Ending the Pension Monster

[eliza61]

Your last sentence says it all!

but what's the problem? They paid into it, they worked for it? what do you object to? the fact that they get to retire young or are you mad because you don't have same benefits?
They negotiated the contracts, the city and the state agree to these contracts. When contract negotiations come around again employer (state, feds, city) can put that on the table. That's like buying some thing on sale and then getting mad because people are not paying full price for them.

 

[adkkev]

Yep.

I am a federal employee is is not getting some ridiculously wonderful pension. They stopped enrolling employees in that plan (CSRS) back in 1984. The last few folks on that pension plan are now close to retiring. It is a wonderful plan. If you work your 30 years, you get something like 80% of your highest salary average over your last 3 years. Not bad. You get no SS and you never had to contribute.

The *new* system, which is now over 20 years old is the typical 401K plan. There is a small pension that is 1% of your salary for every year that you work.

As for elected officials such as senators, etc., I believe they do have a different pension plan.

Here's the Congressional plan: http://usgovinfo.about.com/library/weekly/aa031200a.htm

As a state employee, I am mandated to contribute 3% of my salary, per pay period, into the state retirement fund. State employees have the option of contributing to a 457 plan (like a 401k) in addition to their mandated retirement payment.

 

[BillSears]

Yep.

I am a federal employee is is not getting some ridiculously wonderful pension. They stopped enrolling employees in that plan (CSRS) back in 1984. The last few folks on that pension plan are now close to retiring. It is a wonderful plan. If you work your 30 years, you get something like 80% of your highest salary average over your last 3 years. Not bad. You get no SS and you never had to contribute.

The *new* system, which is now over 20 years old is the typical 401K plan. There is a small pension that is 1% of your salary for every year that you work.

As for elected officials such as senators, etc., I believe they do have a different pension plan.

Actually the old CSRS plan is closer to your years of service X 2 - 2% so that 30 years of service would actually get you about 58% of your salary. You need to work over 40 years to get 80%. While you don't contribute to SS you do contribute 7%(matched with another 7% of employee contribution) to the CSRS and 2% to medicare.

As for retiring early. You have that option after 25 years of service with CSRS. However your benefits are reduced 2% per year of early retirement before 55. So you could retire after 25 years of service at 45 recieiving a base 48% of your pay for your 25 years and then have that reduced by 20% so your final pay would be about 38.5% of your pre-retirement pay.

 

[eliza61]

We have retirees here who are age 48!

Yes, our career military should be rewarded after age 60.

Why should current participants be "grandfathered" in? When private employers end a pension fund or it becomes insolvent there are no protections for those plan participants! If everyone who worked pays into the same fund, our elected officials included, there would be motivation to better fund our retirees. As it stands now, there is no incentive to change the current practice.

Just curious, why 60? how did that get to be the magic bullet.
My dad did a tour in Vietnam and a tour in Korea (won a silver star) he then became a NYC cop. Because of his age and his 2 tours in a combat zone he was able to retire at 45, so by your agument this is wrong because he's young? He's 84 so he's been collecting a pension for 40 years. He earned that pension. I'm sorry private companies have lousy pension plans (believe me I work for an private company and would love to go out after 20 years) but I see no reason to penalize the people who do have great pensions.

 

[Christine]

Actually the old CSRS plan is closer to your years of service X 2 - 2% so that 30 years of service would actually get you about 58% of your salary. You need to work over 40 years to get 80%. While you don't contribute to SS you do contribute 7%(matched with another 7% of employee contribution) to the CSRS and 2% to medicare.

As for retiring early. You have that option after 25 years of service with CSRS. However your benefits are reduced 2% per year of early retirement before 55. So you could retire after 25 years of service at 45 recieiving a base 48% of your pay for your 25 years and then have that reduced by 20% so your final pay would be about 38.5% of your pre-retirement pay.

Thanks!! We have two employees here who are getting ready to get their 40 years then. They will be getting 80% of their pay!!!

My ex-boss' wife retired at 45 years of age with the 38.5% amount. I'm not sure I would have done that. Had she stayed on under the CSRS, she would have done very well.

 

[CarolG]

Edit: Looks like I was typing at the same time as BillSears.

Yep.

I am a federal employee is is not getting some ridiculously wonderful pension. They stopped enrolling employees in that plan (CSRS) back in 1984. The last few folks on that pension plan are now close to retiring. It is a wonderful plan. If you work your 30 years, you get something like 80% of your highest salary average over your last 3 years. Not bad. You get no SS and you never had to contribute.

The *new* system, which is now over 20 years old is the typical 401K plan. There is a small pension that is 1% of your salary for every year that you work.

As for elected officials such as senators, etc., I believe they do have a different pension plan.

