Rhode Island Public Pension System Reform

[nun]

MA just came out with similar changes to the pension scheme for new employees. The minimum retirement age went from 55 to 60, there's a new COLA calculation, and the DB is calculated on the top 5 years of income rather than 3. I'm in the MA state retirement system already, so these changes don't apply to me. I would have been fine with the last 2, but having to wait an extra 5 years to ER would have been difficult. FYI MA employees contribute 11% to the plan, the state kicks in 5% and we don't pay into SS.

I wonder how long it will be until similar things happen with military pensions as they are a large part of the defence budget, maybe the DOD will suggest going to a DC type of plan.

 

[ziggy29]

I wonder how long it will be until similar things happen with military pensions as they are a large part of the defence budget, maybe the DOD will suggest going to a DC type of plan.

I don't know that the military is really a place where it could work well, especially not those who are deployed in combat-ready roles around the world.

I think we have to question the continued use of 20 as the "magic number", though, as well as the ability to start collecting at age 38. Many places start offering at least some pension vesting at 10 years and occasionally less, and as long as these are actuarially sound I have no problem with that. Maybe there should be more of a sliding scale, from (say) 10 to 40 years -- not just all or nothing at 20 (nothing for 19 years, full pension and lifetime health insurance at 20?). And most pensions don't allow starting the pension until age 55 or so -- maybe as early as 50, some as late at 60, but few allow being a pensioner at 38.

Also, depending what happens with health care reform in the future, that could make less military spending specifically on health care for military retirees which is necessary under the current (largely broken) health insurance model here.

In terms of any future cutbacks for military retirement, I'd hope at the very least decent people would agree that nothing should be taken from combat-disabled veterans, especially those too disabled to find work elsewhere. We certainly owe a lot to our veterans, and especially the vets and families who suffered casualties in combat or combat training. And nothing should change for those already in the service.

 

[Mulligan]

MA just came out with similar changes to the pension scheme for new employees. The minimum retirement age went from 55 to 60, there's a new COLA calculation, and the DB is calculated on the top 5 years of income rather than 3. I'm in the MA state retirement system already, so these changes don't apply to me. I would have been fine with the last 2, but having to wait an extra 5 years to ER would have been difficult. FYI MA employees contribute 11% to the plan, the state kicks in 5% and we don't pay into SS.

I wonder how long it will be until similar things happen with military pensions as they are a large part of the defence budget, maybe the DOD will suggest going to a DC type of plan.

Concerning the changing of top 3 years to top 5 years, this may actually be reverting back to the way it used to be. Cant cite specifically concerning Vermont, but I have read many systems lowered this number to 3 from 5 back in the go-go 90's of the stock market. Our pension system has not reverted back to the top 5 years yet, but has studied it. It in recent years it has focused on increased contribution rates from employee and employer and reducing COLAS. Of course if salary increases are frozen or minimal in coming years, the effect of going to 5 will be minimal. Our system has a lifetime COLA cap at 80% of final salary which is unchanged. But freezing the COLAs at 2% will probably cause many people to "expire" before capping out. Im sure the actuary people have that factored into the equation

 

[nun]

I don't know that the military is really a place where it could work well, especially not those who are deployed in combat-ready roles around the world.

I think we have to question the continued use of 20 as the "magic number", though, as well as the ability to start collecting at age 38. Many places start offering at least some pension vesting at 10 years and occasionally less, and as long as these are actuarially sound I have no problem with that. Maybe there should be more of a sliding scale, from (say) 10 to 40 years -- not just all or nothing at 20 (nothing for 19 years, full pension and lifetime health insurance at 20?). And most pensions don't allow starting the pension until age 55 or so -- maybe as early as 50, some as late at 60, but few allow being a pensioner at 38.

I'm a fan of DB plans, but if we are looking at cutting costs DC plans are the way to go. I don't really understand the issue with doing DC for deployed service people. Just replace the DB part of the retirement benefit with DC contributions to the TSP. Contributions would be automatic and vesting would be immediate.

 

[ziggy29]

I'm a fan of DB plans, but if we are looking at cutting costs DC plans are the way to go. I don't really understand the issue with doing DC for deployed service people. Just replace the DB part of the retirement benefit with DC contributions to the TSP. Contributions would be automatic.

I guess the question is: Is there really a strong correlation between DB pensions and retention, AND is retention that important for any given role?

