A look at Pensions

[hopefullyoneday]

I have no issue with public employees getting the pensions that they were promised... but when they game the system with devious crap like pension stuffing then that makes the lublic much less sympathetic... I suspect that the abuses are a relatively small percentage of the total retires but one badd apple spoils the whole bunch... and those few abuses tarnish the whole with the public.

what is pension stuffing?

 

[pb4uski]

I guess I miswrote it... it is pension spiking, not pension stuffing... but same idea:

Pension spiking, sometimes referred to as "salary spiking", is the process whereby public sector employees are granted large raises, bonuses, incentives or otherwise artificially inflate their compensation in the time immediately preceding retirement in order to receive larger pensions than they otherwise would be entitled to receive. This artificially inflates the pension payments due to the retirees.

Upon retirement any employee transitions from receiving a paycheck from the employer to a pension check drawn on the assets of the retirement fund; this amount is typically determined as a percentage of the employee's regular salary by state law or statute. When an employee due to retire receives a "spike", the amount of money the employee will receive does not reflect the percentage of salary the employee and employer haves contributed for the majority of the employee's career, and places a burden on the economic viability of the pension fund. This practice is considered a significant contributor to the high cost of public sector pensions.

https://en.wikipedia.org/wiki/Pension_spiking

 

[Retiree_Having_Fun]

I have no issue with public employees getting the pensions that they were promised... but when they game the system with devious crap like ....

The public employee unions contributing and working to get the politician elected that gives them a raise or pension benefits. Sounds like a conflict of interest.

 

[Just_Steve]

I guess I miswrote it... it is pension spiking, not pension stuffing... but same idea:



https://en.wikipedia.org/wiki/Pension_spiking

Pretty much eliminated in NY's public sector except for law enforcement and fire services, thats 2/3 of the holy trinity of untouchables.

 

[hopefullyoneday]

I guess I miswrote it... it is pension spiking, not pension stuffing... but same idea:



https://en.wikipedia.org/wiki/Pension_spiking

would you consider it spiking if the employee worked overtime throughout their career while contributing a percentage of that pay into the pension fund.

 

[pb4uski]

would you consider it spiking if the employee worked overtime throughout their career while contributing a percentage of that pay into the pension fund.

Depends in circumstances... if overtime was reasonably uniform then no, but where OT is skewed to years that are critical to the pension benefit formula then yes.

 

[imoldernu]

I don't know if this is still the case, but when we first moved in to the Chicago area, the headlines featured final year "overtime" hours for the police department. Time and a half, and double time for 10 or more hours each week as I recall. My first real encounter with big city politics.

Compare this to an average Chicago police pension of $62,000 starting at age 58. In this case, the estimated total pension payout over a normal lifetime is $2,500,000.” “The average Chicago police pension is worth three times that of Social Security with retirement four years earlier and with six years less work.”

https://taxpayersunitedofamerica.org/chicago-police-pensions-worth-three-times-social-security-pensions-with-less-time-worked/

 

[Bir48die]

Agreed.....but during this 10 year bull run why didn't these funds sky rocket.

They have grown immensely but two things:

Our state guarantees a 7.5% rate of return to the retirees no matter what the market does.

Most importantly now the net cash outflow is like $1.3 billion more than the gains so we're screwed any way you look at it.

Courts will not allow any changes due to law. Oh, and the judges are all on PERS. No conflict there

 

[hopefullyoneday]

Depends in circumstances... if overtime was reasonably uniform then no, but where OT is skewed to years that are critical to the pension benefit formula then yes.

I understand your point. For my pension it is based off of my high 3 years of earnings throughout my career. Overtime where i am at is uniform as long as you sign up for it. Of course if you don't sign up it means you don't want it and you wont get chosen. But of course if i continue to work overtime up until i retire my last 3 years will be my highest considering i get between 1 and 4 % raise each year in base pay.

When the city was asked by the citizens about pension spiking making our pension being unfunded and tax rates may be increased to cover it. The city said they ran the numbers and it is cheaper for the fund to pay so called spike overtime pensions than it would be to hire additional employees and giving them a pension and benefits. I am not a number cruncher so i don't know what all is involved in that calculation.

 

[hopefullyoneday]

I don't know if this is still the case, but when we first moved in to the Chicago area, the headlines featured final year "overtime" hours for the police department. Time and a half, and double time for 10 or more hours each week as I recall. My first real encounter with big city politics.




https://taxpayersunitedofamerica.org/chicago-police-pensions-worth-three-times-social-security-pensions-with-less-time-worked/

Wow double time, we dont have that. We may get a couple of dollars extra above our 1.5 overtime rate only if we work overtime on a holiday. But even the scheduled people for the holiday get 1.5 time.

