Author Topic: $76k/MONTH pension -- NYTimes article  (Read 10584 times)


wenchsenior

  • Handlebar Stache
  • *****
  • Posts: 1737
Re: $76k/MONTH pension -- NYTimes article
« Reply #1 on: April 16, 2018, 08:15:29 AM »
You know, if cities and states just adopted the same pension system the Feds have, this ridiculous bs wouldn't happen and the general public wouldn't be convinced that ALL pensions pay out like you hit a goldmine.  Also, they would stay solvent, which would be nice.

nereo

  • Walrus Stache
  • *******
  • Posts: 8296
  • Location: la belle province
    • Here's how you can support science today:
Re: $76k/MONTH pension -- NYTimes article
« Reply #2 on: April 16, 2018, 08:29:31 AM »
You know, if cities and states just adopted the same pension system the Feds have, this ridiculous bs wouldn't happen and the general public wouldn't be convinced that ALL pensions pay out like you hit a goldmine.  Also, they would stay solvent, which would be nice.
Yeah, I'm increasingly of the mind that pensions should be barred outright and that everyone should have the same opportunities to invest in retirement accounts.
When you think critically about it, it's hard to come up with a system more unfair to the worker than a no-choice private pension plan.

jlcnuke

  • Pencil Stache
  • ****
  • Posts: 761
Re: $76k/MONTH pension -- NYTimes article
« Reply #3 on: April 16, 2018, 08:33:43 AM »
I don't see anything obscene about it. A highly compensated person who's skills were in demand was given a compensation package that included delayed compensation in the form of a pension that was a fraction of his market value. Seems fairly normal and acceptable to me.

mm1970

  • Walrus Stache
  • *******
  • Posts: 5728
Re: $76k/MONTH pension -- NYTimes article
« Reply #4 on: April 16, 2018, 08:40:31 AM »
I don't see anything obscene about it. A highly compensated person who's skills were in demand was given a compensation package that included delayed compensation in the form of a pension that was a fraction of his market value. Seems fairly normal and acceptable to me.

I guess, move to Oregon and enroll your kids in crumbling schools then?

dude

  • Handlebar Stache
  • *****
  • Posts: 2136
Re: $76k/MONTH pension -- NYTimes article
« Reply #5 on: April 16, 2018, 08:57:25 AM »
You know, if cities and states just adopted the same pension system the Feds have, this ridiculous bs wouldn't happen and the general public wouldn't be convinced that ALL pensions pay out like you hit a goldmine.  Also, they would stay solvent, which would be nice.

+1,000!

jlcnuke

  • Pencil Stache
  • ****
  • Posts: 761
Re: $76k/MONTH pension -- NYTimes article
« Reply #6 on: April 16, 2018, 09:23:24 AM »
I don't see anything obscene about it. A highly compensated person who's skills were in demand was given a compensation package that included delayed compensation in the form of a pension that was a fraction of his market value. Seems fairly normal and acceptable to me.
The obscene part is that the cities and states negotiate these deals and then don't ensure that they reserves appropriate funds to pay the pensions when their time comes due.

I'd call that irresponsible, not obscene, personally. That wasn't what I felt the other posters were referring to as obscene though.

jlcnuke

  • Pencil Stache
  • ****
  • Posts: 761
Re: $76k/MONTH pension -- NYTimes article
« Reply #7 on: April 16, 2018, 09:24:32 AM »
I don't see anything obscene about it. A highly compensated person who's skills were in demand was given a compensation package that included delayed compensation in the form of a pension that was a fraction of his market value. Seems fairly normal and acceptable to me.

I guess, move to Oregon and enroll your kids in crumbling schools then?

I have no desire to move to Oregon in the first place, and even less of a desire to have kids, much less send those non-existent money-pits anywhere...

mathlete

  • Pencil Stache
  • ****
  • Posts: 766
Re: $76k/MONTH pension -- NYTimes article
« Reply #8 on: April 16, 2018, 09:34:00 AM »
The guaranteed minimums used in some pension valuations are laughable.

They gotta cut the minimums (more than they already have) for employees, raise taxes, and cover other shortfalls through borrowing. That's pretty much all there is to do until this problem fixes itself over time.

mm1970

  • Walrus Stache
  • *******
  • Posts: 5728
Re: $76k/MONTH pension -- NYTimes article
« Reply #9 on: April 16, 2018, 09:50:28 AM »
I don't see anything obscene about it. A highly compensated person who's skills were in demand was given a compensation package that included delayed compensation in the form of a pension that was a fraction of his market value. Seems fairly normal and acceptable to me.
The obscene part is that the cities and states negotiate these deals and then don't ensure that they reserves appropriate funds to pay the pensions when their time comes due.

I'd call that irresponsible, not obscene, personally. That wasn't what I felt the other posters were referring to as obscene though.

