Risk Factor for Public Pensions?

[Mulligan]

Although my pension is currently fine, if something happens, I would rather tweak it a bit early than see the heads go in the sand until its too late. Some of these court rulings may be short sighted and end in bankruptcy issues creating more painful cuts in the end. So many levers can be gently pulled. Reducing COLA's (if applicable), increasing employee contribution rates, raise minimum wage to draw pension, without increasing needed years to work, lowering multiplier, gaming strategies, etc. But just doing nothing and let pension systems draw down to 30-40% prefunding levels while saying nothing can be done to change system hurts everyone and will ultimately blow up the system.


Sent from my iPad using Tapatalk

 

[nun]

Apocalyptic thinking has a long history. It seems to be popular in retirement planning too. Like all visions of the apocalypse, they are worst than reality.

 

[Another Reader]

In San Jose, Chuck Reed's Measure B is quietly being undone by his successor, who won in a close race with another candidate that ran on a platform of getting out from under the legal mess and returning to the old system. Reed's state-wide ballot initiative initiative is not gaining much traction, either.

I don't think the political will to make major changes exists yet, at least not in California. Like so many other touchy issues, it's easier to kick the can down the road than to come up with reasonable solutions that everyone can accept.

 

[daylatedollarshort]

In San Jose, Chuck Reed's Measure B is quietly being undone by his successor, who won in a close race with another candidate that ran on a platform of getting out from under the legal mess and returning to the old system. Reed's state-wide ballot initiative initiative is not gaining much traction, either.

I don't think the political will to make major changes exists yet, at least not in California. Like so many other touchy issues, it's easier to kick the can down the road than to come up with reasonable solutions that everyone can accept.

Pension reform will probably follow a similar path to drought measures. Better late than never but things had to get serious before big initiatives with public support were undertaken. Now the newspapers try to find out the highest individual household water users and report on the water wasters with glee. I see the same level of reporting and interest in finding out the most outrageous public pension spikers / loophole abusers in our future.

 

[brett]

It is one thing to have a seriously underfunded public sector pension plan.

It is quite another if that same jurisdiction has a shrinking population, an aging demographic, and zero growth or a reduction in good paying jobs or a combination of all three as some in fact do.

The combination of these would, IMHO, call for some immediate financial planning.

Politicians are reluctant to act-if only because of the significantly higher voter turnout in those aged 55 and above.

 

[eta2020]

As far as firefighters and education, a friend is a firefighter here in San Diego. He has an undergraduate from Yale, MBA from Harvard, was a Navy Seal and worked for Goldman Sachs as an investment banker. He felt a calling to do public service.

No disrespect Rodi, but that sounds like character from one of the Steven Seagal's movies

 

[Another Reader]

Articles about individuals or groups maximizing their pensions by working the systems have been published in the LA Times and SF Chronicle every few years for at least 20 years. There is about 15 minutes of outrage, a few people hide from the cameras, and then everyone goes on with their lives.

The tax increases that Emanuel has proposed in Chicago may draw more attention, because now a concrete number by which taxes will go up to pay for pensions will appear on property tax bills. That may result in some more effective outrage.

CalPERS is so big, with so many agencies and entities contributing to different plans, it will be difficult to get any unified opposition. One entity may encounter problems, while others may not. Not like City employees in Detroit that will take cuts via bankruptcy, or the Chicago situation.

People also forget that these are not real numbers, but actuarial assumptions and projections. For as long as I can remember, those assumptions and projections have ebbed and flowed with the paper asset markets. During the internet bubble, the actuaries said a lot of systems were over funded. That led to benefit increases and cuts in agency payments into the system. People got used to that and did not adapt when the markets changed.

 

[nun]

Not 4 times but more like 8 times average SS payment.

Average SS benefit 16k a year average Southern California Firefighter benefit 130k a year retiring in 50s.

https://www.ssa.gov/news/press/basicfact.html
Newspaper probe alleges nepotism among L.A. firefighters

In MA the average state pension is $30k and its retirees get no SS because MA opts out. The pension is funded by an 9% (11% for the high paid) employee salary contribution and a 3.2% state match. If the state was to abolish the pension it would have to opt back into SS and pay the employer contribution of 6.2%. So MA is incentivized to keep the state pension. The high level of employee funding of the state pension is part of the reason the MA legislature has not been anxious to reduce the benefits of active employees.

 

[utrecht]

Did the rest of us not earn our pensions too? This tendency to split off public safety pensions or military pensions from criticism because uniform wearers are somehow more deserving just serves the divide-and-conquer strategy of those who'd like to see all pensions go away. If only public safety pensions remain they'll be that much easier to do away with.

Everyone who worked for a pension earned it.

Everyone who worked and was promised a pension deserves their pension, but uniform wearers ARE more deserving in my opinion and in the opinion of the majority of people. They risked their lives on a regular basis. Some of them were injured or killed and many of them have lingering work related injuries for the rest of their lives. You cant possibly think that compares to a guy who worked behind a desk at IBM. Mr IBM still deserves what he was promised but its apples and oranges.

