Those w/Pensions: How much do you pay in?

[putty]

Hired in 2007 and pay nothing in. I don't count on having it though. I believe once I become vested in a year or so I can roll it over to an IRA when I leave the company.

 

[Goonie]

Wow. Talk about the golden goose, does the State of Illinois still offer these generous DB plans? Let's see... ARC buyback, VAC, double-dipping into SS, no tax on pension payments/distributions? Did I just read this correctly? Is the pension plan above 80% funded considering its liabilities and only a flat 3% IL state tax?

I think I'm going to update that resume and move back to Illinois?!

Here's a little (OK...a lot of) clarification....I'll apologize in advance for the length of my reply. Someday I'll work on a "Cliff's Notes" version.

Although it's public pension plan in IL, it's not a State of IL pension. It is regulated by the laws & statutes of IL, but it's neither controlled by, nor accessible to, politicians or their follies. It's governed by a Board of Trustees, who are elected by the employees, employers, and retirees. Four trustees are elected by employers, three are elected by employees, and one is elected by retirees.

And though it was totally exempt from IL income tax ....even the low 3%....it's not fed income tax exempt, only deferred. So I pay Fed income tax on the 'distributions', which I have deducted from my monthly payment.

There's also no "double-dipping into SS"....I paid into SS fully for my entire 'working' life (30+ years), so I'm eligible, according to SSA rules & regulations, to collect at age 62 or later. "Double-dipping" would be receiving 2 pensions from the same pension plan....which with our pension plan is 100% impossible.

Before the rather bleak year we just came out of, the pension plan was expected (as of sometime in 2007) to be over 100% funded by 12-31-2008. However, with the way things went this past year, it's somewhere between 82% and 86% funded, but still totally solvent. (Unlike the 'actual' State of IL employee pensions, which have been not only under-funded, but also intentionally unfunded, by a certain Governor who was just impeached by the State House of Reps yesterday.) Fortunately, our pension plan isn't funded by the State of IL, or by State income tax dollars. It's completely funded by participating employees and their employers.....mostly municipalities, counties, school districts, etc. And those employers use a small portion of the money received through property taxes, and taxes on goods and services, to fund their portion of the pension.

Before I received that 1st pension check, I made my last contribution to the pension fund, as did my employer. Neither I nor they ever pay another dime into the pension fund to cover my monthly pension payment!

There is only a very tiny percentage of people who ever are able to meet the requirements for the early retirement package that I was able to qualify for! To qualify for a full pension, you need to be at least 55 years old AND have at least 35 years of service. To be able to qualify for "early retirement" with the full pension, FIRST your employer must officially participate in, and offer an "early retirement incentive" program. Secondly, the employee must be at least 50 years old AND have at least 30 years of service...PLUS they'll need to "buy" 5 years of service credit....which will cost the employee an amount equal to 4.5% of an average of his 4 highest years' wages out of the last 10 years, multiplied by the 5 years years he's "buying". My average yearly contribution for my 4 highest years' wages was just over $2000 per year....therefore I had to pay in over $10,000 to "buy" my needed additional service credit.

In all of the years that my municipality has been participating in the pension plan...which has been a loooong time.....only 3 people (including myself) have ever qualified! The 3 of us all began our employment there when we were 19 years old, and we all retired at 50 years old in Spring 2007. Currently, there is only one person working there now who will qualify in the future.....if it's still offered. But he has over 28 years to go!!!

BTW, what's the "ARC buyback" you mentioned? I never saw or heard that term before.

 

[SinCityGrrrl1]

Pensions

It's changed over the years and it's confusing. When I first started, the company contibuted up to $11,000, then you would do 3%. After every contract it would go up to $14,000, $17,000 and so on. The company stopped contributing about 15 years ago, it's overfunded, although it's taken a hit this past year I'm sure.

Now I contribute nothing up to $70,000, after that it's 3% of your weekly paycheck. I also am in the Voluntary Pension Account where I contribute 3% all year until I hit $70,000 or yearly max of VPA of $2,100 then the contributions switch to your regular pension account.

I should of done the VPA when it first started about 12 years ago but as it stands now I will have 15 years of contributions when I retire in 9-10 years.

Then we have a guaranteed pension based on your high 3 consecutive years of pay in your last 10 years. Whichever is higher between your regular and guaranteed is the pension you will get.

If you retire at age 60 or before you also get a pension supplement until age 62 when you can collect SS.

We also have the S&SP, sort of like a 401K. Company stocks, mutual funds, savings bonds, where the company matches half your contributations. So if you do 7% they will match 3.5%, that's the highest they go.