No, that's pretty much it.  Well, it depends - I can't say for sure what % $76k a month is, compared to his annual salary?  But my thoughts, in random order:

- nobody should get a pension equal to 100% of their max income while working.
- pensions need to be better funded, and better taken care of.  Unfortunately, our local and state pensions are in the red because of overly aggressive assumptions on how much the fund would be making - yet they don't cut pensions when the funds fall short by a few %.  What that means is: crumbling schools and crumbling roads.  I mean, this is ridiculous.  Don't we know better by now?
- I guess we do know better, because many (if not most) public agencies have 2-tier pension systems where newer employees have much less generous pensions, have to wait longer, get less, etc.  But we will still go broke on the old ones.
- There is no reason to collect a pension for longer than you were actually working.  Many sheriff, police, and firefighters retire after 30 years at age 48 and collect a pension (worth upwards of $200k per year) for over 30 years.  This falls into the same category as #1.

jlcnuke

  • Pencil Stache
  • ****
  • Posts: 761
Re: $76k/MONTH pension -- NYTimes article
« Reply #10 on: April 16, 2018, 09:57:56 AM »
I don't see anything obscene about it. A highly compensated person who's skills were in demand was given a compensation package that included delayed compensation in the form of a pension that was a fraction of his market value. Seems fairly normal and acceptable to me.
The obscene part is that the cities and states negotiate these deals and then don't ensure that they reserves appropriate funds to pay the pensions when their time comes due.

I'd call that irresponsible, not obscene, personally. That wasn't what I felt the other posters were referring to as obscene though.

No, that's pretty much it.  Well, it depends - I can't say for sure what % $76k a month is, compared to his annual salary?  But my thoughts, in random order:

The annual salary of the other guy with a $600k/year pension mentioned in the article meant his pension was less than 15% of his employed compensation. You can extrapolate for the other cases if you'd like, but I'd wager his salary was also substantial.

- nobody should get a pension equal to 100% of their max income while working.

Why not?

- pensions need to be better funded, and better taken care of.  Unfortunately, our local and state pensions are in the red because of overly aggressive assumptions on how much the fund would be making - yet they don't cut pensions when the funds fall short by a few %.  What that means is: crumbling schools and crumbling roads.  I mean, this is ridiculous.  Don't we know better by now?

Sounds like a problem with the funding of the pensions, and the way your local and state pension shortfalls are made-up. Not sure stealing the compensation people signed up for is the correct answer though. That'd be a bit like your employer taking your previous pay back from you because they didn't have a good year. A pension is part of people's compensation. Cutting it etc is a method of taking the pay they were contracted for away from them after-the-fact (they already worked for that compensation and now you want to take it away..).

- I guess we do know better, because many (if not most) public agencies have 2-tier pension systems where newer employees have much less generous pensions, have to wait longer, get less, etc.  But we will still go broke on the old ones.

Yep, some places set up pension systems better than others...

- There is no reason to collect a pension for longer than you were actually working.  Many sheriff, police, and firefighters retire after 30 years at age 48 and collect a pension (worth upwards of $200k per year) for over 30 years.  This falls into the same category as #1.

Why not?

FIRE Artist

  • Bristles
  • ***
  • Posts: 483
  • Location: YEG
Re: $76k/MONTH pension -- NYTimes article
« Reply #11 on: April 16, 2018, 10:01:58 AM »
I don't see anything obscene about it. A highly compensated person who's skills were in demand was given a compensation package that included delayed compensation in the form of a pension that was a fraction of his market value. Seems fairly normal and acceptable to me.
The obscene part is that the cities and states negotiate these deals and then don't ensure that they reserves appropriate funds to pay the pensions when their time comes due.

This.  I am a member of a public pension and it is managed by a 3rd party, not by my employer.  My employer has to pay a certain percentage into it every year, along with the percentage I have to put in.  My employer has to put in 1% more than I put in.  The amount that I and my employer contribute is reviewed annually by the fund to ensure that everything is on target for my eventual retirement, as well as ensuring the health of the plan for current retirees.  The contribution rate actually went down by 1% for 2018 due to the recent years market run up.  It could easily go up a couple of % points next year.  My total compensation package is still less than what my job goes for in the private sector (I am trading off work life balance for higher compensation, I am not complaining about this), so any arguments about public sector workers being over compensated, at least for those in the professions, is simply not correct.  My eventual pension payout looks like it pretty much follows the 4% rule.   

When I hear about municipal pensions being cut after the fact to employees like police and firemen, it makes my blood boil.  The blame is squarely on the shoulders of the municipalities, not on the workers, but oh how easy it is to vilify the workers for their "gold plated pensions" sucking away resources to school children. 

It isn't ok for the private sector to withhold compensation because a corporation would rather spend the money on new infrastructure, it  shouldn't be ok for the public sector to do the same thing. 

Perhaps something like Sarbanes–Oxley needs to be expanded to incorporate municipal and state financial accounting. 
« Last Edit: April 16, 2018, 10:04:22 AM by FIRE Artist »

Purple Economist

  • 5 O'Clock Shadow
  • *
  • Posts: 91
Re: $76k/MONTH pension -- NYTimes article
« Reply #12 on: April 16, 2018, 10:45:35 AM »
I don't see anything obscene about it. A highly compensated person who's skills were in demand was given a compensation package that included delayed compensation in the form of a pension that was a fraction of his market value. Seems fairly normal and acceptable to me.
The obscene part is that the cities and states negotiate these deals and then don't ensure that they reserves appropriate funds to pay the pensions when their time comes due.

