners bent over in RI

[ERD50]

.... feeds the frustration and anger that your comment expresses. Not something you want to plan into the system.

If there was anger in my post, it wasn't intended, none was there as I wrote it.

I think the idea that we would plan to move people from short, high-risk careers to a less physically demanding/risky job for their later years is worth considering. Let them know up front, we should not pull any punches on them. It would be extra years that they would be contributing to their pension, and fewer years that they would be collecting and running up the COLA portion. That has to help balance the books.

Do they really need to collect before 65? How many go out and get jobs while collecting an early pension?

-ERD50

 

[donheff]

If there was anger in my post, it wasn't intended, none was there as I wrote it.

Sorry, my miscommunication. I didn't mean to infer that you were angry and particularly not that you were angry at me. I saw your comment, "Tell that to the people..." as reflecting the frustration and anger a whole generation of middle managers and others felt when the rug was pulled out from under them in their 40s and 50s. Lots of legitimate reasons for that downsizing but also lots of cynical, self serving justifications from some corporations that did treat people as things. That poisoned the attitudes of lots of managers and employees. Not something I that I think you want to intentionally build into your system.

 

[ERD50]

Sorry, my miscommunication. I didn't mean to infer that you were angry and particularly not that you were angry at me. I saw your comment, "Tell that to the people..." as reflecting the frustration and anger a whole generation of middle managers and others felt when the rug was pulled out from under them in their 40s and 50s. Lots of legitimate reasons for that downsizing but also lots of cynical, self serving justifications from some corporations that did treat people as things. That poisoned the attitudes of lots of managers and employees. Not something I that I think you want to intentionally build into your system.

No problem, I appreciate the response, and I'm sorry for any confusion - w/o tone and body language posts don't convey emotions well.

When I mention the people that were displaced in the private sector, I was just stating a fact. And I have trouble seeing why one group of employees should be treated or thought of differently, simply based on who their employer is (a govt versus a private company).

We often see firefighters (whom I greatly respect) used as an example of a group who deserves special treatment in terms of short careers and early pensions because of the risk. But googling brought up some interesting stats on risks in various jobs:

Firemen don't even make the top 10 list. I had to go elsewhere for the stats:

Firefighter
Fatalities per 100,000 full-time workers: 4.4
Average salary: $47,760

Note firefighters are 4.4 versus an industry average of 3.3 (that surprised me). These are annual numbers, so if a firefighter can afford to (or is required to, due to physical demands) cut their career short, it seems their career exposure to risk may be lower than the average worker?

Here's a list: americas-10-most-dangerous-jobs: Personal Finance News from Yahoo! Finance

Only 4,340 people died on the job last year, down 16.8% from 2008, according to new data released by the Bureau of Labor Statistics. That's a rate of 3.3 deaths per 100,000 workers -- the lowest ever reported by the BLS

America's Most Dangerous Jobs

Fisherman
Fatality Rate: 200 per 100,000
Median Wages: $23,600

Logger
Fatality Rate: 61.8 per 100,000
Median Wages: $34,440

Airplane Pilots
Fatality Rate: 57.1 per 100,000
Median Wages: $106,240

Farmers and Ranchers
Fatality Rate: 35.8 per 100,000
Median Wages: $32,350

Roofers
Fatality Rate: 34.7 per 100,000
Median Wages: $33,970

Ironworkers
Fatality Rate: 30.3 per 100,000
Median Wages: $44,500

Sanitation Worker
Fatality Rate: 25.2 per 100,000
Median Wages: $32,070

Industrial Machinist
Fatality Rate: 18.5 per 100,000
Median Wages: $39,600

Truckers and Drivers/Sales Workers
Fatality Rate: 18.3 per 100,000
Median Wages: $37,730

Construction Laborer
Fatality Rate: 18.3 per 100,000
Median Wages: $29,150

If you loaded the value of benefits in those salaries, I image it would look quite different. Almost all of the above are private sector jobs. If they can get people to work for them, with those kinds of risks, it makes me wonder if we really need to provide the level of benefits that we do to get qualified firefighters.

.

