Pension problems

[George Lambesis]

The age of retirement could be bumped up which would lead to significant savings.  Or, graduate the retirement income like social security.  The earlier you retire, the less you get. 

Many pension plans already do that.  In my pension plan, I can start collecting my "full" benefit at 60.  I can, however, start collecting at 55, but I would get 2% deducted for each year before I turn 60.  Retirement at 55 = 10% less benefit.

Ted, that is not true.  Pension systems like IMRF, that follow the 100% funding model, are not using today's contributions to pay off current retirees.  It doesn't work like Social Security... 

 I never said they were.  I simply said that that in the future pension systems are untenable.  Many private companies have gone from a guaranteed outcome to a guaranteed contribution because they realize pensions are untenable in the future. It is less risk to guarantee the contribution than the outcome.

 If people are worried about managing that money themselves, you can still create a system of a guaranteed contribution and let others manage the investment (like a union).

  The other problem with government pension plans is that they allow people to retire relatively early. People cannot withdraw from their 401K until 59.5 and cannot collect pensions or social security until they're 65. Yet, many government pension plans allow people to retire at the age of 50 and collect 75% of their salary with some pension plans allowing for inflation adjustments.

 Ted

The biggest reason companies have gone to DCP's , is the same reason they outsource jobs to the third world...GREED.  Sure, they say it keeps costs down, but until CEO's are standing in soup lines, I'll believe that it is to keep their profits up.

As far as people collecting pensions at 50, and getting a 75% benefit; think about this: do you really want 55yr. old + policemen chasing criminals through alleys?  Or, God forbid your house is on fire, do you want a 55yr. old + fireman pulling you out of your burning building?  I think those pensions are the exception, rather than the rule.

[Ted]

The biggest reason companies have gone to DCP's , is the same reason they outsource jobs to the third world...GREED.  Sure, they say it keeps costs down, but until CEO's are standing in soup lines, I'll believe that it is to keep their profits up.

 Wrong, George. It's not greed - it's the competive pressures of the market place. People want to buy goods and services at as low a price as possible. If a company's competitor's is doing things to keep prices down and sells more goods because of it, then a competing company has to try to keep costs down as well or go out of business.

  It's not all about greed - otherwise, most companies wouldn't offer health benefits as part of employment. They would make workers get their own health insurance.

  For example, is it greedy to expect that employee's pay for part of their health insurance and part of their health costs?  Or, instead, when employee's pay for at least part of their health cost, they are more likely to pay attention to what they consume in terms of health needs?

 Same thing with retirement - why should the employer bear the risk of guaranteeing the outcome rather than the person retiring?  Why should they public bear the cost when the rate of inflation outstrips the rate of increase in a particular pension fund?

As far as people collecting pensions at 50, and getting a 75% benefit; think about this: do you really want 55yr. old + policemen chasing criminals through alleys?  Or, God forbid your house is on fire, do you want a 55yr. old + fireman pulling you out of your burning building?  I think those pensions are the exception, rather than the rule.

  Hmmmm... I seem to smell a school of red herrings....

  It has nothing to do with 50 year olds fighting fires. It has to do with 50 year olds collecting a large pension starting at the age of 50 at 80% of their ending salary and adjusted for inflation, especially when those 50 year olds start working a second job and still collect the pension at the same time.

 A person can get another job from 50 to 70 and not be allowed to collect the pension until they're 65 or 70.  Collecting a pension in the high 5 figures at age 50 adjusted for inflation each year and expecting the public to bear the risk of that actuarily is what is untenable.

  Ted

[Homebody]

 I spoke to a Berwyn Firefighter recently. He told me about the toll the job takes on him. It's not just the physical work at the scene of a fire. There are car accidents, and other less critical calls that he has to go to. But there are always calls or the anticipation of getting called out when you are trying to get some sleep. And, when you get called out in the middle of the night, you never get back to sleep.