This.  I am a member of a public pension and it is managed by a 3rd party, not by my employer.  My employer has to pay a certain percentage into it every year, along with the percentage I have to put in.  My employer has to put in 1% more than I put in.  The amount that I and my employer contribute is reviewed annually by the fund to ensure that everything is on target for my eventual retirement, as well as ensuring the health of the plan for current retirees.  The contribution rate actually went down by 1% for 2018 due to the recent years market run up.  It could easily go up a couple of % points next year.  My total compensation package is still less than what my job goes for in the private sector (I am trading off work life balance for higher compensation, I am not complaining about this), so any arguments about public sector workers being over compensated, at least for those in the professions, is simply not correct.  My eventual pension payout looks like it pretty much follows the 4% rule.   

When I hear about municipal pensions being cut after the fact to employees like police and firemen, it makes my blood boil.  The blame is squarely on the shoulders of the municipalities, not on the workers, but oh how easy it is to vilify the workers for their "gold plated pensions" sucking away resources to school children. 

It isn't ok for the private sector to withhold compensation because a corporation would rather spend the money on new infrastructure, it  shouldn't be ok for the public sector to do the same thing. 

Perhaps something like Sarbanes–Oxley needs to be expanded to incorporate municipal and state financial accounting.

This may or may not apply to your pension situation, but it does apply to some of the most egregiously short on funds pension systems.  This includes some pension systems for police and firefighters.

The main issue I have a problem with is when unionized public employees contribute substantially to elected officials' campaigns and then receive actuarilly unsound guaranteed returns for the contributions required by the covered employees.  In my book, it is out and out corruption and is one of the main sources of the squeezes we see today.  The elected officials are long gone and taxpayers that were not even alive at the time are on the hook for the excessive pensions.

hadabeardonce

  • Stubble
  • **
  • Posts: 215
  • It's never too early to learn the value of money.
    • My Journal
Re: $76k/MONTH pension -- NYTimes article
« Reply #13 on: April 16, 2018, 11:02:30 AM »
The highest-paid public employee in every state
https://www.msn.com/en-us/money/careersandeducation/the-highest-paid-public-employee-in-every-state/ss-BBK9Pyd
Spoiler: the majority are college coaches.

Pensions are great, union work is great and government work is great. I highly suggest people find a place where they can experience the greatness.

JLee

  • Magnum Stache
  • ******
  • Posts: 4860
Re: $76k/MONTH pension -- NYTimes article
« Reply #14 on: April 16, 2018, 11:06:32 AM »
I don't see anything obscene about it. A highly compensated person who's skills were in demand was given a compensation package that included delayed compensation in the form of a pension that was a fraction of his market value. Seems fairly normal and acceptable to me.
The obscene part is that the cities and states negotiate these deals and then don't ensure that they reserves appropriate funds to pay the pensions when their time comes due.

I'd call that irresponsible, not obscene, personally. That wasn't what I felt the other posters were referring to as obscene though.

No, that's pretty much it.  Well, it depends - I can't say for sure what % $76k a month is, compared to his annual salary?  But my thoughts, in random order:

- nobody should get a pension equal to 100% of their max income while working.
- pensions need to be better funded, and better taken care of.  Unfortunately, our local and state pensions are in the red because of overly aggressive assumptions on how much the fund would be making - yet they don't cut pensions when the funds fall short by a few %.  What that means is: crumbling schools and crumbling roads.  I mean, this is ridiculous.  Don't we know better by now?
- I guess we do know better, because many (if not most) public agencies have 2-tier pension systems where newer employees have much less generous pensions, have to wait longer, get less, etc.  But we will still go broke on the old ones.
- There is no reason to collect a pension for longer than you were actually working. Many sheriff, police, and firefighters retire after 30 years at age 48 and collect a pension (worth upwards of $200k per year) for over 30 years.  This falls into the same category as #1.

How many police departments do you know of are hiring 18yo's and are paying $200k in retirement?

Mine certainly wasn't.

FIRE Artist

  • Bristles
  • ***
  • Posts: 483
  • Location: YEG
Re: $76k/MONTH pension -- NYTimes article
« Reply #15 on: April 16, 2018, 12:16:32 PM »
One very important thing that I notice which is in place in Canada, but doesn't appear to be in the US is that there are upper limits to pensionable earnings for defined benefit pensions, this is because pension contributions are pre tax, and are kept in line with RRSP contribution limits that everyone has access to. 

RRSP contribution limits are 18% of eligible earnings, up to a maximum contribution of about $26K ($145k gross earning).  For people such as myself who are in a defined benefit pension plan, my RRSP room is reduced in line with the contributions I and my employer make to my pension plan.  I can and do, make up the difference in my own retirement savings if I so choose. 

Are the US public pensions not somehow linked to the 401K program?  Since people could possibly get a pension of $76k/month, it seems limitless which seems illogical. 

JLee

  • Magnum Stache
  • ******
  • Posts: 4860
Re: $76k/MONTH pension -- NYTimes article
« Reply #16 on: April 16, 2018, 12:20:56 PM »
One very important thing that I notice which is in place in Canada, but doesn't appear to be in the US is that there are upper limits to pensionable earnings for defined benefit pensions, this is because pension contributions are pre tax, and are kept in line with RRSP contribution limits that everyone has access to. 

