big disappointment in ohio public pension!

[almost there]

An xtra $2800 per month would be nice!
But if I were banking on 50k per yr I would be pissed.
Actually if my plan had not changed IN 1999 I would be getting
92K per year after 30 yrs. LOL LOL
Rather than 12k per yr or 250k cash ballance. LOL LOL
Something to remember. Things change.

 

[Dwhit]

I would love to have a deal like that! Where I work, we don't have any pension, just a 401k. I would LOVE to have 27.5% of my final salary as a pension! There is no employer health care provided after you retire. We are expected to work until 65. Most people would think you still have a very sweet deal!

A broken promise/contract is still wrong, regardless of the situation. Imagine if the government decided to confiscate your 401K because they needed the money. I am sure someone would pipe up and tell you your are lucky, they would LOVE just to have a job.

 

[farmerEd]

Imagine if the government decided to confiscate your 401K because they needed the money.

They confiscate a bit more of it everyday, they just raise taxes.

 

[CH]

Are your already earned credits being reduced in value? Or just the credits you will earn between now and retirement?

That is, if you have ten years with OPERS, are those ten years still being credited with the old formula and only your remaining fifteen years will be worked under the new, reduced formula?

Or is this just a change in the rules for early retirees?

Have they done anything that would reduce the pensions of folks who are already retired?

I'm asking all the questions because Illinois is in the midst of "reforming" pensions and I'm curious as to whether any other state has already set precedent regarding reducing the value of already earned pension credits or reducing the pensions of already retired folks.

In PA, our governor has been trying to reform pensions but not getting too much support from the legislature. Governor wants to give everyone what they earned so far and reduce going forward. The union is promoting a position that the state constitution guarantees benefits for life...meaning benefits can be increased but never decreased. Their view is benefits can only be changed for new employees.

Benefits will have to be reduced eventually because the current system is not sustainable. Government only seems to access when it gets to the crisis point. It would be a lot healthier for everyone if they would make changes sooner rather than later.

Pensions have almost disappeared from the private sector and health care costs are largely shared by employees. We don't understand why it takes so long for these changes to be enacted by the government.

 

[clifp]

While I agree it sucks to hear about the changes so late in the game and the changes the OP seem more dramatic than I would have guessed, as I said in the how to fix pension plan thread, simply cutting benefits for new workers won't be enough.

To me one of the biggest changes that has to be made is to put benefits on a actuarial sound basis. As rule early retirement reductions are not nearly severe enough and things like buying pension credits are too cheap. So I applaud Ohio for doing this politically painful steps now, when the crisis is meal acute rather than waiting another decade or two and ending up like Detroit.

While I can certainly understand the OP frustration. The reality is Ohio like many states underfunded its pension by an amount roughly equal to 10% of their workers pays for the last 20 odds years.

So one way of looking this is your pay was 10% higher than it should have been during your career, you or 10% of your colleagues should have lost their jobs, or Ohioans should have been paying roughly 7% higher taxes (payroll is roughly 70% of the cost of most state, local agencies..

 

[utrecht]

While I can certainly understand the OP frustration. The reality is Ohio like many states underfunded its pension by an amount roughly equal to 10% of their workers pays for the last 20 odds years.

So one way of looking this is your pay was 10% higher than it should have been during your career, you or 10% of your colleagues should have lost their jobs, or Ohioans should have been paying roughly 7% higher taxes (payroll is roughly 70% of the cost of most state, local agencies..

I'm going to have to disagree with this. The worker's pay wasn't 10% higher than it should have been. The worker was hired and told what his pay would be. That's what his pay should be. Its not their fault that corrupt politicians underfunded and / or borrowed from the pension fund to pay for their pet projects.

 

[TuborgP]

The value of pension benefits is not just the multiplier used to calculate benefits but the salary range it is applied to. Higher income area employees will come out ahead and lower behind. The retirement trick is to work in higher income areas and when retired transplant that higher pension to a nice low cost area.

 

[Spanky]

Its not their fault that corrupt politicians underfunded and / or borrowed from the pension fund to pay for their pet projects.