Until that conversation, I never stopped to consider the stress doing that job would put on someone's heart. So, I get the fact that working until 50 is just about all police and fire personnel can take.

But how do we pay for pensions we don't have the money for? Marge Paul

[jake]

Therefore, the maximum a police officer or firefighter should work is 30 years and retire on 75% of his salary.  Every pay period while that police officer or firefighter is employed he contributes 9.91/9.455% of his salary (respecively) into the pension fund.  This is set by statute. 

So he makes contributions on an increasing scale (he makes the least income in the initial years), but gets benefits based on the maximum salary, correct?  Nice gig!

A police officer and firefighter DOES NOT receive social security.  This is set by statute. 

Nor does he contribute!  If this is meant to replace social security, let's give them SS-like returns on their contributions.

[jake]

The biggest reason companies have gone to DCP's , is the same reason they outsource jobs to the third world...GREED. 

And the biggest reason unions fight to hold on to those DBP is GREED.  The public unions outsource the market risk to the taxpayers! 
I wonder how the public unions would react if the benefit tables reflected social security level returns...

[billyjean]

Ted:  "It has to do with 50 year olds collecting a large pension starting at the age of 50 at 80% of their ending salary and adjusted for inflation, especially when those 50 year olds start working a second job and still collect the pension at the same time.

 A person can get another job from 50 to 70 and not be allowed to collect the pension until they're 65 or 70.  Collecting a pension in the high 5 figures at age 50 adjusted for inflation each year and expecting the public to bear the risk of that actuarily is what is untenable."
*************************************

I agree.  In many instances it is the pension that helps one make the decision to enter the area of police and fire in the first place.  Most ppl are offered 401ks which are attached to a vesting schedule.  On top of that, 401Ks are attached to the stock market.  So depending upon how you diversify ... you are either taking no risk, small risk, moderate risk, risky.  One day you're UP, next day you're DOWN.  So while most ppl have to constantly keep a close eye on their portfolios, fire and police pension seem to just breeze along with no worry about state of economics.  Fire and Police want you to call it quits at 50, yet Federal government seems to think you can zip through your job at 70.  Show me one 70 year old person working at a Walmart and I'll show you five more that are already considering assisted living.

And while at 50 you receive a pension which as Ted states is bascially 80% of your ending salary (which replaces social security) and you can work as much as you want, the rest of us who want to retire at say 62 can receive social security, with limitations on how much they can make in wage, I believe the combined total cannot be over something like $14,000.  That's at 62 now.  Since many of you are younger people, you will have to work till 67 to collect full social security and work as much as you like to supplement.  I got news for you.  Many of you will likely be using a walker by that time.  So good luck.  So there does exist this great difference between P and F and the rest of us.

I wouldn't dare to put Fire and Police in the same category as politicians, but I do believe both are driven towards those vocations because of the benefits they get for life.

In an economy like we are experiencing these days, it would seem that P and F unions would have some type of gizmo in place to adjust otherwise they are contributing to breaking the back of the city/town that employs them.  When the city/town can't afford it, what happens then?  Layoffs?

So, yes, I agree with Ted on this one.  It's time unions stop promising and delivering the moon and get in line with what is reasonable when it comes to benefits.  Politicians too.  They are totally out of touch with reality, expect you to make all the concessions, while they make NONE.

[billyjean]

I also agree with Ted that at 50 you can still work.  However, I would differ on age for receiving pension.  I think a pension kicking in at 62 would be fair, because at present that is the age social security says you can start collecting if you choose to do so.  I also think the 80% is pretty high.  And remember, since they receive no social security, they can work as much as they want for as long as they want.  That is a big consideration.  Further, nothing stops F and P from taking part of their salary and putting it into an IRA like many of us have to do.

So we have retire at 50, earn 80% of your ending salary, work as much as you want, and collect dividends at 59-1/2 if you've got some IRA's goin for ya.

And correct me if I am wrong, but if the retiree dies, the spouse continues getting the same pension benefit.