RRSP contribution limits are 18% of eligible earnings, up to a maximum contribution of about $26K ($145k gross earning).  For people such as myself who are in a defined benefit pension plan, my RRSP room is reduced in line with the contributions I and my employer make to my pension plan.  I can and do, make up the difference in my own retirement savings if I so choose. 

Are the US public pensions not somehow linked to the 401K program? Since people could possibly get a pension of $76k/month, it seems limitless which seems illogical.

Nope. They're different.

Sorinth

  • 5 O'Clock Shadow
  • *
  • Posts: 47
Re: $76k/MONTH pension -- NYTimes article
« Reply #17 on: April 16, 2018, 12:27:13 PM »
The main issue I have a problem with is when unionized public employees contribute substantially to elected officials' campaigns and then receive actuarilly unsound guaranteed returns for the contributions required by the covered employees.  In my book, it is out and out corruption and is one of the main sources of the squeezes we see today.  The elected officials are long gone and taxpayers that were not even alive at the time are on the hook for the excessive pensions.

How is it any different then say an oil company contributing to a campaign and then having favourable regulations passed. Or rich people contributing and then getting a tax break.

So long as the ability to raise large funds matters to getting elected special interests will always have an outsized influence on politicians. There's no reason public sector unions shouldn't have the same rights to influence politicians that corporations do. The fix is to make fund-raising less important to getting elected, but that's a hard nut to crack.

NoStacheOhio

  • Handlebar Stache
  • *****
  • Posts: 2152
  • Location: Cleveland
Re: $76k/MONTH pension -- NYTimes article
« Reply #18 on: April 16, 2018, 12:42:44 PM »
One very important thing that I notice which is in place in Canada, but doesn't appear to be in the US is that there are upper limits to pensionable earnings for defined benefit pensions, this is because pension contributions are pre tax, and are kept in line with RRSP contribution limits that everyone has access to. 

RRSP contribution limits are 18% of eligible earnings, up to a maximum contribution of about $26K ($145k gross earning).  For people such as myself who are in a defined benefit pension plan, my RRSP room is reduced in line with the contributions I and my employer make to my pension plan.  I can and do, make up the difference in my own retirement savings if I so choose. 

Are the US public pensions not somehow linked to the 401K program?  Since people could possibly get a pension of $76k/month, it seems limitless which seems illogical.

Nothing is linked to anything, basically.

The income restrictions on IRAs are lifted if you aren't covered by a workplace retirement plan.

Some pension-eligible employees are excluded from Social Security because of the way their pensions are structured.

Beyond that ... *shrug*

mm1970

  • Walrus Stache
  • *******
  • Posts: 5728
Re: $76k/MONTH pension -- NYTimes article
« Reply #19 on: April 16, 2018, 01:47:53 PM »
Quote
How many police departments do you know of are hiring 18yo's and are paying $200k in retirement?

Mine certainly wasn't.

My county sheriff's department retirement #'s in 2013:
# of retirees in the county with >$200k a year in pension: 4
# of retirees in the county with $100-$200k in pension: 6

I typed "police" and the first page, the lowest # on the page for the state is $600k
By page 3, you're all the way down to $449k. Yikes.

Finding my own city was trickier because of how they do the entries.  Listed not by their department, but google and all that.
A short 10 minutes and on the first page only, about 5 retired police employees at $175k and two fire employees at $160-$175k. 
Average years of service just under 30 years.

jlcnuke

  • Pencil Stache
  • ****
  • Posts: 761
Re: $76k/MONTH pension -- NYTimes article
« Reply #20 on: April 16, 2018, 02:05:13 PM »
Quote
How many police departments do you know of are hiring 18yo's and are paying $200k in retirement?

Mine certainly wasn't.

My county sheriff's department retirement #'s in 2013:
# of retirees in the county with >$200k a year in pension: 4
# of retirees in the county with $100-$200k in pension: 6

I typed "police" and the first page, the lowest # on the page for the state is $600k
By page 3, you're all the way down to $449k. Yikes.

Finding my own city was trickier because of how they do the entries.  Listed not by their department, but google and all that.
A short 10 minutes and on the first page only, about 5 retired police employees at $175k and two fire employees at $160-$175k. 
Average years of service just under 30 years.

Not knowing where you live, what website it is you were looking at and searching on, etc, I can't comment on your data other than to say "so what?"  Almost every pension system I've heard of for public employees like cops etc pay out on a percentage of pay times years of service, resulting in a 30 year retirement paying out ~50-75% of the working pay... and require the employee getting the pension to put 8-15% of their pay into that retirement system for all those years.  If you were earning enough to have a 50% pension payout $200k, you'd be contributing ~$40k towards that pension by the final year yourself. When you account for the significant forced savings they have to do in order to get the pensions, the payout sure looks a lot smaller..
« Last Edit: April 16, 2018, 02:09:46 PM by jlcnuke »

wenchsenior

  • Handlebar Stache
  • *****
  • Posts: 1737
Re: $76k/MONTH pension -- NYTimes article
« Reply #21 on: April 16, 2018, 02:06:22 PM »
Quote
How many police departments do you know of are hiring 18yo's and are paying $200k in retirement?