No doubt the skill sets are different - I'm not saying a $23,000 fisherman would make a good firefighter. But I think it does lend some perspective to it. I don't think most on that list are offered the kind of early pensions that firefighters are. The only 'pension plan' I know of for farmers is the value of their land - which gets taxed at 50% when they die! Pensioners can spend their pensions on family members while alive. Farmers can't spend the value of their land.

-ERD50

 

[donheff]

Here's a list: americas-10-most-dangerous-jobs: Personal Finance News from Yahoo! Finance



If you loaded the value of benefits in those salaries, I image it would look quite different. Almost all of the above are private sector jobs. If they can get people to work for them, with those kinds of risks, it makes me wonder if we really need to provide the level of benefits that we do to get qualified firefighters.

-ERD50

I have to admit, in terms of jobs I would prefer, I would choose pilot, police, firefighter above the rest of that list even with salary and pension being equal.

 

[Bimmerbill]

I still believe pensions can be actuarily sound and a great benefit for the employee as well as the employer.

Wasn't there a series of articles about how the 401K plan is a failure? Sure, it failed because people didn't participate, took money out for stuff, didn't roll it over when changing jobs, etc.

Does anyone have any ideas how to value a pension as part of total compensation?

Today's political climate is seriously anti-pension. I agree that there are a lot of pensions mismanaged and in financial problems, but there must be a large number that are solvent.

 

[samclem]

One reason for back-ended pensions for government workers, going back to England, was the desire to create a group of professional civil servants with strong administrative skills, who stayed for the long term, and were loyal to the system and the "process" above any particular loyalty to individual politicians or those outside government. They were there to carry out the law as written in regulations, and to do this impartially. Now, some may argue that the civil service system has succeeded too well in this regard, but I'll accept a bit of inefficiency (which we should continue to root out) if it's the price to avoid a political civil service, or one more subject to corruption.

 

[Lusitan]

"professional civil servants" = fail

"strong administrative skills" = fail

"who stayed for the long term" = check

"loyal to the system" = check

"above any particular loyalty to ... those outside government" (i.e. those for whom they ostensibly work and who pay their salaries) = check

"a bit of inefficiency" = ha ha yeah just a bit, so check

"(which we should continue to root out)" = impossible under the current system, so fail

"political civil service" = yeah because the government labor unions aren't political serfs for the Democratic party, fail

"subject to corruption" = fail

OK so let's see ... our beloved government employees get a score of 4 out of 9. Good enough for government work, so I would say our system of government employees has been a resounding success!

 

[donheff]

OK so let's see ... our beloved government employees get a score of 4 out of 9. Good enough for government work, so I would say our system of government employees has been a resounding success!

That has been the off and on refrain for three decades. If enough kids buy into it we will need an even more generous set of benefits to recruit anyone at all. And your beliefs will become a self fulfilling prophecy. To the extent that we need some Government, and we do, you shoot yourself in your foot.

 

[Spanky]

That has been the off and on refrain for three decades. If enough kids buy into it we will need an even more generous set of benefits to recruit anyone at all. And your beliefs will become a self fulfilling prophecy. To the extent that we need some Government, and we do, you shoot yourself in your foot.

I would not worry about that at all. There will be scores of people lining up for a government job. Where else can one receive a better benefit package than that offered by the government? The pay for a highly skilled worker in the public sector, for example, is very similar to that in the private sector.

I remind my two kids from time to time to get a government job, if possible.

 

[donheff]

I would not worry about that at all. There will be scores of people lining up for a government job. Where else can one receive a better benefit package than that offered by the government? The pay for a highly skilled worker in the public sector, for example, is very similar to that in the private sector.

I remind my two kids from time to time to get a government job, if possible.

Thank you for making my point: those benefits help make up for the sneering negative attitude from the politicians.

 

[clifp]

This may not be the last word on Central Falls, RI but it doesn't look good for the pensioners.