Could be paying benefits longer than than the person ever worked.

[George Lambesis]

From Ted:
"Wrong, George. It's not greed - it's the competive pressures of the market place. People want to buy goods and services at as low a price as possible. If a company's competitor's is doing things to keep prices down and sells more goods because of it, then a competing company has to try to keep costs down as well or go out of business."

It is all about greed...corporate and individual.  It's the Walmart mentality.  It's about lowering our standard of living.  Everyone has to have lots of "stuff".  People want to buy things at as low a price as possible, and do not care if the product was made in a coal-fired, smoke billowing, third-world factory; by women or children, who are abused by their employers.

Also...no red herrings here, but being Greek, I see that you do like mythology.  There are studies that show that police officers have a lower life expectancy than average folks, so they are not living on your dime for 30 years after retirement.  Also.....if a police officer retires at 50, there is no way that he/she can receive the maximum benefit of 75%, because I believe you have to be 21 to be a police officer, and 50 minus 21 doesn't equal 30 yrs.  Besides, (and I will find the proof, if you want it) very few people become police officers at the age of 21!  My guess would be that the average starting age of a police officers is in the late 20's.  My guess would also be that most officers retire with 20-25 years on the job. 

Finally, the employer's pension contribution is deferred compensation.  I don't know what the average employer contribution rate is, but if pensions were done away with, salaries would have to be raised, because, let me repeat, pensions are deferred compensation.  It would probably make city budgeting more predictable, but money would have to be budgeted each and every year...not like the way it is currently done, where government officials seem to draw a number out of a hat, and decide that is what they are going to pay into the pension funds for that year.

[Jerry Marzullo]

Frighteningly, billyjean, Jake and Ted could not be more mistaken in their arguments if they tried. I know that Ted is always wrong as he has no idea what he is talking about at any time. However, I'm hoping the others would be able to listen to reason. Yours, Jerry Marzullo 

[George Lambesis]

Another thing I would like to add is the myth of the 3% Cost Of Living Adjustment.  It does not compound, it is the same dollar amount every year, based on your base pension.  When you initially retire, and your monthly benefit is $500, then your monthly benifit for year 2 is $515 (3.0%).  For year 3 it is $530  (2.9%).  For year 5 it it is $575 (2.67%).  So the COLA percentage actually DECREASES from year to year. 

There you have it....another myth.....busted!

[OakParkSpartan]

Another thing I would like to add is the myth of the 3% Cost Of Living Adjustment.  It does not compound, it is the same dollar amount every year, based on your base pension.  When you initially retire, and your monthly benefit is $500, then your monthly benifit for year 2 is $515 (3.0%).  For year 3 it is $530  (2.9%).  For year 5 it it is $575 (2.67%).  So the COLA percentage actually DECREASES from year to year. 

There you have it....another myth.....busted!

That's a bait and switch because you just said the 3% COLA doesn't compound, yet you are using compounding to say it decreases.  By your own statement, it would remain constant because the increase is based upon the initial benefit.

George, in one of your posts you talk about everyone wanting lots of "stuff".  Would you advocate that your union members not take an increase to show they are not, to use your word, "greedy"?

Anything that you collect later could be considered "deferred".  Having a pension is a BENEFIT.  It isn't a required part of compensation.

[George Lambesis]

Another thing I would like to add is the myth of the 3% Cost Of Living Adjustment.  It does not compound, it is the same dollar amount every year, based on your base pension.  When you initially retire, and your monthly benefit is $500, then your monthly benifit for year 2 is $515 (3.0%).  For year 3 it is $530  (2.9%).  For year 5 it it is $575 (2.67%).  So the COLA percentage actually DECREASES from year to year. 

There you have it....another myth.....busted!

That's a bait and switch because you just said the 3% COLA doesn't compound, yet you are using compounding to say it decreases.  By your own statement, it would remain constant because the increase is based upon the initial benefit.

