Illinois Pension Reform

[youbet]

I think for unions to go along with this the state's obligation to its contribution would definitely have to be mandatory. If there is no guarantee there than down the road they would be looking for more cuts.

Remember, when the union boss and the politician get up in the morning, their feet are on the floor next to the same bed. How do you think we got into the current jam?

That's why I'd like to see the pension reforms involve going to SS and a 401k type situation. The Feds (if we can trust them.......) would be responsible for seeing that the employer's contribution is paid into SS. The 401k money, deposited with private brokerages such as Vanguard, Fidelity, etc., would always be the employee's without vesting or any way for the politicians to dip in for a tasty snack.

The most implicated in this whole mess are the politicians and the labor leaders followed closely by the pension fund managers and boards. Don't trust them. IMHO, that is.

 

[ripper1]

Remember, when the union boss and the politician get up in the morning, their feet are on the floor next to the same bed. How do you think we got into the current jam?

Ouch...that hurts.

 

[ripper1]

It should be brought to a vote by all the members instead of them making the decision for you.

 

[Midpack]

Why would you complain since you were treated with kid gloves? Freezing a pension is no issue. You're receiving everything you earned. And I'm glad you didn't lose any earned benefits in the change. But being treated well is nothing to complain about, so why would you?

Was you pension actually "lost" Zig? Or was it frozen? I think we're getting pulled between the idea of having a pension frozen (happened where I worked too......) and having already earned pension benefits withdrawn or reduced.

You missed my point on complaining entirely.

I am glad to know "freezing a pension is [categorically] no issue," and that it's completely different than having already earned pension benefits withdrawn or reduced by a member posting here who has not yet retired. Still trying to reconcile that distinction...

My pension was frozen at age 40 after working 19 years, and the resulting lump sum at age 57 works out to 5% of our portfolio. The difference between frozen and lost outright isn't always much different.

 

[youbet]

It should be brought to a vote by all the members instead of them making the decision for you.

That might help........

But what Illinois public employees need right now is an advocate with (1) no personal stake in the game and (2) who understands what happens when pension funds, machine politics, unions and greed blend together.

Unfortunately, the "reform" (what a joke that term is in this context) will include union involvement but not through rank and file referendums. It'll happen in smokey back rooms where politicians and union bosses will work out what will happen and who will win the next primaries. (Remember, in Illinois, primary elections are more important than the final elections since the winning party is fairly easy to predict.) If they agree that party survival is best supported by a short term pension funding fix, which will need to be revisited a few years down the road, then that's what it will be. They'll be retired and on state pensions themselves by then!

Anyway, as I've been saying, we didn't get in this mess overnight or by accident. And it wasn't the 3rd grade teacher in Peoria or the guy running the snow plow in East St Louis who were naughty. But, in the end, they'll pay the price before the wheels of this runaway bus ever get back on the road. I hope some of them join us on the ER board!

 

[Midpack]

I'm missing ya here. Whatdaya talking about?

As usual we have several story lines going at once, but I'm at least as much to blame as anyone else. Some are talking about current retirees (and I think we all agree they should be last to be "harmed" if at all) and some are also extending "what we're owed" to active employees (from the public sector) who have not yet retired. Unfortunately they may have to accept higher retirement ages, reduced benefits/COLA, freezing and/or higher contributions just as (but not because of) many private sector employees have/will. Most of the responses here, including yours, seem to reflect a shared sacrifice in response - that's entirely fair.

 

[clifp]

You missed my point on complaining entirely.

I am glad to know "freezing a pension is [categorically] no issue," and that it's completely different than having already earned pension benefits withdrawn or reduced by a member posting here who has not yet retired. Still trying to reconcile that distinction...

My pension was frozen at age 40 after working 19 years, and the resulting lump sum at age 57 works out to 5% of our portfolio. The difference between frozen and lost outright isn't always much different.

Well put. There is no doubt in mind that vast majority of folks private system pension was frozen and/or converted into a defined contribution system got hosed.

It is completely different than being able to collect 41.8% of your final salary at age 62 like you would have been able to if you had worked for the State of Illinois and the same thing happened

 

[youbet]

Well put. There is no doubt in mind that vast majority of folks private system pension was frozen and/or converted into a defined contribution system got hosed.

It is completely different than being able to collect 41.8% of your final salary at age 62 like you would have been able to if you had worked for the State of Illinois and the same thing happened

I guess it's all an interpretation of levels of being hosed.......... Did ya get hosed, really hosed or hosed even some more? Maybe the dreaded triple hosing? But most everyone is getting "da hose."