If public pensions did away with things like using overtime in formula calculations, the whole pension under funding issue would be dramatically reduced. Between fixing those problems and lowering benefits for new hires, its actually a pretty easy fix.

 

[stepford]

Everyone who worked and was promised a pension deserves their pension, but uniform wearers ARE more deserving in my opinion and in the opinion of the majority of people. They risked their lives on a regular basis. Some of them were injured or killed and many of them have lingering work related injuries for the rest of their lives. You cant possibly think that compares to a guy who worked behind a desk at IBM. Mr IBM still deserves what he was promised but its apples and oranges.

If public pensions did away with things like using overtime in formula calculations, the whole pension under funding issue would be dramatically reduced. Between fixing those problems and lowering benefits for new hires, its actually a pretty easy fix.

I have good friends who put in their 20 in the military while manning a lab bench at the Air Force Research Lab. My wife has another friend who has been a high school teacher for 30 years - most of that in dangerous urban areas. Do we really want to play the DESERVES card here?

I repeat, they both have done what was asked of them and both are equally deserving. Anything else and you start having to judge heroism on a case by case basis to see who merits a pension - which would make for horribly unworkable public policy.

 

[NW-Bound]

... During the internet bubble, the actuaries said a lot of systems were over funded. That led to benefit increases and cuts in agency payments into the system. People got used to that and did not adapt when the markets changed.

That is a problem with private pensions too. In good times, either benefits are increased or contributions reduced. Then, it is very painful to go back to the "old way", and take back what was given.

As I reported in an earlier post, the city of Phoenix tried to curb pension spiking with unused sick leave, but was taken to court. It argued that city management in July 1996 voluntarily chose to allow the practice and can change it at will. Did the judge agree with that? Nope.

 

[utrecht]

I have good friends who put in their 20 in the military while manning a lab bench at the Air Force Research Lab. My wife has another friend who has been a high school teacher for 30 years - most of that in dangerous urban areas. Do we really want to play the DESERVES card here?

I repeat, they both have done what was asked of them and both are equally deserving. Anything else and you start having to judge heroism on a case by case basis to see who merits a pension - which would make for horribly unworkable public policy.

We could argue back and forth all day, but the fact is that we disagree. We've been over this a million times here. There are so many disadvantages to having a public service job (and I would include teachers in jobs that I think are more deserving of their pension) that I cant even list them here. Anyone who thinks these people dont deserve their pensions more or are jealous of people with public pensions could've taken one of those jobs when they had the chance but most people don't want to make the sacrifice.

Private sector jobs have plenty of perks that public sector employees would never dream of getting. Retirement buy outs, signing bonuses, Christmas bonuses, being able to change companies and usually with a raise. Every job has pros and cons and everyone has the ability to choose the job they want. Of course not every single person in the military has a dangerous job, but the people working in labs also dont get paid as much in total pay.

And lets not forget that most pubic sector employees arent eligible for SS and most dont make anywhere near the $130K that someone listed earlier.

We could take a poll right now and I would bet that the majority of people here would not advise their son or daughter to join the military or become a police officer right now. There are obvious reasons for that but those jobs still need to be filled and the people who are willing to do those jobs against most peoples sane advice deserve to be rewarded.

 

[Rustic23]

The Texas County Retirement works like this:

Here’s how the TCDRS plan works for county and district employees:

A percentage of each employee's paycheck is deposited into his or her TCDRS account. That percentage (from 4% to 7%) is set by the county or district employer.

The employee's savings grow at an annual, compounded rate of 7% interest.

At retirement, the employee receives a benefit payment for life that is based on the final account balance and employer matching. The plan’s matching rate — from "dollar for dollar" up to $2.50 for every dollar saved — is chosen by the employer.

Another thing not said is that they pay out 'your contribution' first. After all your money is gone they start on the Counties match. Your payment is based on an annuity at the time you start collecting. If you out live the time they predict, then there reserves pay out. Upon your death and that of your spouse, if you select coverage, your savings is returned to your estate, County match is not included.

 

[eta2020]

And lets not forget that most pubic sector employees arent eligible for SS and most dont make anywhere near the $130K that someone listed earlier.

Newspaper probe alleges nepotism among L.A. firefighters
Family members beat the odds in winning prized firefighting jobs - LA Times

That is not my listing. That is what newspapers report just as they report that 25% of hires where kids of public officials. BTW that is 130k COLA pension for life at a bit over 50 and not compensation.

As somebody noted such pension is unusual in other parts of US.

 

[utrecht]

Newspaper probe alleges nepotism among L.A. firefighters
Family members beat the odds in winning prized firefighting jobs - LA Times

That is not my listing. That is what newspapers report just as they report that 25% of hires where kids of public officials. BTW that is 130k COLA pension for life at a bit over 50 and not compensation.

As somebody noted such pension is unusual in other parts of US.

Those situations give all the other reasonable public pensions a bad name and its no wonder why California is in such bad shape.

 

[Texas Proud]

Just a couple of thoughts....


