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Old 10-28-2007, 07:35 AM   #41
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As Ive said before, Im not an expert in any of this pension fine print and Im trying to educate myself now. There must be something different about my pension and some of these other government pension funds like yours.

Ive read a couple other strories similar to yours and the main difference I see between them and mine is that there is no goverment entity that "runs" my pension fund. Its its own entity as far as I can see.

For instance, the Governor has no jurisdiction to just appoint a new board. The board has a couple City Council members, and then the rest of the members are all either retired or current police or firemen. They have to be elected by members of the pension every couple years just like any other elected position.

How much (in percentage terms) did your pension drop when they "reformed" it?
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Old 10-28-2007, 07:10 PM   #42
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Originally Posted by RetireeRobert View Post
Oregon averge employer contribution rates are now 17-18%. Up until 2000 or so the employer rate was 11-12%, then started climbing and were headed to a projected 27%. A literal revolution of cities/counties/school districts/state government occurred, and Oregon PERS legislation "reformed" the system. Employer rates dropped back to the now 17-18% and are still dropping. How pay for dropping those employer rates? That's right---retirees/members took it in the shorts in reduced benefits for *current* retirees (yes that can happen and *federal* courts looked the other way), and dropping projected future benefits for current workers.

Maybe there is a whole other political atmosphere in Texas compared to Oregon. I know I never expected to be blindsided by my state pension, last thing in the world I thought would ever happen, but cut my pension they did---now they have the balls to be sending out bills to retirees for prior "overpayments" after 2003. Not only cut pension, they want money back!
My partner works under Oregon PERS and her retirement health benefit were cut as well as her pension being reduced.

I know of some people who retired under PERS when they saw the cuts coming (there was a massive bailout when news of the cuts came out). Some of the pensions were over 100% of their old salary (with jobs paying over $150k per year) That was reduced and they are collecting maybe 80% of their old salary now. Honestly, I don't know what the board was thinking to offer pensions like that.
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Old 10-28-2007, 10:04 PM   #43
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That was reduced and they are collecting maybe 80% of their old salary now. Honestly, I don't know what the board was thinking to offer pensions like that.

The pension benefits were always defined by laws passed by the legislature. The PERS only "ever" offered pensions that had been defined by successive legislatures.

The PERS is a separate legal entity from state government--it is a trust fund. The Governor only has power to appoint PERS Board members as specified by law.

The 2003 legislature "reformed" things, so the Guv got a clean shot to name his own people to a reduced in sized board.

As to percent of salary the PERS paid, the average member gets a 54% replacement ratio of pension to old salary. The employers in the reform fever liked to whip up the newspapers with the 4 or 5% of workers, many of whom had worked 35 or 40 years in the system, who got up to 104% replacement ratio. All the while the other 94 or 95% were getting 54%.
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Old 10-28-2007, 10:08 PM   #44
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the main difference I see between them and mine is that there is no goverment entity that "runs" my pension fund. Its its own entity as far as I can see.

For instance, the Governor has no jurisdiction to just appoint a new board.

How much (in percentage terms) did your pension drop when they "reformed" it?
The Oregon PERS is also a separate legal entity, the PERS Trust Fund.

But the legislature changed the laws about Board appointments which allowed the guv to put new people in to do his bidding. PERS Board appointments are still governed by law, it's just that they changed the law! I presume Texas can change laws to about such things.

My pension dropped 8+%.
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Old 10-28-2007, 10:36 PM   #45
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The employers in the reform fever liked to whip up the newspapers with the 4 or 5% of workers, many of whom had worked 35 or 40 years in the system, who got up to 104% replacement ratio. All the while the other 94 or 95% were getting 54%.
You've got to admit, a COLA'd pension of 54% of your final salary is pretty sweet. Especially when combined with a 403b and subsidized health insurance.

I'm estimating a (Federal) pension worth about 20% of the ave. of my high three working years. I also get a 5% match on my 401k and health bennies. I feel luckier than most.

It seems as though the private sector and the government sector are getting way out of whack in terms of retirement benefits. I'm waiting for the Feds to announce a new retirement system for younger workers.

To the OP, I wouldn't spend down my savings first and trust you will be given what was promised to you in a pension. You have better control over your savings than you do the pension.

That's one of the biggest reasons I am planning on taking SS at 62. If I don't, I will have to spend more of my retirement savings. I don't trust what the Government is going to do with SS.
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Old 10-28-2007, 11:41 PM   #46
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You've got to admit, a COLA'd pension of 54% of your final salary is pretty sweet. Especially when combined with a 403b and subsidized health insurance.