Just FYI, you have to have worked 41 years and 11 months under CSRS to get 80% of your high-3 average salary. If you retire with 30 years of service, you get 56.25% - unless you want to provide a survivor annuity for your spouse. Then the percentage is lower.

And yes, federal employees do contribute to their pension plan whether it's the older CSRS plan (no Social Security) or the newer FERS plan (includes Social Security).

Members of Congress are covered by the same retirement system as other federal employees: http://www.senate.gov/reference/resources/pdf/RL30631.pdf

Congressional pensions, like those of other federal employees, are financed through a combination of employee and employer contributions. All Members pay Social Security payroll taxes equal to 6.2% of the Social Security taxable wage base ($97,500 in 2007). Members covered by FERS also pay 1.3% of full salary to the Civil Service Retirement and Disability Fund. Members covered by CSRS Offset pay 1.8% of the first $97,500 of salary, and 8.0% of salary above this amount, into the Civil Service Retirement and Disability Fund.

Under both CSRS and FERS, Members of Congress are eligible for a pension
at age 62 if they have completed at least five years of service. Members are eligible for a pension at age 50 if they have completed 20 years of service, or at any age after completing 25 years of service. The amount of the pension depends on years of service and the average of the highest three years of salary. By law, the starting amount of a Member’s retirement annuity may not exceed 80% of his or her final salary.

As of October 1, 2006, 413 retired Members of Congress were receiving federal pensions based fully or in part on their congressional service. Of this number, 290 had retired under CSRS and were receiving an average annual pension of $60,972. A total of 123 Members had retired with service under both CSRS and FERS or with service under FERS only. Their average annual pension was $35,952 in 2006.

 

[undertheradar]

This is completely and utterly incorrect.

When a private employer terminates a qualified pension plan (i.e., the type of pension plan you're talking about), it is required by law to be assumed by the Pension Benefit Guaranty Corporation. The PBGC acts as an insurance company that insures pension benefits. Each year, your employer is required to pay a certain amount to the PBGC as "premium" for each participant in the plan. The employer is REQUIRED to do this. If they don't the plan fiduciaries could go to jail.

When a company goes bankrupt, the PBGC automatically assumes control of the plan and its assets. If the company is merely in trouble, it can apply to the PBGC to be assumed. The PBGC works with the company to try to maintain company control, but if the plan is too far gone, then the PBGC assumes it. Additionally, the Internal Revenue Code requires that pension plans maintain a certain level of funding. Beginning this year, that required level of funding is 100%. In the past, it was around 80%. The idea is to limit the number of plans that the PBGC must assume.

The PBGC pays out a similar level of benefits once it has assumed the plan. Certain higher-income workers and some workers who did not work long enough before retiring will have their benefits reduced somewhat, but this usually does not affect people (unless you have the misfortune to be an airline pilot).

Please do not spout off about things you clearly do not understand at all. Plan participants have many protections built into the Internal Revenue Code and the US Code generally via the Employee Retirement Income Security Act of 1974. If your company willfully violates ERISA, they can pay huge fines and go to jail. Executives do not want to do that, so they generally do a pretty good job of following the rules. Many smaller employers are clueless when it comes to operating their benefit plans correctly, but smaller employers are also unlikely to have a pension plan, and are more likely to have a 401(k) plan that is required by law to be fully funded at all times.

Clerly you are ignorant. Have you viewed the dollar amounts involved in the payouts from this program? I have a complete understanding of the program.

 

[Jen_in_NH]

Just my opinion - please don't shoot.

I'm one of the people with a 20 years worked, then retire with a pension folks. So is my DH. We're both firefighter / paramedics. We're both going to have spent 20 years of our lives doing a dangerous job that takes quite a physical toll on you. As firefighters, we don't pay into social security, so that wouldn't be an option for us (unless we work another job that contributes to SS, which we do).

After 45 years old, would you really want us as firefighters? We'd be a huge worker's comp risk, as well as not as physically able to do the job (a generalization, I know)

For the cops, military, and fire fighters having a pension, I don't have a problem with it. We as a society ask these people to risk their lives for us and they deserve some benefit for doing so.

Again, just my thoughts. Please don't hurt me

Jen

 

[CPT Tripss]

BTW . . . NYC firefighters (at least back in 2002-2003) had their retirement payment based upon their pay in the final year. Guess what, a lot of them retired on or about 9/10/2003. They put in tons of overtime and there was just no way that they could pass that retirement nut up.

I'll let someone else tell those guys that they should not have a pension.