Agreed - it's not the worker's fault. You can blame the politicians or the worker's union. But in the end, the workers will get short end of the stick. The lesson is that you cannot trust any entity (business or even the government) to deliver their promises and develop a contingency plan (i.e., additional saving, LBYM, work more years, etc) in advance.

 

[ESRwannabe]

I have eleven years and counting vested into a generous state pension. Fortunately my state pension has been well run and the state has always provided 100% of the funding that they are supposed to do. I think most state pensions have gotten into trouble because the state did not fund them 100% every year.

Recently there were changes made to the pension for new hires, which make it less generous. I didn't pay that much attention to it as it will not affect me.

I don't worry about my pension anymore than I worry about social security. It is out of my control and I will not be surprised if I do not get 100% of what I am supposed to get.

Its not that big of a deal to me because I make over twice my living expenses from my w-2 income and my investments bring in around the same as my living expenses every year already. So I am making three times what I need.

I'm 37 and if I want to I could work to 56 and retire with full pension benefits (i.e. 30 years). It is possible I'll end up doing that but for right now my plan is to ESR around 45, working part-time and using my taxable account investments to pay for the rest of my living expenses. Then a full retirement at 59.5 when I can tap the 401k, Roth IRA and pension (19 years). Then when I am 65+ start taking social security.

 

[utrecht]

I cant figure out how government agencies get away with not making the contributions they are supposed to make. Isn't there some law that covers that? It seems to me that they should lose their bond rating if they don't fulfill their obligations.

 

[youbet]

I cant figure out how government agencies get away with not making the contributions they are supposed to make. Isn't there some law that covers that? It seems to me that they should lose their bond rating if they don't fulfill their obligations.

You seem to be overlooking corruption and incompetence.

Think about the Illinois politicians serving jail time right now. Think about the fact that a tiny percentage get caught. Having a law that covers some situation is a joke.

 

[ERD50]

I cant figure out how government agencies get away with not making the contributions they are supposed to make. Isn't there some law that covers that?

Another case where politicians put themselves above the law. The Feds took reasonable steps (still too lenient, IMO) to help assure that private company pensions were funded. And forced them to pay into an insurance fund if they offered a pension. The insurance fund provides some limited protections for private pensions. But this basic requirement was never placed on municipalities.

See my post in the other pension thread for one explanation of how they could 'get away with it' :


http://www.early-retirement.org/forums/f27/the-pension-problem-67505.html#post1338935 - edit, wrong link

My explanation:

If the Union demanded (and threw their weight behind that demand) that the pension be fully funded, the politicians would have had to raise taxes in real time. That would have brought the issue into the light, and IL taxpayers would be questioning this expense. I say the Union leaders were as interested in keeping this low profile, as the politicians were in using the funds. Kick the can down the road, and all of them would be retired (with their own fat pensions) before the stuff hit the fan.

It seems to me that they should lose their bond rating if they don't fulfill their obligations.

They are, at least in IL.

Lack of pension fix pushes Illinois' credit rating lower | Reuters

CHICAGO | Thu Jun 6, 2013 4:15pm EDT

The state now has the lowest general obligation ratings in its history after the Moody's downgrade to A3, which matches the A-minus the state received from Fitch Ratings on Monday and the A-minus S&P gave the state in January. And those ratings, which carry negative outlooks, are the lowest among all the U.S. states.

Sad.

-ERD50

 

[oldphd]

To me one of the biggest changes that has to be made is to put benefits on a actuarial sound basis. As rule early retirement reductions are not nearly severe enough and things like buying pension credits are too cheap. So I applaud Ohio for doing this politically painful steps now, when the crisis is meal acute rather than waiting another decade or two and ending up like Detroit.

clifp has nailed the crux of the Ohio situation, IMHO. Old system did not have realistic early retirement reductions, cost of buying credits, and control of spiking. They've adjusted those and added an anti spiking formula that prevents crazy payouts relative to amount contributed.

