More State Pension Problems

[youbet]

I could be all wet of course

Yes, that does seem to be the case. Your arguments and reasoning seem more directed at "twisting the knife in glee" as your family's public pension is properly funded (info from another thread) while Illinois state employees will take a bath. Gleefully enjoy your little victory dance!

It's amazing how lucky winners like to gloat to the losers.

 

[youbet]

BTW, you seem to not say that SS also changed with teachers... if a teacher was married to someone who qualified to get SS, then along with their pension they got spousal SS.... it is gone now, but it was there... my mom and oldest sister are getting SS.... both were teachers...

You seem to keep going back 30 years or so TP.

GPO has been in place for a long time. Teachers in Illinois, if their pension amounts to much, have any spousal benefit to which they would otherwise be entitled eliminated. They earn no SS on their own account because their employers (Illinois tax payers) don't want to pay the employer's half of SS contributions and wiggled out of the system.

With this system, the state (or school districts in the case of teachers) avoids mandatory contributions to SS and replaces them with voluntary, "suggested" contributions to the so-called pension fund. Since they do no 401k/403b matching and there is little evidence they ever made pension fund contributions that weren't dribbled back into the general budget or plain ole mismanaged away, it puts naive employees in danger........

It's possible that a naive 2nd grade teacher in Mt Morris, Illinois is at a disadvantage in dealing with cunning (and possibly crooked - check the prisons for Illinois politicians) machine politicians and fat-cat labor leaders.

I'm not sure you understand that or are stuck "back in the day" with the old rules.

 

[Texas Proud]

You seem to keep going back 30 years or so TP.
GPO has been in place for a long time. Teachers in Illinois, if their pension amounts to much, have any spousal benefit to which they would otherwise be entitled eliminated. No ss.

I'm not sure you understand that or are stuck "back in the day" with the old rules.

I understand perfectly well.... I do not think you are reading what I wrote but are being biased in your view...

I am not going back 30 years... my quick looks says it started in 2004... but I could be wrong...

My point was that if you were a teacher and retired back then you GOT SS.... now you will not... that is a change that could cost someone a lot of money... so pensions have been changing for many years for many reasons... expecting them not to change going forward is lunacy... expecting them not to change due to reality is the same...

I have pointed out many instances of changes to my company pension and to my expected SS payments... using real examples...

I have no dog in this hunt as I do not live in Illinois or Kentucky or even California which seem to be the worst... so I will not have to pay taxes to fix the problem if they do not cut pensions... as long as the Federal gvmt stays out and does not try and bail them out I could care less what happens... I am just posting some facts and opinions that many have...

 

[MissMolly]

But these changes to teachers pensions and others where there was SS and now there is not happened BEFORE the teachers put in their 25 or 30 years of teaching. It didn't happen AFTER they were already retired. Big difference. They had an opportunity to plan for their entire career. Pulling the rug out from under a retiree is entirely different and should not, under any circumstances, be tolerated. Once you are retired it's too late to go back and change your plans. I have no issue with the governments changing pension plans going forward. The employee knows at the time he/she is hired what will happen.

 

[youbet]

I understand perfectly well.... I do not think you are reading what I wrote but are being biased in your view...

No, not at all. When you keep throwing out statements as though they could be facts but followed by "I could be wrong," it taints the discussion and shows your bias.

I am not going back 30 years... my quick looks says it started in 2004... but I could be wrong...

And indeed you are wrong. It started, as I said, 30 years ago in 1977. NEA - Social Security: Brief History of Pension Offset and 'Windfall' Provisions

My point was that if you were a teacher and retired back then you GOT SS....

That was a long time ago. Let it go! But, IMHO, public workers whose employers do not enroll them in and contribute to SS should do whatever it takes to change that. Getting into SS, in Illinois anyway, is the only way I can think of where employees can avoid paying into a pension fund from which no output (even their own dollars) is likely.

pensions have been changing for many years for many reasons... expecting them not to change going forward is lunacy... expecting them not to change due to reality is the same...