Retired firefighters and police officers in Central Falls, R.I., agreed to cut their pensions and support a plan that would likely give bondholders everything they are owed by the struggling city.
The unusual arrangement is being watched closely by municipal-bond investors and government officials across the U.S. because it could be cloned in an effort to keep borrowing costs from spiraling higher in municipalities near financially shaky cities and counties.
...
As of Monday, 82 of about 130 Central Falls workers had agreed to support the pension cuts, which will total 25% over the next five years for many recipients, said Matthew McGowan, a lawyer for about 100 police and fire retirees. A minimum of 75 retirees had to support the proposed agreement.

More here

 

[donheff]

This may not be the last word on Central Falls, RI but it doesn't look good for the pensioners.



More here

That's a pretty big deal. Retirees giving up 25% of their pensions doesn't fit the mantra we often hear about greedy union members.

 

[ERD50]

That's a pretty big deal. Retirees giving up 25% of their pensions doesn't fit the mantra we often hear about greedy union members.

First, I wouldn't call these people 'greedy' unless I knew more background that would indicate that was the case.

Second, it doesn't appear that they are 'giving up 25% of their pensions' out of some kindness of heart or concern for others. As the articles states:

"We have many strong legal arguments," Mr. McGowan said. "But in a practical sense, they don't get you very far if the city has no money."

I don't think they had a choice in the matter. And it looks like they would have fought it if they thought they could win (which is fine). I don't think we can equate this to altruism.

Big picture, I really HATE the idea of pensions (see the IL pension thread for more). Some people are bemoaning the fact that they are going away in many private sector areas, I say 'good riddance'. Get the money in your own account, manage it yourself, and don't be reliant on 'promises' that may not be fulfilled. They should go away in the public sector also. Pay salary/benefits in real-time, no future promises.

Look at the USPS. If it wasn't for the need to fund those existing pension promises, they could 'right size' their business and maybe do OK as a smaller unit. But they NEED the volume of business to support their retiree funds. It's just bad for everyone.

-ERD50

 

[rescueme]

...I say 'good riddance'. Get the money in your own account, manage it yourself, and don't be reliant on 'promises' that may not be fulfilled. They should go away in the public sector also. Pay salary/benefits in real-time, no future promises.

I agree.

I'm one of those that had a pension, but it was eliminated in the early 80's, and replaced with a 401(k) with 100% match at the time, but reduced to 50% over time. Compared to the union folks I worked with (I was white collar - not management, but not union), it worked out much better when matching my retirement income (based upon my portfolio) against their "benefit".

And I don't have to give up part of my portfolio (as they must do in their pension) at the early SS age of 62.

I was able to convert a portion of my portfolio to an SPIA, which acts as a pension, however with different criteria.

Like a typical non-COLA pension (as most private pensions are), it does not adjust for cost of living.

However, unlike a typical pension, it pays 100% to the survivor (DW) or me - whomever passes first. It also pays the remainder of the expected life benfit if both of us pass before the calculated age of 87 (then it passes to our son). Also, as I noted before, there are no reductions at age 62. BTW, if either/both of us live beyond age 87, payments continue at 100% until we're both gone.

That SPIA is allowing me to delay my SS till age 70, for the benefit of my DW (assuming I die first), while allowing me to claim against my DW's SS at FRA of 66 (we're the same age) at a 50% rate, which will give me (us) an additional 50K of income. And if we both die tomorrow? It still has value (unlike a pension)...

Yeah, it worked out well; just some more "dumb luck', with a bit of planning...

 

[ERD50]

Here's another funny/sad irony:

At least with private pensions, there is the PBGC - the private companies fund this government managed insurance plan, and the PBGC takes some measures (however imperfect) to help assure that these private pension funds are reasonably funded and managed. And that has provided a decent level of protection for the majority of people under private pension (there are limits for high wage earners). And this is done at no direct taxpayer cost, it is funded by the businesses. As long as the PBGC is reasonably efficient/effective, it seems like a pretty good deal all the way around (though as I said, I'd rather see pension promises eliminated).

But I've never heard of an equivalent for public pensions. The regulators don't want to be regulated? Don't you think that any group that was insuring this fund, or insuring the IL pension fund, would have been raising red flags early on, and maybe avoided the disaster (or at least given everyone fair warning)? There's no checks/balances, the foxes are guarding the chicken coup!