George, in one of your posts you talk about everyone wanting lots of "stuff".  Would you advocate that your union members not take an increase to show they are not, to use your word, "greedy"?

Anything that you collect later could be considered "deferred".  Having a pension is a BENEFIT.  It isn't a required part of compensation.

Brian, your whole post makes no sense.  3% of 500 = 515   3% of 515 =  530.45  3% = 546.36   When you use that equation 10 or 20 years down, there is quite a difference.   The way the formula works is if your monthly benefit is $500 in year 1, it will be $650 in year 11, and $800 in year 21.  I just wanted to make that clear.  I think some people were under the impression that retirees were given a 3% raise on each year’s benefit.  That would make the monthly benefit $500 in year 1, $672 in year 11, and $904 in year 21.  I was merely disputing earlier, misleading posts, because there is a difference.  The percent increase from year to year actually does go down under the formula that is used.

Our bargaining unit (union) has gone without pay increases, so stop blowing that up peoples’ asses.  The greed that I am referring to is people wanting things that they cannot afford, like mortgages and big screen TV’s.  I don’t blame big business for finding a way to mass produce inexpensive TV’s for the masses, but the point is that although those things are monetarily inexpensive, they place a greater cost on our society in terms of carbon footprint, lost American jobs, human rights violations, etc.  Getting a nominal raise from year to year is not being greedy.  $16 billion in annual profits (Walmart), while your American employees are on Medicaid, WIC, and food stamps, is.

I agree with you that having a pension is not a required part of compensation.  But then again, nothing, except paying your employees  a minimum of $7.25 per hour is.

[OakParkSpartan]

Another thing I would like to add is the myth of the 3% Cost Of Living Adjustment.  It does not compound, it is the same dollar amount every year, based on your base pension.  When you initially retire, and your monthly benefit is $500, then your monthly benifit for year 2 is $515 (3.0%).  For year 3 it is $530  (2.9%).  For year 5 it it is $575 (2.67%).  So the COLA percentage actually DECREASES from year to year. 

There you have it....another myth.....busted!

That's a bait and switch because you just said the 3% COLA doesn't compound, yet you are using compounding to say it decreases.  By your own statement, it would remain constant because the increase is based upon the initial benefit.

George, in one of your posts you talk about everyone wanting lots of "stuff".  Would you advocate that your union members not take an increase to show they are not, to use your word, "greedy"?

Anything that you collect later could be considered "deferred".  Having a pension is a BENEFIT.  It isn't a required part of compensation.

Brian, your whole post makes no sense.  3% of 500 = 515   3% of 515 =  530.45  3% = 546.36   When you use that equation 10 or 20 years down, there is quite a difference.   The way the formula works is if your monthly benefit is $500 in year 1, it will be $650 in year 11, and $800 in year 21.  I just wanted to make that clear.  I think some people were under the impression that retirees were given a 3% raise on each year’s benefit.  That would make the monthly benefit $500 in year 1, $672 in year 11, and $904 in year 21.  I was merely disputing earlier, misleading posts, because there is a difference.  The percent increase from year to year actually does go down under the formula that is used.

Our bargaining unit (union) has gone without pay increases, so stop blowing that up peoples’ asses.  The greed that I am referring to is people wanting things that they cannot afford, like mortgages and big screen TV’s.  I don’t blame big business for finding a way to mass produce inexpensive TV’s for the masses, but the point is that although those things are monetarily inexpensive, they place a greater cost on our society in terms of carbon footprint, lost American jobs, human rights violations, etc.  Getting a nominal raise from year to year is not being greedy.  $16 billion in annual profits (Walmart), while your American employees are on Medicaid, WIC, and food stamps, is.

I agree with you that having a pension is not a required part of compensation.  But then again, nothing, except paying your employees  a minimum of $7.25 per hour is.

Businesses/shareholders take risks and should be compensated.  Why should everyone be guaranteed a "nominal" raise?  Does the value of services which they produce increase by that nominal amount every year?  I doubt it.