Illinois pensions have changed dramatically in the last several years. See my earlier post on Illinois Tier II pensions. The change Illinois retirees are whining about is that already long-retired people are going to lose all or some of their pension

I have pointed out many instances of changes to my company pension and to my expected SS payments... using real examples...

I think the difference is that your pension was not reduced/eliminated after you did your FIRE calculations and pulled the plug. Your shoes have not been stepped on.

I am just posting some facts and opinions that many have...

Opinions, yes. Facts, no. It's 1977 not 2004!

 

[ERD50]

Yes, that does seem to be the case. Your arguments and reasoning seem more directed at "twisting the knife in glee" as your family's public pension is properly funded (info from another thread) while Illinois state employees will take a bath. Gleefully enjoy your little victory dance!

It's amazing how lucky winners like to gloat to the losers.

Where is there any "knife twisting" or "glee" or "gloating"?

I can't see where anyone would get that from what I posted. And it isn't the case. If anyone can point out how I might have given that impression, I'll set about trying to correct it, because I would be misrepresenting how I feel, and I don;t want to do that.

Yes, I've talked about my DW's (small) pension from IMRF (Illinois Municipal Retirement Fund), which is pretty well funded. I mentioned that this fund managed to stay out of the grasp of the politicians, it is run by members, kinda like a credit union. It came with her job, just luck that it is a decent one. It's not big enough to matter much anyway, but if it were poorly funded and an important amount, I'd be making some adjustments to my plans, I think that's only prudent. It's too bad the rest of IL didn't have sensible fund management like that. I think that sound like "compassion" doesn't it? Not "glee"?

If you think anything I posted is not correct or incomplete, can you help fill it in?

Now, maybe I'm wrong about this - but I can't help getting the feeling that some people purposely throw personal attacks in to get the thread shut down, because they don't like the discussion. I would hope the mods would take corrective action on the attacks, rather than the broad brush of shutting down the thread.

-ERD50

 

[Texas Proud]

No, not at all. When you keep throwing out statements as though they could be facts but followed by "I could be wrong," it taints the discussion and shows your bias. And indeed you are wrong. It started, as I said, 30 years ago in 1977. NEA - Social Security: Brief History of Pension Offset and 'Windfall' Provisions

That was a long time ago. Let it go! But, IMHO opinion, public workers whose employers do not enroll them and contribute SS should do whatever it takes to change that. Getting into SS, in Illinois anyway, is the only way I can think of employees can avoid paying into a pension fund from which no output (even their own dollars) is likely. Illinois pensions have changed dramatically in the last several years. See my earlier post on Illinois Tier II pensions. The change Illinois retirees are whining about is that already long-retired people are going to lose all or some of their pension I think the difference is that your pension was not reduced/eliminated after you did your FIRE calculations and pulled the plug.


Opinions, yes. Facts, no. It's 1977 not 2004!

I guess the people around you are not smart enough to find the loophole... which was closed in 2004.... Soooo, I am right in practice... even though you are right in theory... and my sister retired just before this went into effect...

http://helenair.com/news/national/t...cle_825ba461-935a-558c-9f9b-7efd08f63cda.html



https://www.nationalcenter.org/NPA552_Social_Security_Scandal.html


Edit to add... responding to the bold... Is that the case where they are saying to cut current retirees? I really do not follow Illinois much... as I said, not a concern of mine... but I would say that would be bad... maybe take away COL increases or something else... but the reality is that you have to weigh the harm to both the current and future retirees..... IOW, if you keep the payments the same today but someone who retires in 10 years gets nothing, how is that fair? And from what I have read it is not a new problem... it has been up front for many years (maybe decades)..... but the fixes so far have had little in really fixing the problem...

So, what do you think should happen? Raise taxes to pay for all pensions? Do a haircut? Do both? It is not going to look pretty no matter what happens...

 

[youbet]

Once you are retired it's too late to go back and change your plans. I have no issue with the governments changing pension plans going forward. The employee knows at the time he/she is hired what will happen.

+1

As I've pointed out, Illinois enacted Tier II pensions several years ago (teachers hired in 2011 and ongoing. The contribution level is the same as the Tier I pensions but the payout is significantly less (including lower COLA than SS).