Mine certainly wasn't.

My county sheriff's department retirement #'s in 2013:
# of retirees in the county with >$200k a year in pension: 4
# of retirees in the county with $100-$200k in pension: 6

I typed "police" and the first page, the lowest # on the page for the state is $600k
By page 3, you're all the way down to $449k. Yikes.

Finding my own city was trickier because of how they do the entries.  Listed not by their department, but google and all that.
A short 10 minutes and on the first page only, about 5 retired police employees at $175k and two fire employees at $160-$175k. 
Average years of service just under 30 years.

Wow,  is this in a big city? What would their annual salaries have been? 

Those examples are getting twice the pension that Paul Ryan will qualify for in a couple years. (Of course, I have little doubt they also worked far more days in their careers than Ryan).

JLee

  • Magnum Stache
  • ******
  • Posts: 4860
Re: $76k/MONTH pension -- NYTimes article
« Reply #22 on: April 16, 2018, 02:26:28 PM »
Quote
How many police departments do you know of are hiring 18yo's and are paying $200k in retirement?

Mine certainly wasn't.

My county sheriff's department retirement #'s in 2013:
# of retirees in the county with >$200k a year in pension: 4
# of retirees in the county with $100-$200k in pension: 6

I typed "police" and the first page, the lowest # on the page for the state is $600k
By page 3, you're all the way down to $449k. Yikes.

Finding my own city was trickier because of how they do the entries.  Listed not by their department, but google and all that.
A short 10 minutes and on the first page only, about 5 retired police employees at $175k and two fire employees at $160-$175k. 
Average years of service just under 30 years.

Not knowing where you live, what website it is you were looking at and searching on, etc, I can't comment on your data other than to say "so what?"  Almost every pension system I've heard of for public employees like cops etc pay out on a percentage of pay times years of service, resulting in a 30 year retirement paying out ~50-75% of the working pay... and require the employee getting the pension to put 8-15% of their pay into that retirement system for all those years.  If you were earning enough to have a 50% pension payout $200k, you'd be contributing ~$40k towards that pension by the final year yourself. When you account for the significant forced savings they have to do in order to get the pensions, the payout sure looks a lot smaller..

IIRC, was putting 11% in (mandatory) -- leaving salary/contribution rates stagnant over a 30 year period and a 7% rate of return, 11% invested would've given me 44% of my salary at a 4% withdrawal rate. Retiring at 50% salary would require a $51/month (1.2%) employer contribution during the accumulation phase.

A normal 401k with a 3% employer match would result in 57% of my salary in retirement.

Gyosho

  • Stubble
  • **
  • Posts: 126
  • Location: us-west-1
Re: $76k/MONTH pension -- NYTimes article
« Reply #23 on: April 16, 2018, 02:56:50 PM »

Pensions are great, union work is great and government work is great. I highly suggest people find a place where they can experience the greatness.

As someone who experienced the greatness first hand, I say a big "Amen".

FIRE Artist

  • Bristles
  • ***
  • Posts: 483
  • Location: YEG
Re: $76k/MONTH pension -- NYTimes article
« Reply #24 on: April 16, 2018, 03:06:03 PM »


IIRC, was putting 11% in (mandatory) -- leaving salary/contribution rates stagnant over a 30 year period and a 7% rate of return, 11% invested would've given me 44% of my salary at a 4% withdrawal rate. Retiring at 50% salary would require a $51/month (1.2%) employer contribution during the accumulation phase.

A normal 401k with a 3% employer match would result in 57% of my salary in retirement.

Great illustration.  The funding shortfall is typically found in a failure of the government office to meet its funding demands year or year, and even worse, borrowing from pension funds.  But again, what a wonderfully divisive narrative it is to blame the police, firemen and teachers for their greedy entitlements stealing from your children's education.  If you can find a couple of high earning, high profile employees with a high pension to wave about as examples, all the better. 
« Last Edit: April 16, 2018, 03:31:19 PM by FIRE Artist »

DreamFIRE

  • Handlebar Stache
  • *****
  • Posts: 1240
Re: $76k/MONTH pension -- NYTimes article
« Reply #25 on: April 16, 2018, 03:47:57 PM »
The main issue I have a problem with is when unionized public employees contribute substantially to elected officials' campaigns and then receive actuarilly unsound guaranteed returns for the contributions required by the covered employees.  In my book, it is out and out corruption and is one of the main sources of the squeezes we see today.  The elected officials are long gone and taxpayers that were not even alive at the time are on the hook for the excessive pensions.

Exactly.  It also reminds me of this entry to the "The Best Post I Saw Today on MMM".

https://forum.mrmoneymustache.com/welcome-to-the-forum/the-best-post-i-saw-today-on-the-mr-money-mustache-forums-was/msg1913472/#msg1913472

Quote:

I think that the source of resentment is more about the perception that public service unions get sweetheart deals because they are in effect negotiating with themselves, in that the politicians are highly motivated to make the public service unions happy.