 

[undertheradar]

but what's the problem? They paid into it, they worked for it? what do you object to? the fact that they get to retire young or are you mad because you don't have same benefits?
They negotiated the contracts, the city and the state agree to these contracts. When contract negotiations come around again employer (state, feds, city) can put that on the table. That's like buying some thing on sale and then getting mad because people are not paying full price for them.

It is the taxpayers who are responsible to maintain the funding for these plans. Currently here in CA, we are having to replace the funds lost to market value reductions to continue the plans as contracted with the employee unions. As economists project higher levels of surviving retirees and higher premium costs, the taxpayers are obligated to fund the pension and medical benefit plans for the retirees.

As for 45 year old retirees, why? Are they no longer able to perform the duties of the jobs they were hired to perform? Many of these younger retirees go on to work in the private sector after retiring. This is double dipping in my opinion. That is why the loopholes need to be closed to end these practices. As we become an older society, there are fewer contributers funding these retirees.

 

[CPT Tripss]

Do you have a pension? I don't have a pension. I'm being hung out there with no pension. I have to be happy with a 401k. That's it. Nothing more. When I retire it's going to be bye, bye , see ya, thanks for the years. Oh, before we forget, here's gold watch.

ETA: I'm playing devils advocate here. I happen to not mind pensions for the military, cops and firefighters because they put their lives on the line everyday.

I'm sorry to hear that your employer is going to hang you out to dry in your "golden" years. Hopefully, your representatives and senators will treat you better by keeping social security alive.

If pensions are OK for some workers, why shouldn't the same type (type, not amount) be available for others?

 

[lovemygoofy]

It is the taxpayers who are responsible to maintain the funding for these plans. Currently here in CA, we are having to replace the funds lost to market value reductions to continue the plans as contracted with the employee unions. As economists project higher levels of surviving retirees and higher premium costs, the taxpayers are obligated to fund the pension and medical benefit plans for the retirees.

As for 45 year old retirees, why? Are they no longer able to perform the duties of the jobs they were hired to perform? Many of these younger retirees go on to work in the private sector after retiring. This is double dipping in my opinion. That is why the loopholes need to be closed to end these practices. As we become an older society, there are fewer contributers funding these retirees.

If someone retires from the military at 20 years or even 30, he or she cannot go into a government job and draw their pension in addition to a salary. By the way, we also pay into social security and medicare as a military family.

 

[adkkev]

When a company goes bankrupt, the PBGC automatically assumes control of the plan and its assets. If the company is merely in trouble, it can apply to the PBGC to be assumed. The PBGC works with the company to try to maintain company control, but if the plan is too far gone, then the PBGC assumes it. Additionally, the Internal Revenue Code requires that pension plans maintain a certain level of funding. Beginning this year, that required level of funding is 100%. In the past, it was around 80%. The idea is to limit the number of plans that the PBGC must assume.

The PBGC pays out a similar level of benefits once it has assumed the plan. Certain higher-income workers and some workers who did not work long enough before retiring will have their benefits reduced somewhat, but this usually does not affect people (unless you have the misfortune to be an airline pilot).

PBGC does NOT pay out a similar level of benefits once it assumes a plan. The retirement benefit that I will receive at age 67 is one quarter of what it was supposed to be under the benefit plan (I have the benefit plan paperwork for reference).

 

[LisaNJ25]

I have no problem with them. Its not like they are walking away with 100% of free money. They are piad into every pay period. Some jobs people get into because of the pension and the heath benifits. My husband is a county employee and frankly.. the pay stinks...especilly for where we live. He knew we were not going to get rich off of his job choice but he picked it because of the pension and benifits and thinking long term

 

[MarkBarbieri]

A pension is just another form of compensation. While you are working for a company offering a pension, they are setting aside money that they could have paid you directly into an investment account. They pay your pension from this account.

The important thing to consider as an employee is the total compensation you will received. That's salary, pension, 401K match, health care, etc, etc. I work for a company that has a traditional pension and a 401K. I could make more money in salary working for a company that offered neither of those.

If a company (or government agency) has lots of qualified candidates begging for jobs, they are probably over compensating their employees. If they are having trouble attracting and retaining qualified employees, they are probably not compensating them enough.

One of the great things about working in the US is that you are free. If your labor is worth more than you are being paid (including your pension) for it, you are free to go to someone that will pay you a fair wage. I've been there. I didn't bellyache about not having a good enough pension. I quit and moved to a company that compensated me fairly.

 

[wilderness01]

Edit: Looks like I was typing at the same time as BillSears.



