More Cheery News: Public Pensions in deep doo doo

[ziggy29]

Yes, it would be a tough political nut to crack. The solution I proposed (current employees continue to get credit for the current pension plan for years already worked but get credit for a less generous plan for future years) commonly occured in private business over the past decade.

I believe retaining pension credit for service already accrued under a pension plan is required by federal law. I have a puny pension waiting for me down the road from nearly 12 years at my first Megacorp, which pulled the plug and froze my pension after about 11 years of service.

 

[youbet]

I believe retaining pension credit for service already accrued under a pension plan is required by federal law. I have a puny pension waiting for me down the road from nearly 12 years at my first Megacorp, which pulled the plug and froze my pension after about 11 years of service.

OK, that would be congruent with my proposal.

Hey..... I have nothing against state, county and municipal employees. In fact, my extended family as well as DW are well represented in that employment arena. I'm just saying that in many cases their pensions have been over promised and the pension funds under delivered (as per the article OP posted). Somethings gotta give......... higher taxes or more realistic pensions....... or some combination.

 

[FinanceDude]

I don't think higher taxes are going to go over well...........

 

[youbet]

I don't think higher taxes are going to go over well...........

Really?

Yeah, you're right. Here in Illinois our new govenor (Blagojevich replacement) wants to increase state income taxes 50% and has a strong majority in the state house to do so if he and they want. But they're afraid of losing seats in future elections and are trying to come up with some scheme where the vote is hidden or something so those voting "yes" don't take the wrap with the voters...... It's a mess. And it impacts the pensions and retirement of public sector employees directly and the retirements of private sector folks indirectly through the higher taxes.

It seems like there are a lot of chickens coming home to roost from bygone political eras that are impacting boomers trying to retire now.

 

[Htown Harry]

Seems to me the obviously answer should be to cease or sharply curtail benefits for new hires while striving to honor existing promises. That wouldn't stop the bleeding but it would make it manageable and somewhat temporary.

Well, Ziggy, it can happen in some instances. My former government employer had a pretty nice DB plan.

They kept the DB plan in place for all the current employees, but here's the 457b deal they recently announced for the newbies:

Retirement - XXX offers full-time employees a contributory retirement program, wherein employees can contribute through payroll deduction up to the maximum limit permitted by the IRS (currently $15,500/year). XXX will automatically contribute 2% of an employee’s salary (including overtime) to the employee’s retirement account. If an employee chooses to contribute, XXX will match dollar for dollar of the first 4% of that an employee contributes, making XXX’s contribution a total of 6%. There is a pro-rated vesting schedule, and employees are fully vested after five years of service.
​

Pretty similar to the typical Megacorp plan, yes?

 

[kyounge1956]

Well, Ziggy, it can happen in some instances. My former government employer had a pretty nice DB plan.

They kept the DB plan in place for all the current employees, but here's the 457b deal they recently announced for the newbies:

Retirement - XXX offers full-time employees a contributory retirement program, wherein employees can contribute through payroll deduction up to the maximum limit permitted by the IRS (currently $15,500/year). XXX will automatically contribute 2% of an employee’s salary (including overtime) to the employee’s retirement account. If an employee chooses to contribute, XXX will match dollar for dollar of the first 4% of that an employee contributes, making XXX’s contribution a total of 6%. There is a pro-rated vesting schedule, and employees are fully vested after five years of service.
​

Pretty similar to the typical Megacorp plan, yes?

Htown Harry,
What was the attitude of the employees' union (if there is one) about this change?

 

[Walt34]

The fed govt was able to switch active employees to a new plan going forward when FERS was created. Why can't the states and municipalities do the same using similar tactics?

Many of them did, as they did where I worked and at about the same time. I was offered the option of getting back half of the contributions I had made to the retirement system to date and switching to the newer system, which would have cut retirement benefits almost in half. I declined the offer.

Some of the dumber ones did take the offer and bought cars, boats, and such with the sudden influx of cash. Those are the ones who are going to be working after retirement because they have to, not because they want to.

And although my retirement plan does include a 100% COLA, that meant that this year it went DOWN by .1%. (Yes, it's in the contract.) While some may argue about the numbers/details I have no quibble with the underlying principle, which is to maintain a constant level of purchasing ability.

 

[Htown Harry]

Htown Harry,
What was the attitude of the employees' union (if there is one) about this change?

This particular case, there were limited politics at play and almost no public outcry. The independent agency reports to an appointed board, not directly to elected officials. There is a union for the blue-collar employees, but this change affected only about 1000 workers in the non-union plan. Also, it's in Texas, an open shop state where unions generally have less legal and political clout.

Admittedly, these circumstances are not the norm. My only point is that it can happen.

As to the reaction of the employees I know, they were relieved it wasn't worse. Management had floated a bunch of reduced benefit ideas before settling in on the "if you are hired after 2008" strategy.