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Old 01-10-2009, 08:21 PM   #21
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Originally Posted by Bikerdude View Post
I did not pay for my pension (no longer offered at Megacorp) but when I interviewed for the position they explained it was part of my overall compensation. It paid a maximum of 60% of your average last 5 yrs. pay at age 60 with 30 yrs of service. The pension is cut by a percentage of your age 62 SS whether you take it at 62 or not. Still a pretty good deal although it does not have a cola.
Biker, this sounds a bit like my government pension. It has a multiplier of 2, so basically 30 years of service nets you 60% ... though of your highest annual salary (instead of a 3-year or 5-year average). It likewise will not allow you to double dip into SS and has a CPI adjusted COLA that generally rises but can actually go negative in a deflationary environment.
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Old 01-10-2009, 08:26 PM   #22
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When I was still working, I paid in 4.5% of my earnings to a gov't DB COLA'd pension plan. It was 3.75% for my pension and 0.75% toward the "spousal pension". And being single, when I ER'd, I got back that 0.75% "spousal pension" plus 7.5% annual interest on it...lump sum! It came out to almost $17K...I rolled $10K back to the pension to fund my purchase of 5 additional years of service credit (the max allowed). The rest I put into a rollover IRA.

My employer also contributed to the pension, but I don't recall the amount.

Another thing that our pension fund offers...though I didn't take advantage of it (like an idiot)....is that the employee can contribute up to an additional 10% per year of their earnings to a Voluntary Additional Contribution (VAC) program. The VAC pays 7.5% annual interest on your contributions, and when you retire you can either get that back lump sum, or as a monthly payment separate from your monthly pension payment.

Since I didn't pay federal tax on my contributions, I owe it on my pension payments. I paid no IL state tax on the contributions either, but they also don't tax the pension payments!!

Besides paying into the pension, I also paid into SS for all those years too, and qualify for SS when I hit 62 or after. Pension will not be reduced due to SS, nor will SS be reduced due to pension.

If I had any regrets whatsoever...which I certainly don't....it would be that I didn't sock away the 10% additional into the VAC program @7.5% interest.
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Old 01-10-2009, 08:28 PM   #23
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2.4% pre-tax matched by the county government. No SS payment. Between 1991 and 2005 there was an option to buy an additional 1% per year to your years of service for an increased annuity, which I did. Separate pre-tax 407 available with no match from the county. Pension is fixed COLA of 3% per year. Pension is calculated based on average of last 4 years of highest earnings.
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Old 01-10-2009, 08:38 PM   #24
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Originally Posted by Goonie View Post
When I was still working, I paid in 4.5% of my earnings to a gov't DB COLA'd pension plan. It was 3.75% for my pension and 0.75% toward the "spousal pension". And being single, when I ER'd, I got back that 0.75% "spousal pension" plus 7.5% annual interest on it...lump sum! It came out to almost $17K...I rolled $10K back to the pension to fund my purchase of 5 additional years of service credit (the max allowed). The rest I put into a rollover IRA.

My employer also contributed to the pension, but I don't recall the amount.

Another thing that our pension fund offers...though I didn't take advantage of it (like an idiot)....is that the employee can contribute up to an additional 10% per year of their earnings to a Voluntary Additional Contribution (VAC) program. The VAC pays 7.5% annual interest on your contributions, and when you retire you can either get that back lump sum, or as a monthly payment separate from your monthly pension payment.

Since I didn't pay federal tax on my contributions, I owe it on my pension payments. I paid no IL state tax on the contributions either, but they also don't tax the pension payments!!

Besides paying into the pension, I also paid into SS for all those years too, and qualify for SS when I hit 62 or after. Pension will not be reduced due to SS, nor will SS be reduced due to pension.

If I had any regrets whatsoever...which I certainly don't....it would be that I didn't sock away the 10% additional into the VAC program @7.5% interest.
Wow. Talk about the golden goose, does the State of Illinois still offer these generous DB plans? Let's see... ARC buyback, VAC, double-dipping into SS, no tax on pension payments/distributions? Did I just read this correctly? Is the pension plan above 80% funded considering its liabilities and only a flat 3% IL state tax?

I think I'm going to update that resume and move back to Illinois?!
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Old 01-10-2009, 09:16 PM   #25
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Originally Posted by friar1610 View Post

As a footnote, there are a few states (MA is one) where contributory
Federal pensions are state-tax free. But non-contributory (i.e., military) pensions are not.
Oddly, I think it's the reverse in Hawaii. Go figure!
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Old 01-10-2009, 11:24 PM   #26
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Hired in 2007 and pay nothing in. I don't count on having it though. I believe once I become vested in a year or so I can roll it over to an IRA when I leave the company.
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Old 01-11-2009, 12:23 AM   #27
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Wow. Talk about the golden goose, does the State of Illinois still offer these generous DB plans? Let's see... ARC buyback, VAC, double-dipping into SS, no tax on pension payments/distributions? Did I just read this correctly? Is the pension plan above 80% funded considering its liabilities and only a flat 3% IL state tax?