Your Medical, Dental, Glasses, & Prescriptions continue until age 65. They have an after 65 plan to supplement Medicare for a monthly premium which is better than most plans.

To tell the truth I've just started to try and understand it all. Retirement seemed so far away. Then 5 years ago it hit me I only have 15 years to go and that's when I joined the S&SP and the VPP. No sense looking back now, at least I'll have a little something extra.

 

[Tadpole]

Federal Retirement Plan Contributions

Originally Posted by Amethyst

Under the "old" Civil Service Retirement System, I have always paid 7 % of pre-tax salary (except for a while when it was 7.5%) toward a defined benefit pension. I have never paid toward Social Security, so wouldn't qualify for SS, unless I work at something else for 10 years after retiring.

Without comparing pension benefits, how much (percentage of pre-tax pay--no need to reveal the actual amount unless you want) do folks in other pension plans actually pay toward your pension? Does anyone get a pension for "free"? (i.e. you serve for 20 or 30 years, your employer gives you an annuity in thanks for your service)

Amethyst

Well, I missed being CSRS 6c by 4 months. So I pay into the FERS 12d plan. I pay in 1.7% pre-tax + SS.

Formula is 1.7% of hi-3 salary for first 20 years & 1% of hi-3 for each additional year. (i.e. 42% for 30 years)

Eligible to retire (unreduced) with 20 years at age 50 or 25 years at any age. Mandatory at age 57.

Pension is eligible for a (diet) COLA after the first year of retirement. Formula for the diet COLA is CPI minus 1%.

Also will receive a pension "supplement" till age 62 which for me will be approx 60% of what age 62 SS benefit would be. (supplement will be means-tested & subject to reduction after age 55)

Actually, in the interest of "fairness" the way FERS contributions are computed is "CSRS contribution minus OADSI contribution" so the total contribution is the same for both with most of the FERS allocated to SS. I sometimes think the change in the pension had more to do with SS than anything else but I don't know.

And also, at least in regular FERS, the supplement is not "means tested" but is "payroll income" tested. FERS retirees don't get the ump that CSRS retirees get by retiring earlier and working for a contractor or other job.

I also ran into this a while back which I found interesting:

- Federal news, government operations, agency management, pay & benefits - FederalTimes.com

Government contributions to retirement

Question: I know that an employee covered by FERS contributes .8 percent to his or her retirement account in FERS and 7 percent to the CSRS retirement account. What is the government/agency contribution to each retirement account on behalf of the employee?

Answer: As of the first pay period beginning on or after Jan. 1, 2003, agencies contribute 7 percent for CSRS regular employees and 7.5 percent for special category employees, such as law enforcement officers and firefighters. Under FERS, they contribute 10.7 percent for regular employees and 22.7 percent for special category employees.
-- Reg Jones

I guess that is why an estimate a few years ago (GAO?) said that FERS was "fully funded" and CSRS was about 40% underfunded.

 

[dm]

My wife has a pension and does not pay into SS. She has had something like 11% withheld since she started 25 years ago with her employer matching. They are talking about it going to 13% next year.

Her pension is good but she has paid quite abit into it.

Edit. I just checked and they paid 13% this year and are raising it to 13 1/2% next year. This does not include the employer match. So 26% to 27% of current income goes into the pension plan. It should pay well.

 

[Walt34]

I paid both 7.5% into the county pension plan and the 7.5% into SS. When I retired I took the option (out of about a dozen) that means when I turn 62 the county pension is reduced by the amount of SS benefits that I'll be eligible for then so the total income remains about the same.

If I'm still working at the job I'm at now I'll delay SS benefits for the greater benefits later and to avoid paying income taxes on the SS benefits. And by then DW will probably have found a job after earning her BA degree so as long as we're both working we won't really need the SS benefits.

And if that doesn't work out we'll just go back to "plan A" and not work at all, since before retirement we were careful to crunch the numbers and not put ourselves in a position where we had to work if we didn't want to.

 

[hankster]

My company pays for the DB pension (non-COLA). I'm eligible in 4 years at age 55, but the amount grows considerably by staying a few years beyond that. I can almost feel the "one more year syndrome" coming to get me

Additionally, they have a 75% match up to 6% on the 401k.

The pension benefits for new hires was reduced 3 or 4 years ago. I'm hoping there's no freeze in the near future as I'm at the point where my age and years of service are really piling up benefits. I'll continue saving as if there could be a freeze. Besides, the pension being non-COLA, I'll have to be providing for inflation protection as well.