-ERD50

 

[ESRwannabe]

Every time I have read an article about this subject, there are a lot of comments suggesting that public workers are scum, and everyone would like to screw them over and see them live out their old age as homeless bums.

Anyway, I'm sure many public employees are going to be screwed over in this era of the "new normal". The US is probably going to look like all the other banana republics in a decade or two. Public employees will have to make a living via shake downs and such.

I like to follow whats going on in Mexico as I believe the US will be just like it soon enough.

 

[youbet]

Pay salary/benefits in real-time, no future promises.

-ERD50

+1

DBP's which attempt to make financial promises today based on assumptions of far distant financial conditions will only continue to pose problems for the hapless public which is footing the bills. Put together compensation packages based on what it takes to attract qualified employees and on what the employer can afford and pay it out real time. No future promises based on totally unknown future tax revenues, future market returns, etc.

 

[Chuckanut]

Every time I have read an article about this subject, there are a lot of comments suggesting that public workers are scum, and everyone would like to screw them over and see them live out their old age as homeless bums.

Anyway, I'm sure many public employees are going to be screwed over in this era of the "new normal". The US is probably going to look like all the other banana republics in a decade or two. Public employees will have to make a living via shake downs and such.

I like to follow whats going on in Mexico as I believe the US will be just like it soon enough.

Don't be concerned. We are losing tens of thousands of public sector jobs each month. Soon, the problem will be solved. As long as workers are fighting workers, those who caused this financial crisis will sail smoothly along while we fight for the scraps.

 

[ERD50]

Every time I have read an article about this subject, there are a lot of comments suggesting that public workers are scum, and everyone would like to screw them over and see them live out their old age as homeless bums.

I have problems with what you wrote there.

There is always a minority group of vocal idiots on any side of anything controversial. Nothing they say affects the reality of the situation. So why bother with it?

I feel this is often used as a red herring to distract from the real issue. Does the fact that some people are vocal like that in any way make the issues any different? No. We still have underfunded pensions, with union leaders and politicians failing to protect those workers. For the record, I don't feel that way towards public workers (not that there aren't problems), so where does that leave us?

Anyway, I'm sure many public employees are going to be screwed over in this era of the "new normal". The US is probably going to look like all the other banana republics in a decade or two. Public employees will have to make a living via shake downs and such.

Before we started seeing actual failures in public pensions, and some private employees would express a little jealousy over what they saw as 'sweet' public pensions/benefits, they'd sometimes get told that 'hey, they could've taken the public sector job, so quit your whining!'. I doubt they'd appreciate being told that they should have made sure they had something like the PBGC behind their public pensions.

Last numbers I saw, public employees were doing better in terms of unemployment, and total compensation than their private counterparts. Yes, hard to compare, it is debatable, but I doubt there is any huge negative (if at all) for public workers. So why single out public workers for needing to turn to criminal activities to make a living? Are you saying they have less scruples than private workers, and would be more likely to turn to crime? I don't think that's fair - maybe you are guilty of your claim in my first quote?

There is pressure on our Standard of Living from other countries. It is going to affect us all.

DBP's which attempt to make financial promises today based on assumptions of far distant financial conditions will only continue to pose problems for the hapless public which is footing the bills. Put together compensation packages based on what it takes to attract qualified employees and on what the employer can afford and pay it out real time. No future promises based on totally unknown future tax revenues, future market returns, etc.

This triggered a thought. Remember the outcry over any attempt to 'privatize' SS or any other pension system? They cried out that we would be subjecting little old great-grandmas to the wild ride of the market (of course there were more suitable options). Yet, all these public pensions are invested in all sorts of things - in the IL thread, they are into hedge funds, Brazilian currency futures and such.

Bottom line, having a public pension doesn't reduce your exposure to market risk. It is still there, just pushed out of sight by another degree of separation.
There is no magic - the taxpayers who have los money inthe market aren't so willing to give up what they have left.


-ERD50

 

[DoingHomework]

Last numbers I saw, public employees were doing better in terms of unemployment, and total compensation than their private counterparts. Yes, hard to compare, it is debatable, but I doubt there is any huge negative (if at all) for public workers. So why single out public workers for needing to turn to criminal activities to make a living? Are you saying they have less scruples than private workers, and would be more likely to turn to crime? I don't think that's fair - maybe you are guilty of your claim in my first quote?

