Squeezy the Pension Python

[ziggy29]

Here's an idea from a state in much better shape than Illinois. This proposal would start with a 20 million dollar incentive to move from the state pension plan to a 201K type of retirement plan. 2000 current employees would be able to make the jump if the plan is approved. What I am not certain of is if the incentive is also available for those on the hybrid DB/DC plan as well as those on the older DB plans.

This link basically shows what I was talking about in another thread yesterday. Traditionally (especially in the last few years) public sector work has looked a lot more attractive to a lot more people in large part because of perceived superior (and more stable) retirement benefits, such as full DB pensions and retiree health insurance... but people looking at entering public sector work today shouldn't assume they can put in their 20+ and get that deal.

In some sense, I guess the feds were 25-30 years ahead of their time when they moved from CSRS to FERS. Though this seems to be going to more of an extreme; at least new hires under FERS still have a three legged stool (with smaller pension plus TSP) while under this state proposal, there's no pension and all 401K. Perhaps this is a *slightly* easier sell now than it was in 2009 with the examples of "401Ks becoming 201Ks" fresh in everyone's mind. But I still think it will be a hard sell for those already in the system, though new hires and younger current employees at some point are likely to have no choice in the matter if they want a job.

This snippet describes the argument playing out all over the country rather well, as it really gets to the contention: the inability of the private sector worker's paycheck and benefits to keep up with those in the public sector. In particular, what the union leader and the state senator are saying succinctly summarizes almost the entire debate:

Tim Welch, a spokesman for the Washington Federation of State Employees, said there is no financial need to end public pensions, calling efforts to do so “a mean and nasty effort to harm public employees.”

If anything, Welch said, pensions enjoyed by public employees should be restored to the private sector, because 401(k) plans weren’t meant to provide a secure retirement for average workers.

But state Senate Majority Leader Rodney Tom predicted it would be difficult for the state to sell tax increases for schools or roads if public employees continue to hold on to pensions unavailable to most workers.

“I think that’s where we’re at — that’s where the private sector is at,” said Tom, D-Medina, who joined Republicans and one other Democrat last year to form a majority coalition in the Senate.

Tom proposed legislation last year that would have moved newly hired state workers, as well as current employees under age 45, to a 401(k) plan. The legislation didn’t go anywhere.

 

[Walt34]

In some sense, I guess the feds were 25-30 years ahead of their time when they moved from CSRS to FERS.

My then-employer did the same thing at about the same time. Additionally they offered (and encouraged) current employees to switch over and if they did they'd get back half of their previous retirement contributions. A lot of them took the bait, bought cars and boats and such, and now regret it.

A big red flag to me was that if one switched over there was no switching back. They made it very clear the decision was irrevocable but the offer would stand as long as one was an employee. That seemed a bit unbalanced and was enough to make me hesitate even before crunching any numbers.

 

[imoldernu]

Chicago Mayor's Proposal to "fix" the system for state public employees.

Does not include the Police, Fireman and Teacher Pensions... the toughest problem.

Emanuel pension fix: Hike taxes, cut benefits - chicagotribune.com

? A Bellwether for other cities?

 

[Fermion]

Interesting that his proposal to raise property taxes doesn't even get support from the unions. Maybe the ultimate solution is to sell more bonds then default on them.

 

[ripper1]

Chicago Mayor's Proposal to "fix" the system for state public employees.

Does not include the Police, Fireman and Teacher Pensions... the toughest problem.

Emanuel pension fix: Hike taxes, cut benefits - chicagotribune.com

? A Bellwether for other cities?

The proposal is for city employees of the municipal pension and the laborers pension. Not the state. These pensions are in far better shape than police and fire. Their retirees also pay for their healthcare whereas police and fire do not.

 

[youbet]

Chicago Mayor's Proposal to "fix" the system for state public employees.

Does not include the Police, Fireman and Teacher Pensions... the toughest problem.

Emanuel pension fix: Hike taxes, cut benefits - chicagotribune.com

? A Bellwether for other cities?

I think you're confused imoldernu. Mayor Emanuel's proposal would NOT apply to state employees.

 

[youbet]

Emanuel and Quinn are similar and consistent in their approach: Forecast extremely bad news and then back off to just bad news.

"All public employees will be gathered in concentration camps where they will be systematically gassed, their gold teeth removed and then cremated in ovens built for the purpose."

Then.......

"All public employees will receive less pension than they were previously told they would receive. The already retired will take the biggest hits since they're the most defenseless."

The second statement would have been unacceptable unless the first had paved the way. But after the first, hey, the second doesn't sound so bad.

The important issue to either Quinn or Emanuel is that the state or city, respectively, not be forced to make pension plan contributions but rather that the pension plans rely solely on the contributions of workers, net of skimming by the state and city of course.

The unemployment rate in Illinois is near the worse in the nation. That's really too bad. It makes public sector jobs look extremely desirable despite the fact that the pension you think you're signing up for will never happen, not even close. If unemployment was significantly lower and workers were harder to recruit, this whole mess might get cleaned up faster.

In Illinois, more and more public employees would like to be part of the Social Security system. But both Illinois and Chicago are fighting it. Why? The Feds would force them to contribute their half of the SS as due. With the state and city pension systems, any employer contributions are optional and vary on a year to year basis. With the state teacher's pension system only 43% funded, there is little evidence that the state ever contributed anything on a net basis. They'd contribute from time to time, but then "borrow" it back. The employees always had their full contribution taken out of their checks which alone pretty much accounts for the 43% funding.

What a mess.......... And it sure speaks for how naïve employees can be. Even today, teachers are working thinking they'll receive even part of the reduced pension that was passed in Springfield just a few months ago. Sheep to the slaughter........