How did you come up with 41.8%? My reference is comparing a frozen but known pension with a pension where vested benefits are subject to change, even as the benefit is being paid. We don't know where the state of the Illinois employee would be at. I think you're assuming today's rules. I'm doubting that's going to happen. The funding numbers are really bad and there seems to be little interest in finding ways to make up today for missed employer contributions yesterday. I think it's all over. Let's just hope the "fix" involves SS and 401k's and no more politician - pension fund combos!

I will say that when my son, who spent a decade at the same MegaCorp I worked at, got converted to a cash balance plan, it worked in his favor. When he left with ten years under his belt, he got to roll over several $10k's to an IRA. Had this still been the traditional DBP, he'd have left with a frozen pension for 10 yrs service collectable decades later (with no inflation adjustment).

So I guess it depends on the circumstances. I don't trust anyone on pensions anymore and have gotten to the point where I'm always ready to prefer plans where the earned benefit is irrevocably turned over to the employee the moment it happens. Ie, your employer gives you a 401k match, it goes into a plan administered by another private entity, supervised by fed gov't regs and in an account totally under the employee's control.

As I said, I've been through the whole catastrophe. Traditional DBP to cash balance to 401k with match to 401k with no match to fired and booted into the parking lot by a burley security guard with no sense of humor.......

 

[youbet]

My pension was frozen at age 40 after working 19 years, and the resulting lump sum at age 57 works out to 5% of our portfolio. The difference between frozen and lost outright isn't always much different.

I should mention...... Congratulations! From reading zillions of your posts I was under the impression you did an outstanding job during your accumulation phase and retired well heeled. But it's great to see some relative numbers. Excellent! I'm a huge fan of folks who FIRE primarily based on portfolios. We're about 50 - 50 here as I've mentioned several times.

Those percentage numbers can vary quite a bit. When my son got his lump sum to roll over, and with only 10 yrs, it amounted to more than half of his portfolio. But he has some time to go and will perhaps eventually accumulate a portfolio where his lump sum will also only amount to 5%.

 

[clifp]

I guess it's all an interpretation of levels of being hosed.......... Did ya get hosed, really hosed or hosed even some more? Maybe the dreaded triple hosing? But most everyone is getting "da hose."

How did you come up with 41.8%?

As I said, I've been through the whole catastrophe. Traditional DBP to cash balance to 401k with match to 401k with no match to fired and booted into the parking lot by a burley security guard with no sense of humor.......

I just multiplied the number of years worked by MidPack by state of IL multiplier 2.2x x years of service = 41.8%. One of the many differences between public and private pension is what happens to pension are modified or frozen. Typically in the case of public pension they still receive
the full benefit. So for example when a public pension plan changes the multiplier from say 2.2 to 2. The pension would be 19 years * 2.2 and if Midpack retired at 62 with 22 more years at 2% a year.

In the case of private pensions that get converted to a cash balance the benefit is based on current salary not the projected salary at age 62. So the private ends with a very modest lump sum at the end.

 

[youbet]

I just multiplied the number of years worked by MidPack by state of IL multiplier 2.2x x years of service = 41.8%. One of the many differences between public and private pension is what happens to pension are modified or frozen. Typically in the case of public pension they still receive
the full benefit. So for example when a public pension plan changes the multiplier from say 2.2 to 2. The pension would be 19 years * 2.2 and if Midpack retired at 62 with 22 more years at 2% a year.

In the case of private pensions that get converted to a cash balance the benefit is based on current salary not the projected salary at age 62. So the private ends with a very modest lump sum at the end.

OK clifp. I thought that might have been what you were doing.

We're kind of doing apples to oranges. My comments were concerning the assumption that already earned benefits are withdrawn or reduced, as is being considered in Illinois. You did your calculation on the existing benefits as though they were ongoing or that benefits already earned were being maintained at the level at which they were earned. I think that's very unlikely.

Given what you did, I agree completely. It's just not what I was talking about.

And as I mentioned above, I'm quite familar with conversions to cash balance, freezes and such.

 

[ripper1]

For those of you who get channel 11 in Chicago (WTTW) there is a show called Chicago Tonight. There will be Union representatives and the Civic Committee of the Commercial Club of Chicago debating the issue at hand. Ought to be fun...

 

[ripper1]

I believe it starts at 7pm.

 

[Midpack]

I believe it starts at 7pm.

Thanks, DVR set (can't watch live)...

 

[Midpack]

I should mention...... Congratulations! From reading zillions of your posts I was under the impression you did an outstanding job during your accumulation phase and retired well heeled. But it's great to see some relative numbers.

Nice self serving spin thinly disguised as congrats...