Under the old system, $250/month income was considered "full time". There were folks who had small hour government positions (think a meeting or two a month in a small county or something) yet got credit. They could do 27 years of that, contribute next to nothing, then get a real job at a real salary and have 3 years to get FAS up, and collect on a formula that counted all the years, but only the FAS. The $250 was set in the 70s with no adjustment for inflation. The anti-spiking formula will look at lifetime contributions and limit the payout. IMHO it is still generous to someone who has legitimately moved up the pay amount, just not crazy.

The full retirement age changes to benefits were not as significant. Work an extra year or two, that sort of thing. The big hit to the already earned time is for those who were doing as the OP planned and retiring early. Changes aren't being made to benefits being paid already, but there was notice provided that you had to retire by such and such a date to get in under the old system. But not everyone is eligible to retire by that point.

While I'm affected by this, I also applaud them for making the changes. I think it's the right thing to do for the long term health of the system, which is in my best interest since I don't want to see something like Rhode Island. To my knowledge, everyone's been paying in, not skipping contributions like some in the news. And for my personal situation, I have the proverbial multi-legged retirement stool... assets in taxable, IRAs, SS, a modest pension.. no single one of those income streams will be enough to retire on, but in combination they will work, and that makes me diversified in the event that something happens to one... In my case this means most likely delaying drawing the pension until I hit the full age, which may/may not be reduced by inflation as well...

Ironically, they also offer an additional annuity, whereby someone who is a member can pay more and get paid an annuity. It's not additional credit, the idea is an SPIA but without the sales charges. I understand these payout rates are subject to change, but in the case of their estimator the difference between taking a payout at 60 vs 66 is nowhere near as big as the early retirement reduction. I routinely see folks complain about taxpayers footing the bill, but in this situation the people who hit the full retirement and collect are doing it in part on the backs of those who go early or don't hit the full amount.

 

[ERD50]

Originally Posted by clifp View Post

While I can certainly understand the OP frustration. The reality is Ohio like many states underfunded its pension by an amount roughly equal to 10% of their workers pays for the last 20 odds years.

So one way of looking this is your pay was 10% higher than it should have been during your career, you or 10% of your colleagues should have lost their jobs, or Ohioans should have been paying roughly 7% higher taxes (payroll is roughly 70% of the cost of most state, local agencies..I'm going to have to disagree with this. The worker's pay wasn't 10% higher than it should have been. The worker was hired and told what his pay would be. That's what his pay should be. Its not their fault that corrupt politicians underfunded and / or borrowed from the pension fund to pay for their pet projects.

I see where clifp is coming from.

You have to look at it from the alternative scenarios. Had the pols done the 'right thing', and fully funded the pension, the money in each of those years had to come from somewhere. So you can cut pay to workers, and apply that savings to the pension fund, or raise taxes on everyone in the State (or some combo).

Take each individually for now - if the State cut their pay, this would have been transparent to the workers. Each worker could decide if the job was attractive at that total compensation and leave for greener pastures if they felt that way. The problem was/is that it wasn't transparent, and from that standpoint I agree with you that the workers didn't really have this choice (or it wan't as obvious as it could have been). If it was criminal for the pols to divert the funds (certainly unethical), I'd also say it was criminal for the Union reps not to make this painfully transparent in real time to the workers they represent, and to continue to use Union dues to fund/promote the campaigns of those same crooks.


Now, for the taxpayers - if the State raised their taxes, this would have been more transparent. Each taxpayer could decide if their taxes were being well-spent. It would have raised issues around the State pension/benefits - can we afford this, what do we need to offer to attract the workers we need? The problem (just like the workers) was/is that it wasn't so transparent, so the taxpayers didn't get the message they needed to support/oppose/vote/move as they deemed necessary.

But that is all water under the bridge. Where do we go? Is it 'fair' to collect 'back taxes' now for bills that were never presented? Is it 'fair' to cut promised benefits? I don't think either is 'fair', but the money isn't going to fall from the sky. I would hope they just settle on some kind of 'shared pain', and fix the root causes of this problem - what alternative is there? And the longer they wait, the bigger the problem becomes.

-ERD50

 

[youbet]

See my post in the other pension thread for one explanation of how they could 'get away with it' :

Trying to move the lion's share of the blame away from the entrenched political machine in Illinois and onto the backs of the employee associations and unions is exactly the same as saying the a young girl was raped because she didn't fight back hard enough.