[George Lambesis]

Businesses/shareholders take risks and should be compensated.  Why should everyone be guaranteed a "nominal" raise?  Does the value of services which they produce increase by that nominal amount every year?  I doubt it.

AIG, Lehman Bros., Goldman Sachs, GM, Chrysler...big risk-takers there. 

You're starting to sound like Ted...I never said that anyone should be guaranteed a nominal raise, only that getting one is not greedy.  Maybe all prices should be frozen...that would end inflation.  The value of services produced may not increase from year to year, but the value of the dollar goes down from year to year.  I don't have time to debate economics with you...my wife says that I can't play anymore today, so have a great Saturday!  Maybe the sun will come out.  George

[n01_important]

Point one for OP vs. George L.

Will George even the score after his master allows him to play again? 

Inquiring minds want to know!   

[billyjean]

Frighteningly, billyjean, Jake and Ted could not be more mistaken in their arguments if they tried. I know that Ted is always wrong as he has no idea what he is talking about at any time. However, I'm hoping the others would be able to listen to reason. Yours, Jerry Marzullo 

I'm willing to listen to reason, Jerry.  Let me hear your best pitch.  In addition to anything you want to point out, you perhaps could touch upon some of the counter points made:

1)  50 is too early to receive a pension, as one is still at an age they can work

2)  The percentage of pension of 80% of ending salary is too high

Jerry, not trying to be mean or begrudge anyone benefits they have worked for, but when I look at private sector and look at benefits F and P receive, there is a great disparity.

As I said before, I put county workers and elected state officials in the same boat.

We've have already had plenty of discussion on teachers as well.

It just seems when it comes to unions, they will viciously fight to hold on to what they have and most times ask for more, while the rest of us poor schumks are expected to pay more.  When times are good (unlike now) people rarely think about all this stuff because they are too busy enjoying the good life.  However, this whole recession has made everyone stop and review who is doing what, who is getting what, and asking why am I the one making all the concessions?  Granted, this is not specific to Berwyn.  It's all over.  Obama keeps spending and spending, Quinn is now going to raise taxes, .... its just tax after tax after tax, and heads are spinning.

So rather than think of it as an attack, it could be viewed as an important discussion to determine if the way things are is the way they should remain in connection with P and F pensions.

So if you would care to pitch me on the justification of what's been debated, I certainly would be happy to listen.

[n01_important]

Frighteningly, billyjean, Jake and Ted could not be more mistaken in their arguments if they tried. I know that Ted is always wrong as he has no idea what he is talking about at any time. However, I'm hoping the others would be able to listen to reason. Yours, Jerry Marzullo 

I'm willing to listen to reason, Jerry.  Let me hear your best pitch.  In addition to anything you want to point out, you perhaps could touch upon some of the counter points made:

1)  50 is too early to receive a pension, as one is still at an age they can work

2)  The percentage of pension of 80% of ending salary is too high

Jerry, not trying to be mean or begrudge anyone benefits they have worked for, but when I look at private sector and look at benefits F and P receive, there is a great disparity.

As I said before, I put county workers and elected state officials in the same boat.

We've have already had plenty of discussion on teachers as well.

It just seems when it comes to unions, they will viciously fight to hold on to what they have and most times ask for more, while the rest of us poor schumks are expected to pay more.  When times are good (unlike now) people rarely think about all this stuff because they are too busy enjoying the good life.  However, this whole recession has made everyone stop and review who is doing what, who is getting what, and asking why am I the one making all the concessions?  Granted, this is not specific to Berwyn.  It's all over.  Obama keeps spending and spending, Quinn is now going to raise taxes, .... its just tax after tax after tax, and heads are spinning.

So rather than think of it as an attack, it could be viewed as an important discussion to determine if the way things are is the way they should remain in connection with P and F pensions.

So if you would care to pitch me on the justification of what's been debated, I certainly would be happy to listen.