 

[ERD50]

I understand your point. For my pension it is based off of my high 3 years of earnings throughout my career. Overtime where i am at is uniform as long as you sign up for it. Of course if you don't sign up it means you don't want it and you wont get chosen. But of course if i continue to work overtime up until i retire my last 3 years will be my highest considering i get between 1 and 4 % raise each year in base pay.

When the city was asked by the citizens about pension spiking making our pension being unfunded and tax rates may be increased to cover it. The city said they ran the numbers and it is cheaper for the fund to pay so called spike overtime pensions than it would be to hire additional employees and giving them a pension and benefits. I am not a number cruncher so i don't know what all is involved in that calculation.

The question becomes, is the overtime applied evenly over the entire workforce, or does a disproportionate amount go to those in their last 3 years? If you worked the overtime your whole career, and pension is based on total pay, that is reasonable. But if you worked significantly more OT in your last three years, you get a pension based on those three years, but you weren't really paying into it at that level all the previous years.

It's a problem.

-ERD50

 

[hopefullyoneday]

The question becomes, is the overtime applied evenly over the entire workforce, or does a disproportionate amount go to those in their last 3 years? If you worked the overtime your whole career, and pension is based on total pay, that is reasonable. But if you worked significantly more OT in your last three years, you get a pension based on those three years, but you weren't really paying into it at that level all the previous years.

It's a problem.

-ERD50

It is applied evenly at my employment. If you want to work overtime you have to sign up for it for that given day. You have until 9pm the night before the day you want to work. Once you sign up you are placed on a list based on the last day you worked overtime. So if i signed up and the last time i worked was a week ago and my buddy signs up and he worked 2 weeks ago he will get hired before me.

I do understand the second statement you made, but it is allowed by the city management to do that so the citizens should be upset with the city not the employee.

 

[ERD50]

It is applied evenly at my employment. If you want to work overtime you have to sign up for it for that given day. You have until 9pm the night before the day you want to work. Once you sign up you are placed on a list based on the last day you worked overtime. So if i signed up and the last time i worked was a week ago and my buddy signs up and he worked 2 weeks ago he will get hired before me. ...

That sounds fair. Though you never know, there may be pressure to let the 3 years to go guy sign up? Not saying that happens in your area, but it's one of those things that might happen in some places.

... I do understand the second statement you made, but it is allowed by the city management to do that so the citizens should be upset with the city not the employee.

Certainly. Just like I will take the tax breaks I can legally take, even if I don't like the idea of them. Don't get upset with me for taking them.

It get's a little murky though, when some of the unions representing those employees are campaigning for the city officials that make the rules. I feel like the typical voter isn't really at the table.

-ERD50

 

[hopefullyoneday]

That sounds fair. Though you never know, there may be pressure to let the 3 years to go guy sign up? Not saying that happens in your area, but it's one of those things that might happen in some places.
anybody can sign up, the only way you are not allowed to sign up is if you are over the overtime cap. At the beginning of each year after month 3 a list is generated every month with the top 3% of people with the most overtime hours. They are not allowed to work overtime until others catch up and they are no longer the top 3%.


Certainly. Just like I will take the tax breaks I can legally take, even if I don't like the idea of them. Don't get upset with me for taking them.
I take all i can too and there is some i'm sure i have missed out on.
It get's a little murky though, when some of the unions representing those employees are campaigning for the city officials that make the rules. I feel like the typical voter isn't really at the table.

-ERD50

Our union has represented a few but found out after they got into office that they were just saying whatever to get backed. Our union has no power like the big 3 or teamsters. We cannot strike, we cannot say were are not doing what the city asks of us. We can only ask for things and if the city says no there is nothing we can do about it.

 

[HadEnuff]

I am not trying to politicize this discussion, but i do have a question.

To what degree, if any, is the US Government on the hook to "bail out" pensions, whether they be private, or municipal (not Federal, as I assume they are on the hook to bail out their own pensions) in the case of the pensions just running out of money at some point?

 

[mexexpat]

I am not trying to politicize this discussion, but i do have a question.

To what degree, if any, is the US Government on the hook to "bail out" pensions, whether they be private, or municipal (not Federal, as I assume they are on the hook to bail out their own pensions) in the case of the pensions just running out of money at some point?

Link to Pension Benefit Guaranty Corporation, which is a federal agency.
https://www.pbgc.gov/

 

[ERD50]

Our union has represented a few but found out after they got into office that they were just saying whatever to get backed. ...