Proponents of DB pensions usually cite the need for retention as a justification for those retirement plans. And that may well be the case. But if they cost more and have less predictable expenses for the public, the next question would be: Which jobs *need* retention enough to justify the added potential expenses and cost uncertainty of DB pensions? I don't have an answer to that, but it would seem to be -- from a practical dollars and cents and "bang for the buck" perspective -- the question that drives our decision making.

 

[ripper1]

Just read the Illinois website. The only question I have is how can there not be shared sacrifice? maybe the already retired getting a little less cola, those on SS getting a little less etc. I find it hard to look at my kids and their kids in their 30's and say I got mine, the hell with you.

I am a retiree from the City of Chicago and I agree with the shared sacrifice. Why not make it last for everybody. It is just a shame though that the State and Chicago didn't do their part and make the proper contributions especially during good times.

 

[clifp]

I am a retiree from the City of Chicago and I agree with the shared sacrifice. Why not make it last for everybody. It is just a shame though that the State and Chicago didn't do their part and make the proper contributions especially during good times.

That is really nice to hear I wish we could clone that attitude. So many of the pension reforms have been focused on reducing the benefits of new hires while maintaining 100% of the benefits for current and soon to retirees which just seems horribly unfair to 20 and 30 year olds. I like that the RI reform includes delaying/reducing COLA raises until the system is in better financial shape.

COLA weren't include in Social Security until 1975 and in the 80s and even 90s for most other government pension plans. This means that for most current retirees when the first started working their pension didn't include any automatic increases. So the claim that they are cutting promised benefits rings a bit hollow.

 

[haha]

It's funny that we try to pretend that this has anything at all to do with fairness. Sure, fairness is always invoked piously. But what really counts is political power, and unionized public workers are about the most consistent voting bloc known to man. Especially middle aged ones who can start to taste that retirement that looks so sweet. Newcomers don't vote that much, and if any cutbacks have to me made they are the obvious group.

Voters can be swayed by skilled election campaign appeals to "fairness". But the tiniest bit of thought would cause them to ask, how fair is the current system where I work like mad to provide the building inspector or bus driver with a retirement that I could never hope for?

But even that tiny bit of thought is beyond Jonathan & Janet Q. P.

Ha

 

[clifp]

It's funny that we try to pretend that this has anything at all to do with fairness. Sure, fairness is always invoked piously.
Ha

Well if Lennon can..

Imagine there's no countries
It isn't hard to do
Nothing to kill or die for
And no religion too
Imagine all the people
Living life in peace

I can hope for something more modest like fairness in government compensation.

 

[youbet]

That is really nice to hear I wish we could clone that attitude. So many of the pension reforms have been focused on reducing the benefits of new hires while maintaining 100% of the benefits for current and soon to retirees which just seems horribly unfair to 20 and 30 year olds. I like that the RI reform includes delaying/reducing COLA raises until the system is in better financial shape.

COLA weren't include in Social Security until 1975 and in the 80s and even 90s for most other government pension plans. This means that for most current retirees when the first started working their pension didn't include any automatic increases. So the claim that they are cutting promised benefits rings a bit hollow.

Clifp....

I'll play devil's advocate......

It does seem that retroactive changes are particularly hard on already retired people since there is no way for the employees to go back and alter decisions and their outcomes. For someone who carefully determined they were financially ready to retire and did retire a few years ago, it's a tad late to change that now.

Look at the Illinoisisbroke.com site. That really looks like a reasonable plan. It fixes the issues in "it doesn't get any worse than this Illinois" without significantly impacting people who won't have time to react such as those long ago retired or folks on the verge of retiring.

Or, if we must retroactively reduce pensions for already retired folks, I hope the rules for doing so are carefully established so that we aren't opening the flood gates for private companies to reduce pensions to their already retired folks arbitrarily.

 

[ripper1]

That is really nice to hear I wish we could clone that attitude. So many of the pension reforms have been focused on reducing the benefits of new hires while maintaining 100% of the benefits for current and soon to retirees which just seems horribly unfair to 20 and 30 year olds. I like that the RI reform includes delaying/reducing COLA raises until the system is in better financial shape.

COLA weren't include in Social Security until 1975 and in the 80s and even 90s for most other government pension plans. This means that for most current retirees when the first started working their pension didn't include any automatic increases. So the claim that they are cutting promised benefits rings a bit hollow.