I agree with many of your statements expect for one assumption.  You seem to blame the ills on the greedy unions. 

Although, I don't disagree that unions, "when it comes to unions, they will viciously fight to hold on to what they have and most times ask for more, while the rest of us poor schumks are expected to pay more"... it's not the unions I blame.. rather the spineless or corrupt elected officials that give into to such demands.

Just another opinion from some who doesn't matter.

[jake]

Frighteningly, billyjean, Jake and Ted could not be more mistaken in their arguments if they tried. I know that Ted is always wrong as he has no idea what he is talking about at any time. However, I'm hoping the others would be able to listen to reason. Yours, Jerry Marzullo  

Well, I did try.  So enlighten me.

My statements were:

1.These pensioners make contributions on an increasing scale (i.e., the "rookie" year is much lower than the year the retirement payout is based on), but the benefits are based on the maximum salary.  What is not correct in this statement?
2.The pensioners do not contribute to social security (in reply to your statement that they do not collect SS).  Is this not correct?  Since you claim I "could not be more mistaken in [my] arguments if tried", I really want to see the reply to this one. I also said that if this is meant to replace social security, they should only get SS-like returns on their contributions.  Why should the taxpayers get lower-tier returns on their defined benefits in the SS system?
3.The public unions outsource the market risk to the taxpayers!  If the pensioner is not at risk in the market (it is defined benefit), and it is not the taxpayer (because you say I am wrong), then who is at risk?

[Rizzo]

I spoke to a Berwyn Firefighter recently. He told me about the toll the job takes on him. It's not just the physical work at the scene of a fire. There are car accidents, and other less critical calls that he has to go to. But there are always calls or the anticipation of getting called out when you are trying to get some sleep. And, when you get called out in the middle of the night, you never get back to sleep.

Until that conversation, I never stopped to consider the stress doing that job would put on someone's heart. So, I get the fact that working until 50 is just about all police and fire personnel can take.

But how do we pay for pensions we don't have the money for? Marge Paul

For a start the city might have made all of its full contributions into the pension funds over the past fifty years.  If all the full annual contributions had been made there would be no problems today.  Next time ask that firefighter about the 457 plan and how deductions were taken from pay and not placed into the individual 457 plans until much later.
 

[Rizzo]

Frighteningly, billyjean, Jake and Ted could not be more mistaken in their arguments if they tried. I know that Ted is always wrong as he has no idea what he is talking about at any time. However, I'm hoping the others would be able to listen to reason. Yours, Jerry Marzullo 

I'm willing to listen to reason, Jerry.  Let me hear your best pitch.  In addition to anything you want to point out, you perhaps could touch upon some of the counter points made:

1)  50 is too early to receive a pension, as one is still at an age they can work

2)  The percentage of pension of 80% of ending salary is too high

Jerry, not trying to be mean or begrudge anyone benefits they have worked for, but when I look at private sector and look at benefits F and P receive, there is a great disparity.

As I said before, I put county workers and elected state officials in the same boat.

We've have already had plenty of discussion on teachers as well.

It just seems when it comes to unions, they will viciously fight to hold on to what they have and most times ask for more, while the rest of us poor schumks are expected to pay more.  When times are good (unlike now) people rarely think about all this stuff because they are too busy enjoying the good life.  However, this whole recession has made everyone stop and review who is doing what, who is getting what, and asking why am I the one making all the concessions?  Granted, this is not specific to Berwyn.  It's all over.  Obama keeps spending and spending, Quinn is now going to raise taxes, .... its just tax after tax after tax, and heads are spinning.

So rather than think of it as an attack, it could be viewed as an important discussion to determine if the way things are is the way they should remain in connection with P and F pensions.

So if you would care to pitch me on the justification of what's been debated, I certainly would be happy to listen.

Based upon what has been written here.  No one retires from the PD or FD at 50yrs of age and 20 years service with an 80% pension.