There is NO subsidized health insurance. State retirees pay it ALL plus 2% administrative fee. I selected the cheapest option available for retirees which has 50% co-pay----for this privilege I pay $876/month for family coverage.
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Old 10-29-2007, 10:47 AM   #47
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I just got off the phone with one of the pension fund board members who is also an old supervisor of mine.

Here are the main questions I had for him.

1) There was a major pension referrendum on the ballot a few years ago that passed by landslide. What was it?

It was an ammedment to the Texas Constitution that now makes it illegal to lower the benefits of any member of a private pension. Beneftis for future members can be lowered but not current members. A change would require a new election and based on the fact that this one passed 94-6%, I dont see that happening.

2) DROP accounts were subject to early withdrawal penalties just like an IRA but the board was trying to change this. Did anything change?

The age has been lowered to 50. Anytime after 50, withdrawals are unlimited with no early withdrawal penalties.

3) Do the Citys 27.5% contributions drop at any point?

The 27.5% contribution rate was determined during an arbritration process back in 1984. If / when the pension is 100% funded, the City can lower their contributions to 17%. The board member I spoke with doesnt foresee that happening. He thinks the contributions could be lowered but not all the way down to the min of 17%. However, even if it did happen, the new law still prevents any decrease in pension benfefits. Worst case scenario would be that new hires would have a lowered pension package than we currently have.

4) Is there any talk whatsoever of eliminating the DROP system?

No. He said that most private pensions have "dropped" DROP because it was a liability to them. They were paying out too much in interest and it was costing too much in administrative costs. Our DROP program is set up differently from everyone elses and its actually an asset to our overall pension mainly because of this:

The City pays the 27.5% contributions in one giant lump sum check once per year. Its based on the total payroll of the police and fire department. The higher the payroll, obviously the higher the 27.5% check is. The people in DROP are the highest paid people on the dept because they have the most seniority so the more people staying around longer (because of DROP), the more money the City pays into the pension with its 27.5% check. He says that DROP will never be "dropped" but even if it is, the DROP money belongs to the individual person and each member could withdraw his entire DROP balance as needed. There is $54M in the DROP system and over $4B in the entire pension fund so even if every person withdrew their entire balance it would not have much of an impact.

I asked him about the State of Oregon and he said (pardon me)..."They are ****ed. So is the state of Ohio."
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Old 10-29-2007, 11:02 AM   #48
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I just got off the phone with one of the pension fund board members who is also an old supervisor of mine.

Here are the main questions I had for him.

1) There was a major pension referrendum on the ballot a few years ago that passed by landslide. What was it?

It was an ammedment to the Texas Constitution that now makes it illegal to lower the benefits of any member of a private pension. Beneftis for future members can be lowered but not current members. A change would require a new election and based on the fact that this one passed 94-6%, I dont see that happening.

2) DROP accounts were subject to early withdrawal penalties just like an IRA but the board was trying to change this. Did anything change?

The age has been lowered to 50. Anytime after 50, withdrawals are unlimited with no early withdrawal penalties.

3) Do the Citys 27.5% contributions drop at any point?

The 27.5% contribution rate was determined during an arbritration process back in 1984. If / when the pension is 100% funded, the City can lower their contributions to 17%. The board member I spoke with doesnt foresee that happening. He thinks the contributions could be lowered but not all the way down to the min of 17%. However, even if it did happen, the new law still prevents any decrease in pension benfefits. Worst case scenario would be that new hires would have a lowered pension package than we currently have.

4) Is there any talk whatsoever of eliminating the DROP system?

No. He said that most private pensions have "dropped" DROP because it was a liability to them. They were paying out too much in interest and it was costing too much in administrative costs. Our DROP program is set up differently from everyone elses and its actually an asset to our overall pension mainly because of this:

The City pays the 27.5% contributions in one giant lump sum check once per year. Its based on the total payroll of the police and fire department. The higher the payroll, obviously the higher the 27.5% check is. The people in DROP are the highest paid people on the dept because they have the most seniority so the more people staying around longer (because of DROP), the more money the City pays into the pension with its 27.5% check. He says that DROP will never be "dropped" but even if it is, the DROP money belongs to the individual person and each member could withdraw his entire DROP balance as needed. There is $54M in the DROP system and over $4B in the entire pension fund so even if every person withdrew their entire balance it would not have much of an impact.