What is being fought, and with success in the courts so far, is changing the rules for already retired teachers and for the already-worked-years of current teachers.

 

[ERD50]

I do not think that what you choose to call a "promise" is proper description of what the state employees are told. The pension contracts with many of these states contain language that unequivocally states it is an inviolable contract. The definition of inviolable is:

adjective 1. prohibiting violation; secure from destruction, violence, infringement, or desecration: an inviolable sanctuary; an inviolable promise.


2. incapable of being violated; incorruptible; unassailable: inviolable secrecy.


So, far more than a "promise". And this inviolability is expressed to the employees starting with their date of hire and continues throughout their employment. They are told over and over again "this is why we can pay you less". We guarantee this pension to you. Not we "promise", but we GUARANTEE. ...

...

@MissMolly if you think public pensions are inviolable, just sit and wait. Maybe for only a few months, maybe for a year or two.

As SGOTI once said: "The difference between theory and practice is that, in theory, they are the same."

MissMolly, do you have sources to say that "many" of these contracts are "inviolable"? I searched, the closest I could find was this:

http://www.ncpers.org/files/STATE PROTECTIONS FOR PUBLIC SECTOR RETIREMENT BENEFITS.pdf

Which used the term only for Kentucky. And I have to agree with OldShooter, I don't know how anyone can look at anything 30 years out and use the word "guaranteed". Stuff happens. Even with IL pension benefits being constitutionally protected, there still exists the path for amending the constitution, or simply no money left. I just don't think anyone is helping themselves by assuming/insisting their benefits are "guaranteed", and especially not "GUARANTEED".

... The taxpayers received services from the state at a discounted rate in the form of lower taxes due to the below market salaries that have been paid to the workers for decades. Time for the taxpayers to pay their fair share for these services they have been receiving. ...

I addressed this earlier - the time to ask for the tax increase was when it was supposed to be paid into the fund. That would have given the taxpayers a chance to accept it, or demand changes. To let it lapse, and then ask for it 30 years later isn't right, just like my example of the car, computer or TV.

-ERD50

 

[ncbill]

I just have to say I'm sorry this is happening.

A modest state teacher's pension of just a few hundred dollars monthly made a huge difference for my grandmother after her husband died (losing his pension & SS retirement) more than a decade before she passed away.

Both of them started their working careers prior to WWII (retired around 1980) and so their investments were in individual stocks bought at hefty commissions (no mutual funds much less ETFs)

The federal 0% capital gains tax rate also helped given the significant gains realized on the above.

 

[ERD50]

... Once you are retired it's too late to go back and change your plans. I have no issue with the governments changing pension plans going forward. The employee knows at the time he/she is hired what will happen.

And no one wants to see benefits cut to the already (or nearly) retired.

But then reality comes to visit. When a private company goes bankrupt, and has an underfunded pension, several things happen. First, they have been making insurance payments to the PBGC to help cover these kinds of cases. Second, PBGC will intervene and try to get the pension more fully funded before there are major problems with the company. Third, if it comes down to it, PBGC takes over the pension - and there is a cap on how much they will pay, and these PBGC pensions do not get COLA'd. The cap is currently $64,432 for a 65 YO in a plan that failed in 2017.

While we don't want to see anyone's benefits cut, it seems a bit off for public pensioners to say it just should never happen, and yet, it does happen to those with private pensions, and they are asked to pay the taxes for those public pensions. If needed, I think some sort of cap system like PBGC uses could be applied to public pensions that are in trouble.

Many of us have used a 75% number when plugging SS into FIRECalc. It may not get cut, but it may get taxed to the point it is worth less. None of us will like it, but we will need to accept it, and some us plan for it, just in case. I'm just not going to risk telling myself that it is "guaranteed".

-ERD50

 

[youbet]

I addressed this earlier - the time to ask for the tax increase was when it was supposed to be paid into the fund. That would have given the taxpayers a chance to accept it, or demand changes. To let it lapse, and then ask for it 30 years later isn't right, just like my example of the car, computer or TV.

But you addressed it incorrectly. Public employees in Illinois have always preferred their pension fund to be properly funded, in the actuarial sense of "properly." I've been involved with this for decades and I've yet to hear an employee state that it was fine with them if their pension became drastically underfunded. They paid their 9.5% like clockwork every payday and expected the politicians to do the same.