By shared sacrifice though I don't think a retirees principal benefit be reduced but maybe a delay or reduction in COLA perhaps. The other unfair issue we have here in Illinois is city workers taking leaves of absence to work for the unions for a few years and getting pensions that are 4 and 5 times their city pay. This to me is criminal. Their is a bill in Springfield now to stop this. The gutless wonders in Illinois have until the 29th of November to vote on it.

 

[haha]

Well if Lennon can..
I can hope for something more modest like fairness in government compensation.

That Lennon song was always hard for me to take too, unless I was stoned.

Maybe that's what is missing from my life and giving me such a bad attitude.

Ha

 

[Mulligan]

Clifp....

I'll play devil's advocate......

It does seem that retroactive changes are particularly hard on already retired people since there is no way for the employees to go back and alter decisions and their outcomes. For someone who carefully determined they were financially ready to retire and did retire a few years ago, it's a tad late to change that now.

Look at the Illinoisisbroke.com site. That really looks like a reasonable plan. It fixes the issues in "it doesn't get any worse than this Illinois" without significantly impacting people who won't have time to react such as those long ago retired or folks on the verge of retiring.

Or, if we must retroactively reduce pensions for already retired folks, I hope the rules for doing so are carefully established so that we aren't opening the flood gates for private companies to reduce pensions to their already retired folks arbitrarily.

My pension system reduced our COLAs, to 2%. While, I personally am ok with it and believe in shared sacrifice, my beef is with the pension system and the way they handled it. Notice, I did not say politicians, as the system is run by an independent board of directors. The system kept sending out emails and statements on website that the pension is " guaranteed by law" and "invest for the long term" and "system is fundamentally sound". They did not mention they had a 2 year investigational study to determine what legally they could do or not to the pension payout. The trustees are there to insure the long term stability of the system, and what they did, I have no problem with. However, I dont understand why they did not inform their members they were looking at possible options to reduce pension payouts. Atleast people still working could have made an informed decision before retiring. That doesnt sound too selfish of me does it? Of course on the other hand, I just asked two retirees today that are in the system and asked them if they knew (this happened 3 months ago) their COLA was reduced from 3.6% to 2%. Neither of them even knew they were going to get a COLA anyway. So maybe my concern for advanced planning is irrelevant!

 

[Chuckanut]

Mulligan: Read the book Retirement Heist. Hiding changes in pension funds is not new. Obscuring the results of those changes is not new. Leaving confused employees and retirees in their wake is not new.

 

[clifp]

Clifp....

I'll play devil's advocate......

It does seem that retroactive changes are particularly hard on already retired people since there is no way for the employees to go back and alter decisions and their outcomes. For someone who carefully determined they were financially ready to retire and did retire a few years ago, it's a tad late to change that now.

Look at the Illinoisisbroke.com site. That really looks like a reasonable plan. It fixes the issues in "it doesn't get any worse than this Illinois" without significantly impacting people who won't have time to react such as those long ago retired or folks on the verge of retiring.

Or, if we must retroactively reduce pensions for already retired folks, I hope the rules for doing so are carefully established so that we aren't opening the flood gates for private companies to reduce pensions to their already retired folks arbitrarily.

Yes I agree it is hardship, but compared to the fairly typical family which had a budget assuming $X made a commitment to a big ticket item house, college, car etc. and then suffered a pay freeze, his was bonus eliminated, plus they increase his medical premium. His wife meanwhile had her hours cut in half. I suggest that having only a 2% COLA increase vs 3.6% as what happen to Mulligan is significantly less painful. In economy were real incomes have fallen the only group that has more income now than back in 2007 is those over 65. Asking senior/retirees to accept a smaller COLA increase, seems more fair than asking the taxpayers bear the entire burden of the unfunded pensions.

Now granted over a decade the lower COLA increase will add up, but hopefully the same economic turn around that would help this family get back to even will also allow the pension funds to provide a real COLA increase.

 

[clifp]

That Lennon song was always hard for me to take too, unless I was stoned.

Maybe that's what is missing from my life and giving me such a bad attitude.

Ha

I think you are approaching the age where medical marijuana is pretty easy to obtain.

 

[BLS53]

The no COLA policy will eventually spread from the states to federal pensions and SS. Recipients and their lobbyist will view this as the least of potential evils, and COLA's will slip away beneath the radar. At some point in the future, the monthly benefit will be worth a cup of coffee. Fortunately, I'll be dead by then.