I think I'm going to update that resume and move back to Illinois?!
Here's a little (OK...a lot of) clarification....I'll apologize in advance for the length of my reply. Someday I'll work on a "Cliff's Notes" version.

Although it's public pension plan in IL, it's not a State of IL pension. It is regulated by the laws & statutes of IL, but it's neither controlled by, nor accessible to, politicians or their follies. It's governed by a Board of Trustees, who are elected by the employees, employers, and retirees. Four trustees are elected by employers, three are elected by employees, and one is elected by retirees.

And though it was totally exempt from IL income tax ....even the low 3%....it's not fed income tax exempt, only deferred. So I pay Fed income tax on the 'distributions', which I have deducted from my monthly payment.

There's also no "double-dipping into SS"....I paid into SS fully for my entire 'working' life (30+ years), so I'm eligible, according to SSA rules & regulations, to collect at age 62 or later. "Double-dipping" would be receiving 2 pensions from the same pension plan....which with our pension plan is 100% impossible.

Before the rather bleak year we just came out of, the pension plan was expected (as of sometime in 2007) to be over 100% funded by 12-31-2008. However, with the way things went this past year, it's somewhere between 82% and 86% funded, but still totally solvent. (Unlike the 'actual' State of IL employee pensions, which have been not only under-funded, but also intentionally unfunded, by a certain Governor who was just impeached by the State House of Reps yesterday.) Fortunately, our pension plan isn't funded by the State of IL, or by State income tax dollars. It's completely funded by participating employees and their employers.....mostly municipalities, counties, school districts, etc. And those employers use a small portion of the money received through property taxes, and taxes on goods and services, to fund their portion of the pension.

Before I received that 1st pension check, I made my last contribution to the pension fund, as did my employer. Neither I nor they ever pay another dime into the pension fund to cover my monthly pension payment!

There is only a very tiny percentage of people who ever are able to meet the requirements for the early retirement package that I was able to qualify for! To qualify for a full pension, you need to be at least 55 years old AND have at least 35 years of service. To be able to qualify for "early retirement" with the full pension, FIRST your employer must officially participate in, and offer an "early retirement incentive" program. Secondly, the employee must be at least 50 years old AND have at least 30 years of service...PLUS they'll need to "buy" 5 years of service credit....which will cost the employee an amount equal to 4.5% of an average of his 4 highest years' wages out of the last 10 years, multiplied by the 5 years years he's "buying". My average yearly contribution for my 4 highest years' wages was just over $2000 per year....therefore I had to pay in over $10,000 to "buy" my needed additional service credit.

In all of the years that my municipality has been participating in the pension plan...which has been a loooong time.....only 3 people (including myself) have ever qualified! The 3 of us all began our employment there when we were 19 years old, and we all retired at 50 years old in Spring 2007. Currently, there is only one person working there now who will qualify in the future.....if it's still offered. But he has over 28 years to go!!!

BTW, what's the "ARC buyback" you mentioned? I never saw or heard that term before.
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Pensions
Old 01-11-2009, 05:36 AM   #28
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Pensions

It's changed over the years and it's confusing. When I first started, the company contibuted up to $11,000, then you would do 3%. After every contract it would go up to $14,000, $17,000 and so on. The company stopped contributing about 15 years ago, it's overfunded, although it's taken a hit this past year I'm sure.

Now I contribute nothing up to $70,000, after that it's 3% of your weekly paycheck. I also am in the Voluntary Pension Account where I contribute 3% all year until I hit $70,000 or yearly max of VPA of $2,100 then the contributions switch to your regular pension account.

I should of done the VPA when it first started about 12 years ago but as it stands now I will have 15 years of contributions when I retire in 9-10 years.

Then we have a guaranteed pension based on your high 3 consecutive years of pay in your last 10 years. Whichever is higher between your regular and guaranteed is the pension you will get.

If you retire at age 60 or before you also get a pension supplement until age 62 when you can collect SS.

We also have the S&SP, sort of like a 401K. Company stocks, mutual funds, savings bonds, where the company matches half your contributations. So if you do 7% they will match 3.5%, that's the highest they go.

Your Medical, Dental, Glasses, & Prescriptions continue until age 65. They have an after 65 plan to supplement Medicare for a monthly premium which is better than most plans.