 

[youbet]

For those of you who get channel 11 in Chicago (WTTW) there is a show called Chicago Tonight. There will be Union representatives and the Civic Committee of the Commercial Club of Chicago debating the issue at hand. Ought to be fun...

Thanks......

 

[youbet]

Nice self serving spin thinly disguised as congrats...

Midpack! How could you go there? Sheeesh!

I think it's fairly common knowledge that despite the fact DW and I are roughly 50/50 - pension/FIRE portfolio, I'm intrigued and impressed by the folks who were able to put together substantial assets and retire early on their portfolio alone. Threads where investment tactics designed to make a FIRE portfolio support a desired lifestyle for some X number of years are my favorite but I don't always feel qualified to participate since we have SS and a pension check as roughly 50% of our annual spend.

Really, your ability to have a lump sum distribution of a 19 year frozen pension be only a tiny portion of your portfolio is impressive. And being RE'd without pension or SS more so.

 

[Texas Proud]

Federal law generally doesn't allow the takeaway of vested benefits for service already accrued (absent bankruptcy). So "losing" it usually means freezing it -- except for people who weren't vested yet. At my Megacorp the pension vesting period was 10 years (I worked there for 11.5 so I barely made it). Someone who worked there for 9 years could have nothing to show for it. And if they passed on other more lucrative opportunities in the meantime because they wanted the pension, oops -- too bad.

My only point is that people using terms like 'misery loves company" and calling others "jealous" to flippantly dismiss people with contrary feelings and opinions are making no effort to try to understand why people feel that way. When you utterly dismiss them like that, good luck gaining any of their support.

Don't know if someone has addressed this or not...

But FWIR, if they freeze a plan everybody is vested... It was very early in my career, but my company froze their plan with me having one year.... I got a check for $700... my benefits if I had been vested...

 

[Ron0731]

All I will say... is that it is easy to have opinions when it's not your pension that is going to be affected.

 

[ERD50]

All I will say... is that it is easy to have opinions when it's not your pension that is going to be affected.

Awww, c'mon. I'm sure you could say more.


-ERD50

 

[ERD50]

For those of you who get channel 11 in Chicago (WTTW) there is a show called Chicago Tonight. There will be Union representatives and the Civic Committee of the Commercial Club of Chicago debating the issue at hand. Ought to be fun...

Thanks, caught it but was not able to give it my full attention.

The guy from the 'Commercial Club' seemed to think it was what was needed. The Union guy thought it stank, but I never heard what he thought should be done - did he make suggestions?

-ERD50

 

[ripper1]

The union guy was disappointed that they were not part of the working group and going forward would like to be part of the representation to work on coming to some middle ground that will be acceptable to all parties.

 

[Steel Rain]

All I will say... is that it is easy to have opinions when it's not your pension that is going to be affected.

Well, since my pension is just my investment portfolio, the inevitable higher taxes is very much going to impact my "Self Pension". I could turn this around and say its easy to want no change since you have yours....

Im not poking at you specificialloy, but most public pensions were unsustainable anyway. Im not looking to hurt folks that are retired, but it would be nice if there were some balance to this so i dont get taken to the cleaners. We already jacked up the taxes in a big way here in illinois, and it was blown though in one year with an even larger deficit.

Steel

 

[ripper1]

Well, since my pension is just my investment portfolio, the inevitable higher taxes is very much going to impact my "Self Pension". I could turn this around and say its easy to want no change since you have yours....

Im not poking at you specificialloy, but most public pensions were unsustainable anyway. Im not looking to hurt folks that are retired, but it would be nice if there were some balance to this so i dont get taken to the cleaners. We already jacked up the taxes in a big way here in illinois, and it was blown though in one year with an even larger deficit.

Steel

Don't forget Illinois had one of the lowest tax rates before then. Even at a flat across the board 5% it is still comparatively low.

 

[ERD50]

Well, since my pension is just my investment portfolio, the inevitable higher taxes is very much going to impact my "Self Pension". I could turn this around and say its easy to want no change since you have yours....

Im not poking at you specificialloy, but most public pensions were unsustainable anyway. Im not looking to hurt folks that are retired, but it would be nice if there were some balance to this so i dont get taken to the cleaners. We already jacked up the taxes in a big way here in illinois, and it was blown though in one year with an even larger deficit.

Steel

+1

Also, since DD is in TRS, I'd sure like to see changes so that the system is sustainable and there is something for her when she retires. Does that make me selfish?

The union guy was disappointed that they were not part of the working group and going forward would like to be part of the representation to work on coming to some middle ground that will be acceptable to all parties.

Thanks, I did catch that part - did he relay any suggestions on the show?

-ERD50