I asked him about the State of Oregon and he said (pardon me)..."They are ****ed. So is the state of Ohio."
Interesting. So the constitutional amendment prevents "private" pensions to lower benefits for existing memebers. But isn't your City P&F pension fund a "public" pension? SDince when were "cities" considered "private"?

If I were you I would read for yourself what that constitutional amendment says. Not take some dude's word for it. And does it really say it prevents cuts for "exisiting" members? Or does it only prevent cuts in already accrued benefits, but not in future benefits to be accrued by "exisiting" members? Read and study that amendment for yourself.

As to his explanation of why the DROP system is actually an "asset" to the overall pension---that explanation made NO sense to me. Maybe something got lost in translation, but if I were the overall pension fund manager and I had to be convinced DROP was an overall asset, I wouldn't buy it from the above explanation.

So what lessons, if any, did your friend draw from Oregon's and Ohio's experiences?
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Random Googling
Old 10-29-2007, 11:20 AM   #49
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Random Googling

found this about Dallas P&F pensions fund:


<SPAN style="COLOR: black; mso-bidi-font-size: 9.0pt">The Dallas Police and Fire fund is short $750 million, the highest dollar amount of the three local plans on the state list.
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If Houston Can Exempt Themselves, then?
Old 10-29-2007, 11:27 AM   #50
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If Houston Can Exempt Themselves, then?



Voters Release Houston From Pension Law

By Mary Williams Walsh, The New York Times

May 17, 2004
Houston residents voted decisively on Saturday to exempt their city's pension plan from a state requirement that pension promises be kept.

About 73 percent of the ballots cast in the special election were in favor of opting out of the pension requirement, which became part of the Texas Constitution in 2003, according to the clerk for Harris County, which includes Houston.

Houston put the matter to the voters amid growing concern about the solvency of the city's pension fund. Pension officials added an unusually generous package of benefits to the plan in 2001. The package attracted little notice at the time, but the cost has since climbed.

Similar problems have cropped up in other cities and counties that set up the same type of benefits package in the last few years. The package is usually called a DROP, for deferred retirement optional program.

In Houston, taxpayers learned this year that their city's DROP had left them on the hook for pension benefits far richer than those offered by private-sector companies, or by other cities of comparable size.

An actuarial study commissioned by the city in February showed that hundreds of public employees would qualify for special, one-time payouts of more than $1 million each when they retired and that some public workers stood to earn more as retirees than they did when they worked.

The study was done by Joseph Esuchanko of the Actuarial Service Company in Troy, Mich., who also calculated that the city pension fund had fallen about $1.5 billion short of the amount it needed to pay all the benefits it owed. He said the shortfall would grow in the next few years.

The Harris County district attorney, Charles A. Rosenthal Jr., has been looking into possible wrongdoing in the sweetening of Houston's pension benefits. Mr. Rosenthal declined to discuss the inquiry before the election, saying he did not want to prejudice the vote. The constitutional amendment gives municipalities in Texas a single opportunity to opt out of the pension requirement, by holding a referendum.

Mayor Bill White has said he does not want to reduce city workers' pensions. But he said Houston needed more flexibility to keep the benefits affordable.
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Old 10-29-2007, 12:31 PM   #51
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All cities within Texas had 1 year from the election to exempt themselves. Austin, Houston and San Antonion did. Dallas didnt. Its too late now, but theyve shown no interest in in anyway. There was one council member who wanted to exempt out and he got no where with the rest of the City Council.

I meant "public" pension...not private.

What does "short $750 million" mean? Short from what? Thats probably the amount that we are underfunded since we are only 89% funded right now. It makes sense that we have the largest underfunding in total $$ since we have the biggest pension fund.
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Old 10-29-2007, 12:37 PM   #52
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Therir actuarial study showing "hundreds" of people will have one time payouts of more than $1M is a joke. We have a total of $54M in our entire DROP system. Not hundreds of millions.

They must be using some projections for how many people they "think" will go into DROP and how long they "think" they will stay in it.

They certainly dont owe hundreds of people over a million right now and even if they did, so what? Those people arent going to cash out their millions is a lump sum.

They retired for pension purposes and went into DROP. Who cares if they took their pension checks and spent it or they invested it in the DROP account? The pension fund isnt losing money if they leave it in. Its more or less breaking even.

He didnt go into detail about why Oregon is screwed up.
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Old 10-29-2007, 05:05 PM   #53
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It was not the DROP program that was killing the Houston plan, but an increase in the percent per year that someone will earn..