A lot of these pensions cannot be changed easily.... I remember a few years back there was a constitutional vote in Texas that would not allow gvmt entities to reduce pensions.... and from what I read about the various court cases around the country it seems to be common in many (maybe most) states... so first, you will have to change the constitution of a state that would allow any reduction...


About salaries... I did not read the article, but one of my sisters called me when she read an article that said the avg salary of a deputy Sheriff was $128K... WHAT That means that a pension that can approach $100K is not that hard to get....


But, to the OP first post.... I do not have a pension so I did not factor one in my number.... I did look at 100% SS for me.... but did ignore DW match...

 

[eta2020]

Those situations give all the other reasonable public pensions a bad name and its no wonder why California is in such bad shape.

And that as I wrote many posts ago is a biggest thread to some public pensions.

I have no problem that those jobs for most part require High School education only. I understand many of them are brave guys doing tough and dangerous work.

But the greed that some of them should get 130k pension at age 50 and hire their kids into their job.....that greed is a big risk to their Public Pension because it is not financially sustainable.

You can complain about my post... It is just my opinion.

Good night to you my friends!

 

[rodi]

No disrespect Rodi, but that sounds like character from one of the Steven Seagal's movies

No disrespect taken - he also is an entrepreneur who appeared on Shark Tank - they said he was the most impressive person they'd seen. He's pretty amazing... The whole family is pretty amazing.

 

[utrecht]

Just a couple of thoughts....


A lot of these pensions cannot be changed easily.... I remember a few years back there was a constitutional vote in Texas that would not allow gvmt entities to reduce pensions.... and from what I read about the various court cases around the country it seems to be common in many (maybe most) states... so first, you will have to change the constitution of a state that would allow any reduction...


About salaries... I did not read the article, but one of my sisters called me when she read an article that said the avg salary of a deputy Sheriff was $128K... WHAT That means that a pension that can approach $100K is not that hard to get....


But, to the OP first post.... I do not have a pension so I did not factor one in my number.... I did look at 100% SS for me.... but did ignore DW match...

Salaries for police officers and deputies vary wildly around the country depending mostly on cost of living, but I can guarantee you that there is no large county in Texas where the avg deputy sheriff makes $128K.

 

[Rustic23]

Here is the listing for Harris County, TX i.e. Houston.

http://www.hcsojobs.com/Salary.aspx

Looks like a Senior Deputy makes $66,000 a year. There could be overtime and stuff added, but that is a 20 year deputy.

 

[steelyman]

Adding to some of the remarks in defense of public/govt employees: the advice to "invest in your retirement plan up to the company match" doesn't mean much to those who don't get any match (I didn't, I can say that for sure).

I never hear anyone referring to "gold-plated", "bloated", "Cadillac" matches, though.

 

[daylatedollarshort]

The teamsters are not public pension funds but federal law has been changed in order to deal with their shortfalls:

"Cutting retirees’ pensions had been illegal—until late last year when the Multiemployer Pension Reform Act was passed. That allows trustees of severely underfunded multiemployer plans to cut pensioners’ income, ending more than four decades of protection under federal law."

Proposed draconian cuts to Teamsters' pensions draws fire from retirees, who vow action - Article from Logistics Management

 

[highlow65]

mass pension

to Nun, the Massachusetts pension is also one of the nations cheapest, only regular income, no sweeteners and poorly indexed for inflation, only 3 % of the first 13000$ so will not keep up with inflation over the years, and is still poorly funded but some make up provisions have been added, no one will get rich off of this.

 

[kjpliny]

I think public pensions as a whole are too varied to put them all into the same bucket. As has been mentioned in previous posts, some retirees can't collect SS, while salaries in some states are way different than others. In NY, I believe the teacher and police pensions are more generous than in many other states, and the salaries are also pretty high. There is a good website where you can see all public salaries and pensions:

SeeThroughNY :: Home

A guy I went to school with is a detective in Nassau County and his salary last year was over $200k. He has about 25 years on the force and can retire right now at 50 with a pension over $100k.

My wife teaches in NY and like all NY teachers, has a Masters degree and also has over 60+ continuing education credits. She will be able to retire at 55 with about a $90k pension, with 100% survivor benefits, and it is inflation adjusted for the first $18k. She will also be able to collect SS at 62 if she decides to take it early. Unlike many of her co-workers, she works very hard and puts in lots of time when not at school. What I disagree with is that she only had to pay 3% of her salary for the first 10 years to get what amounts to about a $1.5M-2M annuity. The tax payers in NY are basically paying for that difference. Public employees should be paying more into the fund or the property taxes will continue to skyrocket (ours are currently about $15k, with 70% of that paying the school taxes alone). We live in a small 1960s ranch house.

My company was recently acquired and the new company did away with the cash balance pension. They will contribute an extra 2% into the 401k. After over 20 years with the company, I can barely buy a semi-decent car with the pension if I took a lump sum. Go figure.

 

[Chuckanut]

A quick question for those of you who worked in a public pension system that did NOT pay into the Federal Social Security system.

Was or is there any requirement that the dollars not paid into SS (both employee and employer) be put into the pension system so as to make up for missing SS benefits?