The foundation for fair negotiations is that both parties should be motivated to protect their own interests. It should be adversarial. In the model of public service union negotiations, the politicians arent really the ones who are on the hook for the expense, so they aren't really negotiating on behalf of the taxpayers, leaving the taxpayer to pay the bill when they had no voice in the negotiation.

This disconnect in the context of public sector unions was obvious even to Franklin Roosevelt who said:  “The process of collective bargaining, as usually understood, cannot be transplanted into the public service.”

The costs are usually far down the road, so the politicians who negotiate the deal arent going to pay the political price later when it all falls apart.  Look at the tremendous unfunded / underfunded state and municipal pension / healthcare issue that the country faces.

So in the case of public servants, i think the fact is that people understand that they have to pay fr that largesse in the form of higher taxes and fees, etc.   Contrast that with someone who may have a fantastic private sector job/pension.  Folks might be envious, but at least they arent the ones paying the bill, or at least they arent forced to pay the bill. 

mm1970

  • Walrus Stache
  • *******
  • Posts: 5728
Re: $76k/MONTH pension -- NYTimes article
« Reply #26 on: April 16, 2018, 04:02:12 PM »
Quote
How many police departments do you know of are hiring 18yo's and are paying $200k in retirement?

Mine certainly wasn't.

My county sheriff's department retirement #'s in 2013:
# of retirees in the county with >$200k a year in pension: 4
# of retirees in the county with $100-$200k in pension: 6

I typed "police" and the first page, the lowest # on the page for the state is $600k
By page 3, you're all the way down to $449k. Yikes.

Finding my own city was trickier because of how they do the entries.  Listed not by their department, but google and all that.
A short 10 minutes and on the first page only, about 5 retired police employees at $175k and two fire employees at $160-$175k. 
Average years of service just under 30 years.

Wow,  is this in a big city? What would their annual salaries have been? 

Those examples are getting twice the pension that Paul Ryan will qualify for in a couple years. (Of course, I have little doubt they also worked far more days in their careers than Ryan).

This is California, and the tricky part is many of the pensions are based solely on their highest annual salary, or highest two.  So it's not uncommon to throw a lot of overtime at someone in their last year to "boost" their pension, so to speak.  It's in fact very common.

Transparent California is the website.

As I said up above, the typical years of service for these retirees is 27-29 years.  It's listed on the website, along with the year they retired.

So yes, there are people who have been pensioners for a couple of decades, who are being paid in part by taxes of people who weren't born when the deals were made.

I guess when the city defaults and goes bankrupt, it'll work itself out.

Travis

  • Handlebar Stache
  • *****
  • Posts: 2267
  • Location: Arizona
Re: $76k/MONTH pension -- NYTimes article
« Reply #27 on: April 16, 2018, 04:42:21 PM »

This is California, and the tricky part is many of the pensions are based solely on their highest annual salary, or highest two.  So it's not uncommon to throw a lot of overtime at someone in their last year to "boost" their pension, so to speak.  It's in fact very common.


Do they get paid by the hour or is there some kind of "base" salary before OT or other pay-boosters are factored in?

hadabeardonce

  • Stubble
  • **
  • Posts: 215
  • It's never too early to learn the value of money.
    • My Journal
Re: $76k/MONTH pension -- NYTimes article
« Reply #28 on: April 16, 2018, 04:57:38 PM »

This is California, and the tricky part is many of the pensions are based solely on their highest annual salary, or highest two.  So it's not uncommon to throw a lot of overtime at someone in their last year to "boost" their pension, so to speak.  It's in fact very common.


Do they get paid by the hour or is there some kind of "base" salary before OT or other pay-boosters are factored in?
My CalPERS pension = (Years of Service) * Benefit factor (2-2.5% Based on Age 55-63) * Final Compensation

...so if you worked 40 years and retired at 63, you'd get 100% of your present salary, plus social security.


wenchsenior

  • Handlebar Stache
  • *****
  • Posts: 1737
Re: $76k/MONTH pension -- NYTimes article
« Reply #29 on: April 16, 2018, 05:07:36 PM »

This is California, and the tricky part is many of the pensions are based solely on their highest annual salary, or highest two.  So it's not uncommon to throw a lot of overtime at someone in their last year to "boost" their pension, so to speak.  It's in fact very common.


Do they get paid by the hour or is there some kind of "base" salary before OT or other pay-boosters are factored in?
My CalPERS pension = (Years of Service) * Benefit factor (2-2.5% Based on Age 55-63) * Final Compensation

...so if you worked 40 years and retired at 63, you'd get 100% of your present salary, plus social security.

That makes the federal pensions look like complete crap, to be honest.  Were you paying in 2% throughout your working life? 

hadabeardonce

  • Stubble
  • **
  • Posts: 215
  • It's never too early to learn the value of money.
    • My Journal
Re: $76k/MONTH pension -- NYTimes article
« Reply #30 on: April 16, 2018, 05:20:41 PM »

This is California, and the tricky part is many of the pensions are based solely on their highest annual salary, or highest two.  So it's not uncommon to throw a lot of overtime at someone in their last year to "boost" their pension, so to speak.  It's in fact very common.