RetireeRobert... The problem with Houston is that the old mayor decided to bribe the workers with a pension increase (kicking the can down the road).. I think the plan was increased from (say) 2.2% per year to like 2.4 or 2.5% with NO increase in funding.. and the rate was based on final salary or something, not an average... so, the fund is not being funded with enough money to pay the anticipated pension based on that higher rate...

As an example, the mayor gave the Chief of Police a raise the week he was leaving which meant that his pension went up (and I am sure this number is off) something like $70K per year... the city counsel said not so fast, but they could not do anything fast enough and he got his higher paycheck for one week and qualified for the higher pension... they want to be able to 'fix' that kind of problem in the plan and the constitutional amendment would not allow that... but since they opted out they can change it for future people.


Now... all of this is memeory and can all be wrong...
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Old 10-29-2007, 05:28 PM   #54
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All cities within Texas had 1 year from the election to exempt themselves. Austin, Houston and San Antonion did. Dallas didnt. Its too late now, but theyve shown no interest in in anyway. There was one council member who wanted to exempt out and he got no where with the rest of the City Council.

I meant "public" pension...not private.

What does "short $750 million" mean? Short from what? Thats probably the amount that we are underfunded since we are only 89% funded right now. It makes sense that we have the largest underfunding in total $$ since we have the biggest pension fund.

OK. Sounds like you have been doing your homework. If Dallas is locked into DROP and the Texas constitutional amendment, perhaps you have some legal safeguards. That leavesd fiscal dangers to be aware of.

I think you mentioned the Dallas P&F was a $4billion plan in assets, so $750 million short is little under 20% shortfall. Nowhere near teetering on insolvency, but not as strong as it could be either. If the City is locked in on "having" to contribute at the 27% rate, and has been contributing at that rate for 18 plus years, then I guess the plan stays solvent via City contributions. And they don't have to/can't go to workers/retirees to up their contribution rates or cut benefits.

If you have a plan for you and your wife to take advantage of 8-10% compounding of assets in the DROP program, perhaps it's ok to proceed.

I would just be real cautious---run your numbers on alternatives several times to make sure that is what you want to do. Get some good numbers whizes to go over your projections and plan. See if they can spot any flaws.

Is there anyway if you do proceed, where you get another decision point or points----to start tapping DROP, instead of letting it ride.

I would say if you do proceed and let DROP ride---MONITOR the situation twice a year. Check the laws, the current funding status, the rumor mills for any "troubles" in the DROP plan. Then if something unexpected comes up where DROP drops its allure, bail out.

With you and your wife both in DROP and exhausting your other retirement resources, CAUTION is the constant word of the day.
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Old 10-29-2007, 05:42 PM   #55
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Therir actuarial study showing "hundreds" of people will have one time payouts of more than $1M is a joke. We have a total of $54M in our entire DROP system. Not hundreds of millions.

They must be using some projections for how many people they "think" will go into DROP and how long they "think" they will stay in it.

They certainly dont owe hundreds of people over a million right now and even if they did, so what? Those people arent going to cash out their millions is a lump sum.

They retired for pension purposes and went into DROP. Who cares if they took their pension checks and spent it or they invested it in the DROP account? The pension fund isnt losing money if they leave it in. Its more or less breaking even.

He didnt go into detail about why Oregon is screwed up.
This is how pension "reform" started in Oregon. The longknives hired some actuaries to prepare some studies projecting this and that. Then it was selectively fed to the newspapers hungry for headlines. It didn't matter much about the real details and what the well-informed knew of the situation. What mattered was some theoretical projections on a few matters to generate juicy (but misleading) headlines, and soon the populace was in a frenzy. Soon Oregon public employees became the the scapegoats to blame and start looking at as a place to cut benefits expenses.

Sounds like there is some disgruntlement in Texas about public employee pensions. Apparently, in Dallas the longknives did not get the upper hand in the headline/political wars, and the constiution put in a safegaurd Dallas did not opt out of.

Of course, if DROP is such an "asset" to the localities, why did so many opt out ask the Texas citizens who don't get public pensions.

If I were planning to commit my and my wife's financial futures to relying on DROP after depleting all other retirement resources, I would be keeping a very close and constant watch on DROP and pension developments and the political and budget situations.

This is just advice from a public worker who retired, took his pension "notice of entitlement" as the legal word on p[ension amount, then found three years later the Oregon PERS saying, "surprise, we changed our minds. Your pension is getting cut---yes cut three years AFTER you reitred".

Strange things can and have happened. Be Wary!
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Old 10-29-2007, 08:21 PM   #56
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A skeptical way to view any pension nowadays is Prepare Early Not Seeking Improbable Or Nonexistence.
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