Public Pension System Payroll Contribution Rates

[kyounge1956]

Public employees and retirees, including military: what percentage of your paycheck goes (or went, while you were working) into the pension fund? Do you also pay Social Security tax? Does your employer match contributions? To keep poll to a reasonable number of options, a "match" is any funding added by the employer, whether it is the same amount, greater or lesser than what is deducted from employees' paychecks.

Contribution rate for Seattle employees is currently 8.03%, with an equal employer match, and we also pay into the Social Security system. It won't be certain until after the new budget is adopted, but both employee and employer contributions will almost certainly go up next year, possibly by as much as two percentage points, to address pension system underfunding caused by the stock market downturn of 2008.

 

[Khan]

I don't recall.

 

[GregLee]

I paid in 7% of my salary, plus SS. I voted that there is an employer contribution (nothing else on the ballot), but I'm not sure about that.

 

[Amethyst]

Under CSRS, I pay 7% and my employer matches it. I don't pay into SS. I would need to work (bleagh) about 8 more years in the private sector to qualify for SS, and even then, I imagine there would be an off-set because of my pension.


A.

 

[utrecht]

I pay 8.5%. I don't pay into SS and don't get to collect SS. My employer makes a contribution, but when you say "employer match" I assume you meant they match the same amount? I didn't vote at all because they contribute but not an equal amount.

 

[kyounge1956]

I pay 8.5%. I don't pay into SS and don't get to collect SS. My employer makes a contribution, but when you say "employer match" I assume you meant they match the same amount? I didn't vote at all because they contribute but not an equal amount.

No, "employer match" means any level of employer contribution, whether greater, equal or less than employee contribution. It's a maximum of 20 options per poll, and I used 15 of them as it is, so I couldn't do separate ones for each possible level of employer match.

If you'd like to vote, you're "between 5 & 10%, employer match, but no SS"

 

[utrecht]

OK, I voted. Personally I don't see how any pension could be funded properly without an employer match, unless the pension benefits are minuscule.

 

[Rich]

In MA I just retired from a municipal system in which I paid 11%. No SS taken out, which, while saving me a couple of bucks during my working years, creates a problem for my spouse in that she won't be entitled to any SS from me due to her (should I predecease her) receiving pension monies from an entity in which I did not pay into the system (see: Government Pension Offset for more info on this reg).

Rich

 

[Amethyst]

Contribution rate for Seattle employees is currently 8.03%, with an equal employer match, and we also pay into the Social Security system.

It's great that you'll get a pension and SS, but having that big SS bite taken out of every check in the meantime...ouch.

...employee and employer contributions will almost certainly go up next year, possibly by as much as two percentage points, to address pension system underfunding caused by the stock market downturn of 2008.

That is a worrying trend!

Amethyst

 

[utrecht]

If the pension system is underfunded because of one bad year, they are not invested properly. Seems like if they are invested overly aggressively, they would've made a lot of it back in 2009.

 

[kyounge1956]

OK, I voted. Personally I don't see how any pension could be funded properly without an employer match, unless the pension benefits are minuscule.

I was just trying to include all possibilities. I recall reading about a system that was 100% employer funded, so I also included the possibility of a system being 100% employee funded.

Also, it depends to a certain extent on what you call something. My system has contribution rates of 8% each from employer and employee. But if they paid me 8% more, and raised the employee contribution rate to 16%, or paid me 8% less but put that money straight into the pension fund, the amount of money going into my checking account and the amount going into the retirement system would both remain unchanged, but the answers to the poll would be different in each case. As I said elsewhere, it's not a scientifically accurate survey.

 

[WhoDaresWins]

I pay 9 percent with employer match and I also pay into Social Security. It was seven years before I got the match, but I think they have since changed it to five years. The 9 percent is paid from day one.
Some employees left because of all the deductions. They said they couldn't afford to work for us.

 

[kyounge1956]

If the pension system is underfunded because of one bad year, they are not invested properly. Seems like if they are invested overly aggressively, they would've made a lot of it back in 2009.

I think it was basically a 40% stock, 60% bond portfolio (with some additional frills and curlicues around the edges), and lost about half a billion dollars out of a previous balance of somewhere around $2.2 billion. I think it has recovered significantly since then. This is all going by memory but I think at the worst, the funding level was down to about 56%; it has since come back up to about 65%, which is an improvement, but only from "terrifying" to "lousy". But on the more optimistic side, I've heard the funding level was this low sometime in the early 1980's, and we lived to tell the tale. Even though the market has come back up a lot, the fund has to continue paying benefits, and that must significantly slow down its recovery compared to a similarly allocated personal retirement portfolio that is still in the accumulation phase.

I agree with your basic conclusion that the system is being too aggressive, especially considering that the contribution level will by next year or 2011 be about as high as (IMO) it can realistically go. The tricky part is, how do you segue a pension fund from underfunded and overly aggressive, to adequately funded and realistically risky? Do you hope the market makes a rapid recovery and then shift to a less volatile allocation after the fund balance has returned to an adequate level? Or do move to a safer allocation first, because the fund can't survive another year like 2008, even though that will cause a lower rate of return and slower recovery?

 

[kyounge1956]

(snip) It won't be certain until after the new budget is adopted, but both employee and employer contributions will almost certainly go up next year, possibly by as much as two percentage points, to address pension system underfunding caused by the stock market downturn of 2008.

(snip) That is a worrying trend!

Amethyst

You think that's anxiety provoking? The actuarial report said the contribution rate would have to go up to 12.5% each from employer and employee contribution, to get caught up with underfunding in thirty years. That would be more than half as much again as the current level of just over 8%! The two percentage point increase is as high as employee contributions can go under the current contract, and with the City facing a huge funding shortfall I don't think anyone is expecting a greater than equal match on the employer side. For the next contract it's anybody's guess, but I don't know if it's realistic even to contemplate putting a quarter of the total payroll into the pension fund. I'm inclined to think not. I think I will be a white-haired little old lady before this pension system sees a 100% funding level again.

 

[martyb]

Under CSRS, I pay 7% and my employer matches it. I don't pay into SS. I would need to work (bleagh) about 8 more years in the private sector to qualify for SS, and even then, I imagine there would be an off-set because of my pension.


A.

Mine's the same as Amethyst, except that I DO also qualify for Social Security, based on work prior to becoming a fed employee. It'll be reduced by around 50%, so I expect maybe half. Also, all through the years I was a reservist, SS was witheld from any military pay that I earned. Some years, more than others. I don't think it was enough to trip the trigger for qualifying points under the SS system, though. I have the 40 quarters though, for the basic amount.

I did not contribute any funds towards my military reserves retirement, though.