Why do you use "30 years" when no funding, borrowing back after funding and low (less than actuarial standards) is still going on today? You seem to be trying to bias the situation to make it sound like the "bad boy" political stuff was all long ago. It's happening and being fought today.

Yes, the shell game the politicians gave them sometimes put them inappropriately at ease. Statements like "We're going to skip the pension payment yet again this year but we'll definitely make it up later" or "the money we're borrowing from your fund will be paid back with interest later" shouldn't have fooled them. I find teachers to be naive and gullible in this regard. So, no doubt you'll win and have the satisfaction of a pension delivered as promised at your house while state employees get screwed. [mod edit]

 

[youbet]

And no one wants to see benefits cut to the already (or nearly) retired. But.........

Except perhaps ERD50?

 

[golfnut]

Where is there any "knife twisting" or "glee" or "gloating"?

I can't see where anyone would get that from what I posted. And it isn't the case. If anyone can point out how I might have given that impression, I'll set about trying to correct it, because I would be misrepresenting how I feel, and I don;t want to do that.

Yes, I've talked about my DW's (small) pension from IMRF (Illinois Municipal Retirement Fund), which is pretty well funded. I mentioned that this fund managed to stay out of the grasp of the politicians, it is run by members, kinda like a credit union. It came with her job, just luck that it is a decent one. It's not big enough to matter much anyway, but if it were poorly funded and an important amount, I'd be making some adjustments to my plans, I think that's only prudent. It's too bad the rest of IL didn't have sensible fund management like that. I think that sound like "compassion" doesn't it? Not "glee"?

If you think anything I posted is not correct or incomplete, can you help fill it in?

Now, maybe I'm wrong about this - but I can't help getting the feeling that some people purposely throw personal attacks in to get the thread shut down, because they don't like the discussion. I would hope the mods would take corrective action on the attacks, rather than the broad brush of shutting down the thread.

-ERD50

Good to hear about IMRF. My wife will be collecting in a few years - she works pt at our local library. It ain't much (her pension) but it's something.

 

[ERD50]

... I'm just surprised you're so pleased and enjoy the gloating so much.

But you have not pointed out why you think I'm "pleased" or "gloating" over any of this. I take offense at that language. As I said before, if I'm giving that impression, please point it out so I can set the record straight. But you seem to be the only one taking it that way, that I can see.

Tough times sometimes call for tough measures. That doesn't mean anyone "enjoys" it, but kicking the can down the road isn't working.

-ERD50

 

[youbet]

I guess the people around you are not smart enough to find the loophole...

I read the article you referenced. It's familiar and I think you've posted it before. No, that "loophole" was not a tactic used here. I'm glad they shut it down in Texas.

Edit to add... responding to the bold... Is that the case where they are saying to cut current retirees?

There are many proposed solutions and some definitely call for cutting or even eliminating the pensions of current retirees. I think the talk of eliminating current retiree pensions entirely is premature and meant to be dramatic. But this is Illinois, so ya never know. Of course, the politicians will still get their full pensions!

maybe take away COL increases or something else...

New hires, since 2011, get a COLA lower than SS.

, if you keep the payments the same today but someone who retires in 10 years gets nothing, how is that fair?

None of the numbers are that dramatic at this stage but I suppose it could get there. Illinois politicians are a strange breed of crooks....... Maybe you'd call them dumb crooks. (Or maybe not, they're getting rich from it all........). But even with the sharply lower pensions of teachers hired since 2011, they still won't make actuarially sound annual pension contributions. Even today, there's talk of borrowing from the dramatically underfunded funds. It's just something in their genes. There always has to be a scam, a way to put shoe boxes of cash on their closet shelves. And underfunded pensions. Multi-employer teamster pension problems and the Illinois state pension problems have a lot in common.

So, what do you think should happen? Raise taxes to pay for all pensions? Do a haircut? Do both? It is not going to look pretty no matter what happens...

Well, since you asked, I do have the answer. I'm talking about the non-Chicago teacher situation (TRS).