 

[martyb]

Like the OP, I'm a fed employee under the "old" CSRS defined benefit, fully cola'd plan. I contribute 7% of income to the plan. I also have 31 yrs & counting in the AF Reserves including 4 1/2 yrs active duty time, so I'm working on a contribution-free cola'd pension from the military as well. But, like Rustic said, I may not have contributed monetarily to the military pension but I've paid in other ways lol! Besides, the pensions, I do qualify for a minimal SS check when I get to age 62. I qualified for that one when I was younger, mostly prior to becoming a fed employee. Hopefully the 2 pensions, small SS, plus my TSP (not employer contributed) & Mr. & Mrs. Roth IRA's will keep us from eating dog food.

 

[ohfrugalone]

I contribute 7.9% of my salary to the pension and the employer kicks in 11.9%. The pension is 2.35% of years of service, with the base of the average of the highest 5 years. Non-cola until I am 66 years old, and then the highest cost of living raise would be 2%.

I contribute about another 7.8 percent to a 403-b with no match. Also contribute to Social Security.

 

[Goonie]

When I retired I took the option (out of about a dozen) that means when I turn 62 the county pension is reduced by the amount of SS benefits that I'll be eligible for then so the total income remains about the same.

I had a similar option, but took the option to receive level payments for life...cola'd of course. So when I hit 62 (or whatever after that), and start drawing SS, it will be like extra toppings on an already great sundae!

Hopefully the 2 pensions, small SS, plus my TSP (not employer contributed) & Mr. & Mrs. Roth IRA's will keep us from eating dog food.

Man, I dunno......after perusing the shelves at the local feed & seed store, some of those critter snacks look awful tasty! Fact is, one day I was waiting for the fellow to retrieve my order from the storeroom, and I spotted some yummy looking sausages on the shelf. So I went over to get a closer look-see, and I picked out one that was beef sausage, cheese, and veggie of some sort. I laid it on the counter, and told them to add it on to my order. They inquired what sorta pup I had, and I told 'em "I ain't got one." So they asked why I was buying a doggie treat! Huh?! Darn!! It sure did look yummy!

After seeing what the feed & seed joint offers, and what's on my grocer's shelves.....I'm half tempted to start grocery shopping at the feed & seed!

 

[Gumby]

I recently went to work for the state. Should I stay long enough, I would be eligible to receive a COLA'd pension of about 1.5% of my salary per year of work, commencing at age 62. I would also get fully paid healthcare. For all that, they deduct 2% of my paycheck. I also pay into SS and Medicare.

The young wife is a teacher. She will get a COLA'd pension of 2% of salary per year of work, commencing at 60. She may stay with the school district's group health policy if she wants, but must pay the full boat for it. She will, however, get a $250/mo. cash healthcare stipend to help make that payment. For all that, the school district deducts 6% of her paycheck. She does not pay into SS but does pay Medicare.

 

[pasadenaDC]

Here's a little (OK...a lot of) clarification....I'll apologize in advance for the length of my reply. Someday I'll work on a "Cliff's Notes" version.

BTW, what's the "ARC buyback" you mentioned? I never saw or heard that term before.

That's for clarifying Goonie and yes, the fact that Blago was nowhere near your pension that's most definitely a good thing!!

I should have explained ARC buyback is additional retirement credit or the same as purchasing additional years of service. Looks like you did that at your DB pension, its one of the best deals out there IMO.

 

[wheel9]

I had been paying 8% into my pension (California) and my employer has been paying a variable rate depending on the condition of the fund. Sometimes their share was 18%. My pension was 2.5% of highest year, eligibly to retire at 55.

I did not pay into SS at this job, and am subject to WEP, but from prior jobs, I should be able to get the WEP penalty down to only 5% by the time I collect.

 

[Dog]

Hi Harley. Yes, fGTE. All in all I served for 30 years.

 

[Goonie]

I should have explained ARC buyback is additional retirement credit or the same as purchasing additional years of service. Looks like you did that at your DB pension, its one of the best deals out there IMO.

OK, thank, got it now.

Even though I bought 5 years of service credit, I could have bailed without buying any. However, I wouldn't have gotten the full pension amount. It would have been reduced by 1% for each of the 5 years......for a total of 5% reduction. I had 30 years 10 months of actual service time, so I could have just bought 4 years 2 months. But I opted to pay the slight amount for the extra 10 months in order to boost my pension just a tad more.....only about $300/year, but that pays for all of my coffee joint runs. That $300/year (cola'd for life) cost me about $170 up front, so I broke even after the first 7 months.

 

[pasadenaDC]

OK, thank, got it now.