To tell the truth I've just started to try and understand it all. Retirement seemed so far away. Then 5 years ago it hit me I only have 15 years to go and that's when I joined the S&SP and the VPP. No sense looking back now, at least I'll have a little something extra.
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Federal Retirement Plan Contributions
Old 01-11-2009, 05:53 AM   #29
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Federal Retirement Plan Contributions

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Originally Posted by Texarkandy View Post
Quote:
Originally Posted by Amethyst

Under the "old" Civil Service Retirement System, I have always paid 7 % of pre-tax salary (except for a while when it was 7.5%) toward a defined benefit pension. I have never paid toward Social Security, so wouldn't qualify for SS, unless I work at something else for 10 years after retiring.

Without comparing pension benefits, how much (percentage of pre-tax pay--no need to reveal the actual amount unless you want) do folks in other pension plans actually pay toward your pension? Does anyone get a pension for "free"? (i.e. you serve for 20 or 30 years, your employer gives you an annuity in thanks for your service)

Amethyst
Well, I missed being CSRS 6c by 4 months. So I pay into the FERS 12d plan. I pay in 1.7% pre-tax + SS.

Formula is 1.7% of hi-3 salary for first 20 years & 1% of hi-3 for each additional year. (i.e. 42% for 30 years)

Eligible to retire (unreduced) with 20 years at age 50 or 25 years at any age. Mandatory at age 57.

Pension is eligible for a (diet) COLA after the first year of retirement. Formula for the diet COLA is CPI minus 1%.

Also will receive a pension "supplement" till age 62 which for me will be approx 60% of what age 62 SS benefit would be. (supplement will be means-tested & subject to reduction after age 55)
Actually, in the interest of "fairness" the way FERS contributions are computed is "CSRS contribution minus OADSI contribution" so the total contribution is the same for both with most of the FERS allocated to SS. I sometimes think the change in the pension had more to do with SS than anything else but I don't know.

And also, at least in regular FERS, the supplement is not "means tested" but is "payroll income" tested. FERS retirees don't get the ump that CSRS retirees get by retiring earlier and working for a contractor or other job.

I also ran into this a while back which I found interesting:

Quote:
- Federal news, government operations, agency management, pay & benefits - FederalTimes.com

Government contributions to retirement

Question: I know that an employee covered by FERS contributes .8 percent to his or her retirement account in FERS and 7 percent to the CSRS retirement account. What is the government/agency contribution to each retirement account on behalf of the employee?

Answer: As of the first pay period beginning on or after Jan. 1, 2003, agencies contribute 7 percent for CSRS regular employees and 7.5 percent for special category employees, such as law enforcement officers and firefighters. Under FERS, they contribute 10.7 percent for regular employees and 22.7 percent for special category employees.
-- Reg Jones
I guess that is why an estimate a few years ago (GAO?) said that FERS was "fully funded" and CSRS was about 40% underfunded.
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Old 01-11-2009, 08:23 AM   #30
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My wife has a pension and does not pay into SS. She has had something like 11% withheld since she started 25 years ago with her employer matching. They are talking about it going to 13% next year.

Her pension is good but she has paid quite abit into it.

Edit. I just checked and they paid 13% this year and are raising it to 13 1/2% next year. This does not include the employer match. So 26% to 27% of current income goes into the pension plan. It should pay well.
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Old 01-11-2009, 08:52 AM   #31
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I paid both 7.5% into the county pension plan and the 7.5% into SS. When I retired I took the option (out of about a dozen) that means when I turn 62 the county pension is reduced by the amount of SS benefits that I'll be eligible for then so the total income remains about the same.

If I'm still working at the job I'm at now I'll delay SS benefits for the greater benefits later and to avoid paying income taxes on the SS benefits. And by then DW will probably have found a job after earning her BA degree so as long as we're both working we won't really need the SS benefits.

And if that doesn't work out we'll just go back to "plan A" and not work at all, since before retirement we were careful to crunch the numbers and not put ourselves in a position where we had to work if we didn't want to.
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Old 01-11-2009, 08:53 AM   #32
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My company pays for the DB pension (non-COLA). I'm eligible in 4 years at age 55, but the amount grows considerably by staying a few years beyond that. I can almost feel the "one more year syndrome" coming to get me :confused:

Additionally, they have a 75% match up to 6% on the 401k.