I wish the unions could have and would have been successful. Since they lost their fight to ensure full funding, they failed their membership. But they did take action to fight Blago's "pension holiday" but obviously not sucessfully enough. By the time other actions by Blagojevich eventually put him behind bars, years of zero and partial funding had already taken place.

Your implication that it was OK for Blago to do this and it was the employee associations and unions' unsuccessful fight that is to blame is ridiculous.

I'm very unhappy with the level of resistance being put forth to stop the politicians. I'd enjoy seeing Illinois employees handle the situation as the Wisconsin folks did with Walker. "Smoke over Madison!" It was a beautiful thing. Still, I just can't believe you want to remove guilt from Blago and place it on the lack of successful resistance to him.

Yes, the unions did not do and are not doing a good enough job. Yes, they have a unsavory, long term relastionship with the long dominant party in Illinois. Yes, there is corruption in Illinois unions. But the buck still stops at the desk of the elected officials who put forth and passed the "pension holiday" legislation.

I can't believe you're fighting to let them off the hook.

 

[ERD50]

Trying to move the lion's share of the blame away from the entrenched political machine in Illinois and onto the backs of the employee associations and unions is exactly the same as ....

I don't know why you seem to be pouring gasoline on an already a sensitive situation with such inflammatory visuals. I said they were both implicated, I don't know why you are injecting "lion's share" into that.

But there is a bit of 'Buyer Beware' in this. If I go to a car dealer, I should know he does not represent my best interests. But if I hire a mediator/broker to shop the deal for me, I should reasonably expect them to be looking out for me. If I found out the broker colluded with the dealer, I'd be more mad at the broker than the dealer. So in this analogy, the pols are the car dealer, and the Union reps are my broker. I think the Union members should be really hopped up at their failed leadership first, and secondly at the pols. But in the larger sense, they are both to 'blame'.

Your implication that it was OK for Blago to do this and it was the employee associations and unions' unsuccessful fight that is to blame is ridiculous.

That would be ridiculous - but I didn't imply that. I said it was a failure on both sides. I'm not letting anyone off the hook.

-ERD50

 

[youbet]

I don't know why you seem to be pouring gasoline on an already a sensitive situation

No gasoline here..... Just pointing out that the hypothesis you constructed and are selling to defend Blago is just a theory you've dreamed up. Given the long standing corruption in Illinois politics, and the inappropriate influence the politicians have on the unions, it's not a surprise the politicians pulled a trump card to slow the unions down in their resistance. But when you say "both to "blame" there seems to be a tone of 50 - 50. I'm just sayin' I think it's more like 95 - 5 with Blago being the 95.

EDIT: My apologies to OP. We seem to have brought the plight of Illinois into your thread about Ohio's situation. Sorry.

 

[ERD50]

...

EDIT: My apologies to OP. We seem to have brought the plight of Illinois into your thread about Ohio's situation. Sorry.

Not sure why you claim I'm defending Blago, but it's clearly not productive to continue to try to pin a % breakdown on this. So that we can end in some agreement - yes, let's drop this and get back to the Ohio situation. My apologies to the OP also.

-ERD50

 

[youbet]

not sure why you claim i'm defending blago

Yeah, I see how it tempting it is for you to say he shared the responsibility. Unions could have fought harder to stop him. Voters could have not elected him and, worse, re-elected him. His wife could have withheld sexual favors. His kids could have gone to court to be removed from his household. Fed prosecutors could have locked his sorry butt up sooner. But in the end, I think Rod Baby did it. Saying that others are partially to blame for unsuccessful attempts (especially on the part of his wife!) to stop him just doesn't pass my common sense test.

Are you some buddy of his?