Do they get paid by the hour or is there some kind of "base" salary before OT or other pay-boosters are factored in?
My CalPERS pension = (Years of Service) * Benefit factor (2-2.5% Based on Age 55-63) * Final Compensation

...so if you worked 40 years and retired at 63, you'd get 100% of your present salary, plus social security.

That makes the federal pensions look like complete crap, to be honest.  Were you paying in 2% throughout your working life?
7%

jlcnuke

  • Pencil Stache
  • ****
  • Posts: 761
Re: $76k/MONTH pension -- NYTimes article
« Reply #31 on: April 16, 2018, 06:17:38 PM »

This is California, and the tricky part is many of the pensions are based solely on their highest annual salary, or highest two.  So it's not uncommon to throw a lot of overtime at someone in their last year to "boost" their pension, so to speak.  It's in fact very common.


Do they get paid by the hour or is there some kind of "base" salary before OT or other pay-boosters are factored in?
My CalPERS pension = (Years of Service) * Benefit factor (2-2.5% Based on Age 55-63) * Final Compensation

...so if you worked 40 years and retired at 63, you'd get 100% of your present salary, plus social security.

How much of your pay do you have to contribute?

DreamFIRE

  • Handlebar Stache
  • *****
  • Posts: 1240
Re: $76k/MONTH pension -- NYTimes article
« Reply #32 on: April 16, 2018, 06:35:13 PM »

This is California, and the tricky part is many of the pensions are based solely on their highest annual salary, or highest two.  So it's not uncommon to throw a lot of overtime at someone in their last year to "boost" their pension, so to speak.  It's in fact very common.


Do they get paid by the hour or is there some kind of "base" salary before OT or other pay-boosters are factored in?
My CalPERS pension = (Years of Service) * Benefit factor (2-2.5% Based on Age 55-63) * Final Compensation

...so if you worked 40 years and retired at 63, you'd get 100% of your present salary, plus social security.

That makes the federal pensions look like complete crap, to be honest.  Were you paying in 2% throughout your working life?
7%
Only 7%!  Amazing.   I pay more than that in payroll tax, get a fraction of that benefit in SS at a older age, and "they" want to cut that!

wenchsenior

  • Handlebar Stache
  • *****
  • Posts: 1737
Re: $76k/MONTH pension -- NYTimes article
« Reply #33 on: April 16, 2018, 06:57:47 PM »

This is California, and the tricky part is many of the pensions are based solely on their highest annual salary, or highest two.  So it's not uncommon to throw a lot of overtime at someone in their last year to "boost" their pension, so to speak.  It's in fact very common.


Do they get paid by the hour or is there some kind of "base" salary before OT or other pay-boosters are factored in?
My CalPERS pension = (Years of Service) * Benefit factor (2-2.5% Based on Age 55-63) * Final Compensation

...so if you worked 40 years and retired at 63, you'd get 100% of your present salary, plus social security.

That makes the federal pensions look like complete crap, to be honest.  Were you paying in 2% throughout your working life?
7%
Only 7%!  Amazing.   I pay more than that in payroll tax, get a fraction of that benefit in SS at a older age, and "they" want to cut that!

Ok, not such a major difference then. Much more deferred salary paid in in exchange for a much higher payout as a percent of salary than the federal pension. 

Indexer

  • Handlebar Stache
  • *****
  • Posts: 1180
Re: $76k/MONTH pension -- NYTimes article
« Reply #34 on: April 16, 2018, 07:03:50 PM »
The pension itself doesn't bother me. That appears to be part of their hire contract so their skill set must have justified giving such great benefits.

What does bother me is that they didn't fund it!  They make promises they can't guarantee without concern because it isn't their money, it's the taxpayers, and they will be out of office before the bill arrives.

DreamFIRE

  • Handlebar Stache
  • *****
  • Posts: 1240
Re: $76k/MONTH pension -- NYTimes article
« Reply #35 on: April 16, 2018, 07:29:59 PM »

This is California, and the tricky part is many of the pensions are based solely on their highest annual salary, or highest two.  So it's not uncommon to throw a lot of overtime at someone in their last year to "boost" their pension, so to speak.  It's in fact very common.


Do they get paid by the hour or is there some kind of "base" salary before OT or other pay-boosters are factored in?
My CalPERS pension = (Years of Service) * Benefit factor (2-2.5% Based on Age 55-63) * Final Compensation

...so if you worked 40 years and retired at 63, you'd get 100% of your present salary, plus social security.

That makes the federal pensions look like complete crap, to be honest.  Were you paying in 2% throughout your working life?
7%
Only 7%!  Amazing.   I pay more than that in payroll tax, get a fraction of that benefit in SS at a older age, and "they" want to cut that!

Ok, not such a major difference then. Much more deferred salary paid in in exchange for a much higher payout as a percent of salary than the federal pension.

HUGE difference vs SS!  See my post above, which explains why it happens:

The main issue I have a problem with is when unionized public employees contribute substantially to elected officials' campaigns and then receive actuarilly unsound guaranteed returns for the contributions required by the covered employees.  In my book, it is out and out corruption and is one of the main sources of the squeezes we see today.  The elected officials are long gone and taxpayers that were not even alive at the time are on the hook for the excessive pensions.