 

[Spanky]

The no COLA policy will eventually spread from the states to federal pensions and SS. Recipients and their lobbyist will view this as the least of potential evils, and COLA's will slip away beneath the radar. At some point in the future, the monthly benefit will be worth a cup of coffee.

This scenario is more likely for SS recipients than the DB pensioners.

 

[BLS53]

This scenario is more likely for SS recipients than the DB pensioners.

I've seen this play out with an aunt of mine. At some point in the past, Illinois state pensions didn't have a COLA. My aunt married an Illinois state architect that was about 20 years her senior. She never worked, and they never had children. He died in the early 1970's, and she lived until 1998. Everyone in the family always thought she received a lavish state pension, and many of the nieces and nephews, sucked up to her in hopes of an inheritance. It turned out she had been living on a fixed $800 a month benefit, subsidized with home equity loans and credit cards. No one had a clue.

 

[ripper1]

I've seen this play out with an aunt of mine. At some point in the past, Illinois state pensions didn't have a COLA. My aunt married an Illinois state architect that was about 20 years her senior. She never worked, and they never had children. He died in the early 1970's, and she lived until 1998. Everyone in the family always thought she received a lavish state pension, and many of the nieces and nephews, sucked up to her in hopes of an inheritance. It turned out she had been living on a fixed $800 a month benefit, subsidized with home equity loans and credit cards. No one had a clue.

Even with the COLA people think public employees have these lavish pensions. It is just untrue. It is the top level management and administrators that are gaming the system.

 

[ripper1]

Yes I agree it is hardship, but compared to the fairly typical family which had a budget assuming $X made a commitment to a big ticket item house, college, car etc. and then suffered a pay freeze, his was bonus eliminated, plus they increase his medical premium. His wife meanwhile had her hours cut in half. I suggest that having only a 2% COLA increase vs 3.6% as what happen to Mulligan is significantly less painful. In economy were real incomes have fallen the only group that has more income now than back in 2007 is those over 65. Asking senior/retirees to accept a smaller COLA increase, seems more fair than asking the taxpayers bear the entire burden of the unfunded pensions.

Now granted over a decade the lower COLA increase will add up, but hopefully the same economic turn around that would help this family get back to even will also allow the pension funds to provide a real COLA increase.

I can live with that.

 

[Bimmerbill]

It will be interesting to see if the COLA freezes and other measures taken to improve the health of the pension plans are reversed when the economy recovers.

 

[Chuckanut]

Yes I agree it is hardship, but compared to the fairly typical family which had a budget assuming $X made a commitment to a big ticket item house, college, car etc. and then suffered a pay freeze, his was bonus eliminated, plus they increase his medical premium. His wife meanwhile had her hours cut in half.

I guess my problem is where does it stop!!

Today they cut pensions that were promised.

Next? How about this? "joe, you have earned six weeks sick pay which should have covered your sickenss, but times are tough. So we are taking back two weeks. Hope you can return to work in four weeks instead of six. Sorry."

Then: "Jill, you have accumulated four weeks of vacation, but times are tough. We are taking back a week. Enjoy!"

Then: "Bill, we paid you $70,000 last year, but times are tough and we found out that we should not have paid you that much. We want $10,000 back. Or you can find a new job."

Read "Retirement Heist" if you think these things are so crazy they could never happen. Then read "All the Devils are Here."

 

[ripper1]

I guess my problem is where does it stop!!

Today they cut pensions that were promised.

Next? How about this? "joe, you have earned six weeks sick pay which should have covered your sickenss, but times are tough. So we are taking back two weeks. Hope you can return to work in four weeks instead of six. Sorry."

Then: "Jill, you have accumulated four weeks of vacation, but times are tough. We are taking back a week. Enjoy!"

Then: "Bill, we paid you $70,000 last year, but times are tough and we found out that we should not have paid you that much. We want $10,000 back. Or you can find a new job."

Read "Retirement Heist" if you think these things are so crazy they could never happen. Then read "All the Devils are Here."

They can keep the poor down with welfare but now you start taking away from the middle class. Sounds like revolution.

 

[arebelspy]

Sounds like revolution.

Are we just gonna fill this thread with Beatles songs? The 1% will have to flee and live in their yellow submarines!