Even though I bought 5 years of service credit, I could have bailed without buying any. However, I wouldn't have gotten the full pension amount. It would have been reduced by 1% for each of the 5 years......for a total of 5% reduction. I had 30 years 10 months of actual service time, so I could have just bought 4 years 2 months. But I opted to pay the slight amount for the extra 10 months in order to boost my pension just a tad more.....only about $300/year, but that pays for all of my coffee joint runs. That $300/year (cola'd for life) cost me about $170 up front, so I broke even after the first 7 months.

How did they compute the additional service credit, based on your ending salary or a composite of 3 or 5 years service? Reason being, my DB pension computes as of payment at current salary level... so it behooves me to purchase years when I am vested (in about 3 years) versus waiting later into my career when those service years/credit are much more costly.

Either way, ARC or ASC (whichever you want to call it) is one of the better deals out there. Goonie, don't underestimate those coffee runs! My lovely mother who is semi-retired is a mainstay at Panera and Peet's coffee, so I frequently find myself purchasing giftcards for her, she really does enjoy it as part of her routine.

 

[wheel9]

How did they compute the additional service credit, based on your ending salary or a composite of 3 or 5 years service? Reason being, my DB pension computes as of payment at current salary level... so it behooves me to purchase years when I am vested (in about 3 years) versus waiting later into my career when those service years/credit are much more costly.

Either way, ARC or ASC (whichever you want to call it) is one of the better deals out there. Goonie, don't underestimate those coffee runs! My lovely mother who is semi-retired is a mainstay at Panera and Peet's coffee, so I frequently find myself purchasing giftcards for her, she really does enjoy it as part of her routine.

In my plan, the calculation is made at the time you ask for the quote from the Pension agency. In our case, you should buy the service credits as soon as you are able. They do an estimate, projecting 2% raises, so if you are expecting bigger raises, or a job change for more money, you come out way ahead. I bought my 5 years just before my longevity step increase, benefitted from the salary increase.

It was the best purchase I could have made, as I was able to use my 457 Plan (tax deferred) money to buy the time. By buying the retirement time, I never had to pay taxes on this deferred savings, other than when it is paid to me as pension.

 

[mf15]

Seem that I worked for a real good private company for 31 plus years,
we were sold last year so that is why I am er ed. Anyhow up until 1988 we had ESOP which they stopped,but the cashout was great.
Now have a non COLA pension to which I did not contribute.
After ESOP was over they switched to 401K to which they made conntributions,sometimes stock/cash.
Oh yea I was in middle management also had MIP depending on profits for the year.
Our president was Ered/forced out by the new owners before me, after
I was early retired I wrote him a nice letter thanking him for 31 plus years of stable employmment, plus all the nice ESOP/401K/pension/MIP over
the years. I wish that the pension was COLA/ in 20 years the the buying
power of the fixed amount will be greatly reduced. The new owners froze
the pensions for anyone under 5 years service.
Welcome to the global matrix.
Old Mike

 

[militaryman]

About 3 years active duty and the rest of 20+ in the Guard will give a Cola'd pension (with health benefits) at age 60 that I made no salary contribution to.

22+ years under FERS contributing @ ? -- 1% ish I think

Hoping the Gov does not bury itself in debt or devalue the dollar over the next 16-20 years so I have two worthless pensions.

 

[Goonie]

How did they compute the additional service credit, based on your ending salary or a composite of 3 or 5 years service? Reason being, my DB pension computes as of payment at current salary level... so it behooves me to purchase years when I am vested (in about 3 years) versus waiting later into my career when those service years/credit are much more costly.

In my plan, the calculation is made at the time you ask for the quote from the Pension agency. In our case, you should buy the service credits as soon as you are able. They do an estimate, projecting 2% raises, so if you are expecting bigger raises, or a job change for more money, you come out way ahead. I bought my 5 years just before my longevity step increase, benefitted from the salary increase.

The cost to purchase the service credit is based on the average of the 4 highest year's salary, out of the last 10 years. For me, it was years 6, 7, 8, and 9. Year 10...the year I retired...I only worked a very short period of time, and only earned about $20K, so that year was not considered.

They give you an estimated ballpark figure of what your cost will be, but they don't give an exact cost until after your last day on the job.

With our pension plan, you can't purchase service credit until you officially give notice and retire.

Goonie, don't underestimate those coffee runs! My lovely mother who is semi-retired is a mainstay at Panera and Peet's coffee, so I frequently find myself purchasing giftcards for her, she really does enjoy it as part of her routine.

The normal coffee shop run costs me 42 pennies! That's 39 cents plus tax!