Full disclosure...I am technically a public employee. But I am not in any public pension plan and I am paid through private money that is basically laundered through a government agency. It's all legal of course and for practical purposes I'm a private sector employee.

That said, I find all the criticism of public sector employment right now to be a little bizarre. When I started my career around 20 years ago no one wanted to work for the government because the pay sucked. The benefits were good but not great. The best part was the job security and the retirement plan. Essentially you would take a job at low pay and in return get a secure retirement and didn't have to worry about getting laid off every time some executive made a stupid business decision.

Almost everyone I graduated with who took a public sector job did so because they were attracted to the security because they had a family or something like that. They were not smarter or dumber than everyone else and they were not more or less scrupulous. I took a private sector job back then and took my own retirement risk in exchange for higher pay. I don't regret that decision at all.

But I do think that taking away or degrading promised benefits from public sector workers now is criminal. They contributed by accepting lower pay for many years. The fact that we might be overpaying public employees now is irrelevant. These people played by the rules and deserve what they were promised. It's that simple.

It's also obvious to me that the job security that derives from the difficulty from laying off or firing public employees makes some of them very inefficient. But I've seen as much deadwood in the corporate world so I don't really believe there is any fundamental difference.

 

[ERD50]

But I do think that taking away or degrading promised benefits from public sector workers now is criminal.

Actually, promising the benefits but not funding them was the criminal part, with politicians and Union Leaders actively engaged in the crime. But now that that the crime has been committed, and the bill has come due - who should pay?

And the public employees ought to take some responsibility for sitting by while their pensions were underfunded and in many cases electing and campaigning for the same crooks who were not funding their pensions.

The most distant person from all of this was Joe/Jane taxpayer (many of them weren't even born when this crime was being committed), yet many are saying that we just need to raise taxes to pay for these promises. I say go closer to the source. It's a bad situation, but when the market dropped and my 401K went down in value, I didn't look to anyone else to make up the shortfall.

We can talk about it being wrong all we want - but that doesn't pay the bill. Who is going to pay the bill?

They contributed by accepting lower pay for many years. The fact that we might be overpaying public employees now is irrelevant. These people played by the rules and deserve what they were promised. It's that simple.

Actually, it isn't.

-ERD50

 

[DoingHomework]

Actually, promising the benefits but not funding them was the criminal part, with politicians and Union Leaders actively engaged in the crime. But now that that the crime has been committed, and the bill has come due - who should pay?

And the public employees ought to take some responsibility for sitting by while their pensions were underfunded and in many cases electing and campaigning for the same crooks who were not funding their pensions.

The most distant person from all of this was Joe/Jane taxpayer (many of them weren't even born when this crime was being committed), yet many are saying that we just need to raise taxes to pay for these promises. I say go closer to the source. It's a bad situation, but when the market dropped and my 401K went down in value, I didn't look to anyone else to make up the shortfall.

We can talk about it being wrong all we want - but that doesn't pay the bill. Who is going to pay the bill?

I agree that creating the situation was the criminal part and that elected officials, union leaders, and many more are to blame. But it is like any other public obligation...we all must pay - we the taxpayers. Perhaps we should tap legislators' pensions first.

And don't be so quick to blame the employees. In many cases they had no choice. The were forced to participate in the public pension AND they were not allowed to contribute to IRAs etc. because of income limitations. Sure, they had a choice to work for the government or not. But having made that choice it's not like they participated in the Ponzi scheme - benefited from it perhaps - but they had no choice.

In Arizona, which has a relatively healthy state retirement system (it used to be better), the system was actively REDUCING contribution percentages throughout the 90s because they were earning great returns. There were employee groups then who were critical of that because they worried about it becoming underfunded. But they were ignored and the legislature went along with the changes. Now that it's time to pay the piper, the legislature is essentially making current employees subsidize the past retirees -- and my wife is about to be one of those retirees. I generally agree with the path they are taking to make the system more sustainable. But it is coming at the cost of current employees who may not have been born when the crimes were committed while the taxpayers or 20 years ago who benefited from lower taxes then are getting off the hook.