The pension benefits for new hires was reduced 3 or 4 years ago. I'm hoping there's no freeze in the near future as I'm at the point where my age and years of service are really piling up benefits. I'll continue saving as if there could be a freeze. Besides, the pension being non-COLA, I'll have to be providing for inflation protection as well.
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Old 01-11-2009, 09:25 AM   #33
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Like the OP, I'm a fed employee under the "old" CSRS defined benefit, fully cola'd plan. I contribute 7% of income to the plan. I also have 31 yrs & counting in the AF Reserves including 4 1/2 yrs active duty time, so I'm working on a contribution-free cola'd pension from the military as well. But, like Rustic said, I may not have contributed monetarily to the military pension but I've paid in other ways lol! Besides, the pensions, I do qualify for a minimal SS check when I get to age 62. I qualified for that one when I was younger, mostly prior to becoming a fed employee. Hopefully the 2 pensions, small SS, plus my TSP (not employer contributed) & Mr. & Mrs. Roth IRA's will keep us from eating dog food.
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Old 01-11-2009, 10:53 AM   #34
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I contribute 7.9% of my salary to the pension and the employer kicks in 11.9%. The pension is 2.35% of years of service, with the base of the average of the highest 5 years. Non-cola until I am 66 years old, and then the highest cost of living raise would be 2%.

I contribute about another 7.8 percent to a 403-b with no match. Also contribute to Social Security.
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Old 01-11-2009, 11:07 AM   #35
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When I retired I took the option (out of about a dozen) that means when I turn 62 the county pension is reduced by the amount of SS benefits that I'll be eligible for then so the total income remains about the same.
I had a similar option, but took the option to receive level payments for life...cola'd of course. So when I hit 62 (or whatever after that), and start drawing SS, it will be like extra toppings on an already great sundae!

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Hopefully the 2 pensions, small SS, plus my TSP (not employer contributed) & Mr. & Mrs. Roth IRA's will keep us from eating dog food.
Man, I dunno......after perusing the shelves at the local feed & seed store, some of those critter snacks look awful tasty! Fact is, one day I was waiting for the fellow to retrieve my order from the storeroom, and I spotted some yummy looking sausages on the shelf. So I went over to get a closer look-see, and I picked out one that was beef sausage, cheese, and veggie of some sort. I laid it on the counter, and told them to add it on to my order. They inquired what sorta pup I had, and I told 'em "I ain't got one." So they asked why I was buying a doggie treat! Huh?! Darn!! It sure did look yummy!

After seeing what the feed & seed joint offers, and what's on my grocer's shelves.....I'm half tempted to start grocery shopping at the feed & seed!
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Old 01-11-2009, 11:21 AM   #36
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I recently went to work for the state. Should I stay long enough, I would be eligible to receive a COLA'd pension of about 1.5% of my salary per year of work, commencing at age 62. I would also get fully paid healthcare. For all that, they deduct 2% of my paycheck. I also pay into SS and Medicare.

The young wife is a teacher. She will get a COLA'd pension of 2% of salary per year of work, commencing at 60. She may stay with the school district's group health policy if she wants, but must pay the full boat for it. She will, however, get a $250/mo. cash healthcare stipend to help make that payment. For all that, the school district deducts 6% of her paycheck. She does not pay into SS but does pay Medicare.
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Old 01-11-2009, 11:49 AM   #37
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Here's a little (OK...a lot of) clarification....I'll apologize in advance for the length of my reply. Someday I'll work on a "Cliff's Notes" version.

BTW, what's the "ARC buyback" you mentioned? I never saw or heard that term before.
That's for clarifying Goonie and yes, the fact that Blago was nowhere near your pension that's most definitely a good thing!!

I should have explained ARC buyback is additional retirement credit or the same as purchasing additional years of service. Looks like you did that at your DB pension, its one of the best deals out there IMO.
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Old 01-11-2009, 11:59 AM   #38
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I had been paying 8% into my pension (California) and my employer has been paying a variable rate depending on the condition of the fund. Sometimes their share was 18%. My pension was 2.5% of highest year, eligibly to retire at 55.

I did not pay into SS at this job, and am subject to WEP, but from prior jobs, I should be able to get the WEP penalty down to only 5% by the time I collect.
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Old 01-11-2009, 12:32 PM   #39
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Hi Harley. Yes, fGTE. All in all I served for 30 years.
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Old 01-11-2009, 01:32 PM   #40
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I should have explained ARC buyback is additional retirement credit or the same as purchasing additional years of service. Looks like you did that at your DB pension, its one of the best deals out there IMO.
OK, thank, got it now.

Even though I bought 5 years of service credit, I could have bailed without buying any. However, I wouldn't have gotten the full pension amount. It would have been reduced by 1% for each of the 5 years......for a total of 5% reduction. I had 30 years 10 months of actual service time, so I could have just bought 4 years 2 months. But I opted to pay the slight amount for the extra 10 months in order to boost my pension just a tad more.....only about $300/year, but that pays for all of my coffee joint runs. That $300/year (cola'd for life) cost me about $170 up front, so I broke even after the first 7 months.
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