1. Put all teachers, all TRS members really, on SS.

2. Continue to have new hires on Tier II.

3. Continue with the rules that now prohibit spiking, double dipping, etc. These things were never as prevalent as the media tried to sell, but they are better done away with completely and permanently.

4. Switch incumbent teachers hired before 2011 to Tier II for future years (years not yet worked). This gives them a chance to leave for other employment if they feel undercompensated. Pay them their earned Tier I pension on a pro-rata basis for years already worked.

5. Continue rolling out DBP alternatives that have recently begun such as cash balance pensions and 403b's with matching.

6. Pay already retired teachers per the plan they are on now and that they made their retirement decisions based on.

7. Pass legislation that requires actuarially sound (as opposed to politically expedient) pension fund funding.

8. If cuts to existing pensions are required, a process similar to bankruptcy should occur. (I know states can't declare bankruptcy but the courts can cause them to reveal all the information they would have to reveal in bankruptcy.) Detroit retirees made out much better under the bankruptcy agreement than the offer made to them in the earlier "avoid bankruptcy" stages.

I love the Wisconsin plan. If you're not familiar with it, give it a read.

 

[MichaelB]

This is getting a little personal. How about we all take a step back and relax.

 

[ERD50]

But you addressed it incorrectly. Public employees in Illinois have always preferred their pension fund to be properly funded, in the actuarial sense of "properly." ... .

Of course they "preferred" that their pension fund be properly funded. But what did they do about it when it wasn't being properly funded?

I'm just having trouble reconciling that this was allowed to happen (or at least they watched while it happened), and now these retirees are saying that it shouldn't be allowed to affect their pensions. That's a big disconnect for me. It seems like "magical thinking".

Now, if the Unions really had no power to force the State to make their contributions, then at least it seems they should have been warning their members that their pensions could be cut in the future, and members should have been acting accordingly.

What's the point of funding the pension at all? Let it go to zero and pay out of current taxes. But it wasn't set up that way, and when the funding stops, some red flags, and alternate plans should have been made. You can't just go along and ignore reality. I know that if my pension exceeded (or was even close to) PBGC caps, my plans would count only the amount up to the cap, and probably a bit less. I wouldn't be happy about it, no one would. But it would be my reality. Some of the talk from public pensioners just strikes me as a disconnect from reality, that's all.

-ERD50

 

[OldShooter]

... Even with IL pension benefits being constitutionally protected, there still exists the path for amending the constitution, or simply no money left. I just don't think anyone is helping themselves ...

With the latest IL court ruling that even pension benefits for new hires cannot be cut IMO it is a foregone conclusion that the IL constitution will be amended. There is no other way out.

 

[Sandman62]

Substitute "Social Security" for "pension" and see how most people who expect half, 3/4 or more of their eventual SS benefits would be screaming. What if the federal government decided they'd rather not pay the people who paid into this their whole lives? Would that make the entire US population "naive"? Comparing contracted state public pension raiding to private corp pensions isn't as relevant as comparing them to federal public annuities (SS).

 

[ERD50]

Substitute "Social Security" for "pension" and see how most people who expect half, 3/4 or more of their eventual SS benefits would be screaming. �� What if the federal government decided they'd rather not pay the people who paid into this their whole lives? Would that make the entire US population "naive"? �� Comparing state public pension raiding to private corp pensions isn't as relevant as comparing contracted state public annuities (pensions) to federal public annuities (SS).

I think if you read through this forum, you will find many here who are discounting their SS benefits. If not through direct cuts, through taxation changes that effectively reduce the benefits. And changes have been made during the years we made contributions.

And if you listen to the "Young Dreamers" seems like most of them aren't counting on SS at all, even though they (and their employers) pay into it today.

I'm not sure what it is about private pensions that makes them less relevant to the discussion?

-ERD50

 

[Chuckanut]

What do you think of my "Occam's Razor" explanation a few posts back? I could be all wet of course, but it seems like the most plausible to me. Comments?

-ERD50

Well it makes as much sense as many other explanations. Unions that sell-out/trick/misinform their members are not exactly unknown in this country.