Even though my wife and I are nominally benefiting from the situation, we had no control over it. I personally think that it should be the taxpayers who kick in more since it was the taxpayers who benefited when contributions were lowered (because the state matches contributions by law).

I don't want my taxes to go up and I'm certainly not in favor of handouts. But I do think the taxpayers need to pay for things promised by previous legislatures. Here at least the system is honoring those old promises.

 

[DoingHomework]

Who is going to pay the bill?

As with everything else, we all will -taxpayers. There is no one else. Taxes must go up. Spending must be cut deeply. And governments need to LBYM for the next couple of decades. I think that is the only solution but it will be painful to all.

 

[Texas Proud]

Full disclosure...I am technically a public employee. But I am not in any public pension plan and I am paid through private money that is basically laundered through a government agency. It's all legal of course and for practical purposes I'm a private sector employee.

That said, I find all the criticism of public sector employment right now to be a little bizarre. When I started my career around 20 years ago no one wanted to work for the government because the pay sucked. The benefits were good but not great. The best part was the job security and the retirement plan. Essentially you would take a job at low pay and in return get a secure retirement and didn't have to worry about getting laid off every time some executive made a stupid business decision.

Almost everyone I graduated with who took a public sector job did so because they were attracted to the security because they had a family or something like that. They were not smarter or dumber than everyone else and they were not more or less scrupulous. I took a private sector job back then and took my own retirement risk in exchange for higher pay. I don't regret that decision at all.

But I do think that taking away or degrading promised benefits from public sector workers now is criminal. They contributed by accepting lower pay for many years. The fact that we might be overpaying public employees now is irrelevant. These people played by the rules and deserve what they were promised. It's that simple.

It's also obvious to me that the job security that derives from the difficulty from laying off or firing public employees makes some of them very inefficient. But I've seen as much deadwood in the corporate world so I don't really believe there is any fundamental difference.

I think one of the problems is that public employees are fighting like heck to KEEP the current plan in place...

I agree that if they have already worked and are due a pension, then it should be paid..... but there is NOTHING that says we have to continue with a pension... so instead of getting 2.2% (and sometimes higher) of their final 3 years salary, let's make it 1% starting tomorrow...

And BTW, everybody is probably going to get less SS than they expected... because the money was spent and there is nothing to pay the agreed upon benefits with.... except higher taxes... and it would take a lot more taxes to pay them... so in a way, the private sector people are also going to get less than promised even though they paid into the system the whole time....

In this, we are all in the same place... I don't want to pay more taxes to support SS and I do not want to pay more taxes to support a bloated public pension plan... so cut everybody's payment.....

 

[DoingHomework]

I think one of the problems is that public employees are fighting like heck to KEEP the current plan in place...

I agree that if they have already worked and are due a pension, then it should be paid..... but there is NOTHING that says we have to continue with a pension... so instead of getting 2.2% (and sometimes higher) of their final 3 years salary, let's make it 1% starting tomorrow...

I agree. The conditions that were in place 20 years ago when it made sense to offer a good pension to government workers - low salary - are no longer in place. I think the way to look at it is total cost of an employee and total benefit to the employee. Job security allows an employer to pay less. A pension allows an employer to pay less in salary but should carry the obligation to actually put that money away. That's where the mistake was.

But either way, enough people want to work for the government now that there is no need to pay high salaries or offer a generous pension. Let's make the system dynamic enough that it can adapt to labor market conditions. And right now lets make it unattractive to work for the government. Let's cut the costs without having to lay people off.

As for SS, what a mess. I have my expectation racheted down to 50% of what they say I'll get and I don't actually think I'll get anything. Well, probably something since old people vote. But my savings will be enough that I expect to be means-tested out.

But the real irony of SS is that it could be fixed with a 2% payroll tax increase. I'd gladly pay that if it meant we could have a safety net and avoid all the BS fighting that goes no now. Heck, I'd pay 2% just to not have to listen to all these dysfunctional idiots in Washington act like children.