So you acknowledge that as a voting block, your union has more power than individual voters, you got your guy in office. The fact that it didn't work out the way you planned doesn't change that.

... We cannot strike, we cannot say were are not doing what the city asks of us. We can only ask for things and if the city says no there is nothing we can do about it.

And if Chicago and all of IL was like that, we probably would not be in the mess we are.

-ERD50

 

[ERD50]

I am not trying to politicize this discussion, but i do have a question.

To what degree, if any, is the US Government on the hook to "bail out" pensions, whether they be private, or municipal (not Federal, as I assume they are on the hook to bail out their own pensions) in the case of the pensions just running out of money at some point?

To be clear to the earlier reply - the PBGC is for private pensions only. Any company offering a pension must pay insurance premiums into the PBGC to support their funding. They get no tax dollars.

PBGC has no involvement with State/local pensions. There may be other Federal bailout pathways?

-ERD50

 

[scrabbler1]

So you acknowledge that as a voting block, your union has more power than individual voters, you got your guy in office. The fact that it didn't work out the way you planned doesn't change that.




And if Chicago and all of IL was like that, we probably would not be in the mess we are.

-ERD50

Here in New York, public employee unions are still pretty strong. That is despite the Taylor Law, enacted in 1967.

https://en.wikipedia.org/wiki/Taylor_Law

 

[Bestwifeever]

Thanks. You're right, frozen, and I modified the post above. Though I don't think anyone expects public employee pensions will be taken away either (nor should they be), at worst they will be frozen or somehow reduced if states can't fund them.

DH’s megacorp pension was also frozen back then and replaced with a defined contribution ESOP plan that included profit-sharing he had accrued. Such good timing for him—he will always get a non-COLA pension that covers more than half of what I call our bare-bones budget, and the 401(k) that the DC evolved into had reached seven figures when he er’d in 2008, and the IRA he rolled that over to remains at that level. I hope your frozen pension worked out for you.

Had he returned to teaching in Illinois after his Army service back in the seventies, he would have a much higher pension—and be worrying about the funding. Not sure a frozen public pension could happen in Illinois.

 

[Vacation4us]

Not all public employees i.e. Blue lives matter, count overtime as part of pension calculations. Overtime is not counted as a California state employee.

PS no one would for go OT so those close to retirement could spike anything. Most boys in blue need that OT to make their nut each month. This is why they have a list for OT, so it's fair and evenly distributed to those who want it.

 

[hopefullyoneday]

So you acknowledge that as a voting block, your union has more power than individual voters, you got your guy in office. The fact that it didn't work out the way you planned doesn't change that.




And if Chicago and all of IL was like that, we probably would not be in the mess we are.

-ERD50

Just because we backed them does not mean they got it because of us. I would say they got in from others as they did not do what they said they were going to do for us. But since I don't know the vote count I cant say for sure. Our union only has 900 members and some of us don't live in the city so we cant vote anyways. So its anybody's guess how they actually got in.

Don't know anything about Chicago so cant say.

 

[hopefullyoneday]

I am not trying to politicize this discussion, but i do have a question.

To what degree, if any, is the US Government on the hook to "bail out" pensions, whether they be private, or municipal (not Federal, as I assume they are on the hook to bail out their own pensions) in the case of the pensions just running out of money at some point?

For us if it cant get fixed it goes to Austin for them to say how to fix it and manage it. I don't know where it will go from there if unable to fix but from what we have seen they will get it fixed.

 

[ckelly78z]

To the OP, I know virtually nothing about public pensions, and benefits, but I do know that my Megacorp pension that I will have 28 years into, is privately, and fully funded by it's top 50 global parent company.

I found the following quote from doing research into my potential future retirement state.

"As Tennessee does not have a standard income tax, all forms of retirement income are untaxed at the state level. This includes Social Security and income from retirement accounts. Additionally, property taxes in Tennessee are quite low, with an average effective rate of just 0.75%."

Tennessee does make up this difference with a high 9.46% sales tax between local, and state (which is the highest in the nation) I guess I will have to buy groceries in Kentucky. (or grow my own).

 

[gooddog]

I have been involved in online pension debates for at least 15 years, and during that time have noticed one common theme in pension discussions - misinformation. People from 'either side' can get graphs and stats and 'facts' that support their position. The vast majority of people have no idea of how changing a statewide pension system effects government accounting, invested income, or future outlays by the government for active employees - but everybody has an opinion. The issue is far too complex for a thread on the internet, even on a site such as this with so many financially wise people. The normal online thread devolves into a shouting match of us vs them, and nothing comes of it as 99.9% of people who think they know something/anything about the issue have next to zero clue. Maybe leaving it alone is a good idea?