Just a story from several years ago in my home state: The legislature, as usual, was struggling to balance the new state budget. One idea floated by a group of Dem and Repub representatives was to simply pay less than required into the public employee's pension funds for the next two years. Our governor at the time (a Democrat, FWIW) made it quite clear that that was not acceptable. Ultimately, they met the minimum requirements for funding.

Also, the "Golden" retirement plans were replaced way back in the 1970's. Of course, now zillions of baby boomers who worked under those plans are reaching retirement age. That particular plan has been adjusted at times over the years (often resulting in court battles) and is the least secure plan, though certainly not nearly as bad as Illinois.

Today, many of the newer folks get a hybrid DB/DC plan.
It's not all doom and gloom.

 

[youbet]

Of course they "preferred" that their pension fund be properly funded. But what did they do about it when it wasn't being properly funded?

You continue to make it sound as though it's the teachers' fault Blagojevich et al either didn't fund or funded and then cooked the books by borrowing it back. Because Ms. Jimenez teaching English as a Second language in southern Illinois didn't head up to Springfield to punch Rod Baby over it, you say it's her own fault her pension will be gone? Aw, come on........ That's what I mean by "gleeful." You're really stretching it [mod edit]

I'm just having trouble reconciling that this was allowed to happen (or at least they watched while it happened), and now these retirees are saying that it shouldn't be allowed to affect their pensions. That's a big disconnect for me. It seems like "magical thinking".

See my earlier post on this. Why are you so anxious to blame the victims?

Now, if the Unions really had no power to force the State to make their contributions

If? What do you mean by "If"? Teacher organizations, unions, committees, etc., have no legislative authority. I think you have the misconception of all Illinois employees being in a single, powerful union which communicates information and calls to action to them and they all respond in lockstep. Sorry, it doesn't work that way, not in Illinois. Again, refer to my earlier post on this. Even the recent Illinois Supreme Court battle to keep their pensions failed to pull everyone together and only a last ditch effort and voluntary contributions got them a legal team to put on the case.

I have no issue with your thesis that the money just isn't there and therefore Illinois teachers should prepare for cuts or elimination of their pensions. But I so very strongly disagree with you that it is their own fault. I find them to be, with exceptions of course, a financially naive group of folks who accepted jobs with salaries and benefit packages and now find themselves being told a portion of those benefits will not be delivered. They naively paid their pension contribution every check and thought they'd be taken care of. I fault them for that. But I don't declare them guilty and the politicians innocent. Sorry..... Can't do that.

Before these folks get the boot in the butt from the state, we do need to have a very public bankruptcy-like legal proceeding. If the state says it can't put another penny into the pension funds but it is still paying for legislator junkets to Hawaii every February, we need to put that before the public. If putting additional funds into Mike Madigan's district as payola for votes to keep him in office continues, we need to put that before the public. Bankruptcy helped the retirees in Detroit and a similar Judicial supervised review could help here. As many posters have pointed out "Illinois taxes are high. Where's the money?" We need to find out and cut spending well into the bone before we tell Ms Jimenez (the English as a Second Language teacher from southern Illinois) that her punishment for not finding a way to get through Blagojevich's bodyguards is loss of her pension.

 

[youbet]

With the latest IL court ruling that even pension benefits for new hires cannot be cut IMO it is a foregone conclusion that the IL constitution will be amended. There is no other way out.

I missed this earlier. It's typical of the misinformation going around. I wonder where you got it?

Illinois is completely free to change plans for new hires and has done so. New hires from 2011 on are on Tier II which requires the same employee contribution as Tier I but pays out much less and has a more frugal COLA formula than SS.

I haven't had a chance to study it yet, but there is also a more recent Tier III. It appears to be, on the surface, a tweak to keep the Feds from forcing them (Illinois) to put their employees on SS since Tier II is arguably inferior to SS. Having a pension plan equal to or better than SS is a requirement for states to opt their employees out of SS.

What Illinois cannot do (so far) is change the pension plans of incumbent teachers from the plan they were hired under. But new hires..... I don't think that's a problem. And they have hacked those folks back a bunch.

 

[Walt34]

Thanks everyone for an interesting discussion.