[/quote]

source: Commission on government forecasting and accountability​

the only time blagojevich did “fully fund” the pension system was in 2004, when he borrowed $10
billion using the 2003 illinois pension obligation bonds. A majority of those dollars directly went into
the pension system, giving the impression that blagojevich greatly improved the pension situation. But
this did nothing to change the total liabilities of illinois. The reality is he did nothing more than borrow
from the state credit card to pay off the state mortgage.​

in issuing these pension bonds, blagojevich more than

​

​

doubled the amount of debt owed by illinois​

taxpayers. Adding insult to injury, a majority of the debt repayment is pushed 20 years to 30 years into​

the future, burdening future generations.​

the state pension system was underfunded​

by $2.5 billion​

to $3.5 billion​

each year, save​

one, of his ​

​

​

governorship.​

Sorry I can't get this to format correctly.

And now back to Ohio, where the livin' is good and life is easy!

 

[utrecht]

I see where clifp is coming from.

You have to look at it from the alternative scenarios. Had the pols done the 'right thing', and fully funded the pension, the money in each of those years had to come from somewhere. So you can cut pay to workers, and apply that savings to the pension fund, or raise taxes on everyone in the State (or some combo).

-ERD50

I would propose another option. The corrupt politicians could've stopped wasted and stealing money and there would've been plenty of money to go around.

 

[utrecht]

Why are people allowed to buy pension credits at all? Why is spiking allowed? Why weren't people's pensions reduced properly for early retirement? Why is overtime allowed to enter into the pension formula calculations? All of these things are blatant forms of mismanagement of the pension fund. Look around at other pension funds that are doing well in other states and other government agencies and you wont see any of these spiking issues or buying of credits. There is nothing wrong with public pensions. The system itself is fine as long as it is run properly. Unfortunately a lot of them are run as badly as most people's household finances. I thank the lord that mine is not run by politicians and is going strong.

 

[ERD50]

I would propose another option. The corrupt politicians could've stopped wasted and stealing money and there would've been plenty of money to go around.

I agree in concept, but your proposal requires a time machine (and a stun gun for good measure). But lacking that, what do we do now, after the fact?

Why are people allowed to buy pension credits at all? Why is spiking allowed? Why weren't people's pensions reduced properly for early retirement? Why is overtime allowed to enter into the pension formula calculations? All of these things are blatant forms of mismanagement of the pension fund. Look around at other pension funds that are doing well in other states and other government agencies and you wont see any of these spiking issues or buying of credits. There is nothing wrong with public pensions. The system itself is fine as long as it is run properly. Unfortunately a lot of them are run as badly as most people's household finances. I thank the lord that mine is not run by politicians and is going strong.

Why? Because they could.

Not trying to be flippant, but that's the sad truth.

-ERD50

 

[clifp]

I'm going to have to disagree with this. The worker's pay wasn't 10% higher than it should have been. The worker was hired and told what his pay would be. That's what his pay should be. Its not their fault that corrupt politicians underfunded and / or borrowed from the pension fund to pay for their pet projects.

As I said that was one of three options the other being less workers, or higher taxes. To some extent it is all of our faults we did keep electing and reelecting the bums. I also fault the union reps for not demanding more accountability, this issue has been a long time in the making.

I cant figure out how government agencies get away with not making the contributions they are supposed to make. Isn't there some law that covers that? It seems to me that they should lose their bond rating if they don't fulfill their obligations.

Sadly governments seem to be exempt from following there own rules in some situations. As aside I find it weird the rules that are and aren't enforced, take your local state senator,or dept head to lunch to discuss some issue and they are likely to get raked over the coals. But miss pension payments for years running no big deal.

Bond rating business should be out of business, between missing the asset back bonds earlier in the century, the crazy CDO and CDO squared rating, the negligence in muni bond ratings, etc. they are worse than useless.

 

[CH]

I cant figure out how government agencies get away with not making the contributions they are supposed to make. Isn't there some law that covers that? It seems to me that they should lose their bond rating if they don't fulfill their obligations.

They get away with it because they do not have the money to properly fund the pensions.

 

[ERD50]

They get away with it because they do not have the money to properly fund the pensions.

There were two other options. Increase revenue (taxes), or cut spending (in other areas, or wages, employment, benefits). Or combo.

I can't 'get away with' not paying my mortgage with the explanation that I don't have the money. I make more money, spend less, or turn over the house.

-ERD50