Just FYI, you have to have worked 41 years and 11 months under CSRS to get 80% of your high-3 average salary. If you retire with 30 years of service, you get 56.25% - unless you want to provide a survivor annuity for your spouse. Then the percentage is lower.
And yes, federal employees do contribute to their pension plan whether it's the older CSRS plan (no Social Security) or the newer FERS plan (includes Social Security).
Members of Congress are covered by the same retirement system as other federal employees: http://www.senate.gov/reference/resources/pdf/RL30631.pdf

My husband is under this plan. He has worked hard and deserves this pension. He has mandatory retirement at 56, so we have planned very wisely for this retirement financially. Now I just hope the market goes back up as that was part of our plan.

 

[MarkBarbieri]

PBGC does NOT pay out a similar level of benefits once it assumes a plan. The retirement benefit that I will receive at age 67 is one quarter of what it was supposed to be under the benefit plan (I have the benefit plan paperwork for reference).

DISCLAIMER: I don't know you personal situation and I'm certainly not an expert on the PBGC. One possible reason for the discrepancy may be this. When I see my pension statement, it shows me how much money I will be paid based on a set of assumptions. Some of those assumptions are that I will continue to work for my company until I reach retirement, that I will continue to increase my salary during that time, and that the company would continue to make contributions at the levels implied by the first two assumptions.

If my company went bankrupt and quit paying into the PBGC, I think that my persion benefit would be based on how much money I had accumulated up until that point, not based on the earlier assumptions. While disappointing, that also seems fair. I shouldn't be entitled to the share of the pension that I had not yet earned.

 

[Quiksilvr]

Clerly you are ignorant. Have you viewed the dollar amounts involved in the payouts from this program? I have a complete understanding of the program.

Yes, I know the dollar amounts involved. Most people covered by private pension plans (who retire at age 65) would not suffer a loss in benefits. Obviously, it depends a lot on your plan's benefit formula, but most private pension plan formulas are not very generous. The PBGC caps straight-life payouts at $4500/mo for 2009. That adds up to a pension entitlement of $54,000 per year. Nowadays, very few people would actually come close to that under most private formulas. Generally, people do not stay employed with the same employer long enough to accrue a benefit that would be limited, and in an old-school dollar amount for years of service plan it's almost impossible.

I work with one plan that pays something like a $40 monthly benefit multiplied by years of service. Even if you work 30 years at the same facility, that still only adds up to $1,200 per month. There are still a ton of these plans out there.

Obviously, under a plan formula that relies on high-three or high-five it is possible to get beyond the cap, but again that usually only affects people who are relatively high-pay and have a significant number of years of service (20+). This group is just not that large anymore in any industry other than unionized manufacturing, and most of those guys aren't paid enough to hit that limit anyway.

Something like 75% of Americans make less than $75,000 per year. Even if a person making $75,000 (and thus in the top quartile) was covered by a decent final-average-pay formula (let's say 3% x years of service), they'd still have to work at the same job for 25 years in order to exceed the PBGC maximum payout. That is pretty rare, nowadays, and anyway, I said in my first post that the cap would affect relatively high-pay individuals, and someone in the top 25% of American incomes definitely qualifies.

I still think your comment was off-base. Actually, you should even be able to admit that. You said in one post that there were no protections for people whose plans are insolvent, and then you later say that you completely understand PBGC protection (a monumental feat, to be sure. Most pension practitioners don't completely understand it, so I got to give you credit for that).

 

[eliza61]

It is the taxpayers who are responsible to maintain the funding for these plans. Currently here in CA, we are having to replace the funds lost to market value reductions to continue the plans as contracted with the employee unions. As economists project higher levels of surviving retirees and higher premium costs, the taxpayers are obligated to fund the pension and medical benefit plans for the retirees.

As for 45 year old retirees, why? Are they no longer able to perform the duties of the jobs they were hired to perform? Many of these younger retirees go on to work in the private sector after retiring. This is double dipping in my opinion. That is why the loopholes need to be closed to end these practices. As we become an older society, there are fewer contributers funding these retirees.

That's no more double diping than if you worked 2 jobs. It's not a loophole. There is no loop about it.
They performed the services required of them for the agreed upon time. If you hire me to do a job for 20 years whether or not I can continue to do it is moot. You hired me for 20 years. period.
Yes the population is aging and living longer but you don't get to stiff the workers who have already fulfulled their obligations and employment requirement.

 

[Quiksilvr]

PBGC does NOT pay out a similar level of benefits once it assumes a plan. The retirement benefit that I will receive at age 67 is one quarter of what it was supposed to be under the benefit plan (I have the benefit plan paperwork for reference).

This depends on a number of factors that I can't really speak to since I haven't seen your plan or its paperwork. The PBGC does make a number of assumptions, and the benefit factors are affected considerably by age, years of service, when you retire, what the plan's original benefit formula was, your income level, etc. It is not affected by the funding percentage of the plan.

You also may have had a plan with an exceptional benefit formula, in which case I'm sorry that it went under.