Exactly.  It also reminds me of this entry to the "The Best Post I Saw Today on MMM".

https://forum.mrmoneymustache.com/welcome-to-the-forum/the-best-post-i-saw-today-on-the-mr-money-mustache-forums-was/msg1913472/#msg1913472

Quote:

I think that the source of resentment is more about the perception that public service unions get sweetheart deals because they are in effect negotiating with themselves, in that the politicians are highly motivated to make the public service unions happy.

The foundation for fair negotiations is that both parties should be motivated to protect their own interests. It should be adversarial. In the model of public service union negotiations, the politicians arent really the ones who are on the hook for the expense, so they aren't really negotiating on behalf of the taxpayers, leaving the taxpayer to pay the bill when they had no voice in the negotiation.

This disconnect in the context of public sector unions was obvious even to Franklin Roosevelt who said:  “The process of collective bargaining, as usually understood, cannot be transplanted into the public service.”

The costs are usually far down the road, so the politicians who negotiate the deal arent going to pay the political price later when it all falls apart.  Look at the tremendous unfunded / underfunded state and municipal pension / healthcare issue that the country faces.

So in the case of public servants, i think the fact is that people understand that they have to pay fr that largesse in the form of higher taxes and fees, etc.   Contrast that with someone who may have a fantastic private sector job/pension.  Folks might be envious, but at least they arent the ones paying the bill, or at least they arent forced to pay the bill. 

« Last Edit: April 16, 2018, 07:32:29 PM by DreamFIRE »

Abe

  • Handlebar Stache
  • *****
  • Posts: 1044
Re: $76k/MONTH pension -- NYTimes article
« Reply #36 on: April 16, 2018, 08:07:18 PM »
The person in question was paid $1 million per year ($83k/month) in salary at the time of his retirement, so he is getting 90% of his final salary as pension. He worked 38 years at OHSU, per Wikipedia. Whether the president of OHSU should be paid $1m a year is another question, but his pension math checks out.
« Last Edit: April 16, 2018, 08:12:48 PM by Abe »

maizeman

  • Magnum Stache
  • ******
  • Posts: 2707
Re: $76k/MONTH pension -- NYTimes article
« Reply #37 on: April 16, 2018, 08:26:55 PM »
So the reason Oregon is going bankrupt with pension costs (from the article) is that the calculate the value of employees pensions based on imaginary investment accounts with no actual money in them, where they assume that the employee get the regular returns of the stock market.... unless the stock market return for the year was less than 8%, in which case they get 8%.

So they get all the upside of the stock market, but no downside.

Since 1980, the S&P 500's CAGR, before inflation, has been 12% (a bit above historical averages).

Since 1980, a Oregon public employee's pension value has been growing at a CAGR of 17%.

It's really hard to avoid going broke if you're locked into having your employee's retirement savings grow at 17%/year.

maizeman

  • Magnum Stache
  • ******
  • Posts: 2707
Re: $76k/MONTH pension -- NYTimes article
« Reply #38 on: April 16, 2018, 08:30:27 PM »
Put another way, if I invested $10k in the stock market in 1980, it would have grown to $660,000 today (in nominal dollars). If an oregon state or local employee contributed $10k to their pension fund in 1980, it is being treated at $3.8M in pretend retirement savings for the purpose of calculating their pension today.

Murse

  • Bristles
  • ***
  • Posts: 493
Re: $76k/MONTH pension -- NYTimes article
« Reply #39 on: April 16, 2018, 08:35:54 PM »
I don’t understand why this gets beat to death so bad in the media. I work as a public employee in Oregon. It is now a 3 tier system, the tier always discussed is tier one (the most generous.) anyone who began employment after 2001(I think) was then tier two, anyone who began employment after 2003(ish) are tier 3.

Lawmakers have tried over and over to take away the benefits promised to tier 1 and 2 employees and the courts have repeatedly ruled that you cannot take away benefits that were promised to these employees. Those that continue complaining about it... I don’t understand what you want done?
« Last Edit: April 16, 2018, 09:16:59 PM by Murse »

Mezzie

  • Pencil Stache
  • ****
  • Posts: 825
    • Mezzie Learns
Re: $76k/MONTH pension -- NYTimes article
« Reply #40 on: April 17, 2018, 06:26:52 AM »
I have CalSTRS. I pay just under 10% per paycheck and my employer contributes just over 10%. If I retire at 55 after 31 years of service, I'll get about 30% of my pay for life. If I work until 62, it's closer to 50% of my pay. No overtime, hourly, or stipend pay is calculated into that, so I can't just teach sumner school, be department head, and teach Saturday school my last year and get a crazy windfall; it's based off our base salary on the salary schedule only. People younger than me get less of a deal and hit 50%-ish at 64. I am not eligible for social security, even though I contributed to it for a while, and I can't collect any of my husband's social security.

Everyone at my work also contributes to a 403(b), though the amount varies. We are well aware we won't be getting anywhere near 100% of our pay. We also know pensions have been abolished in other states, so while our personal contributions are safe, the growth on them and our employer's contributions on our behalf could disappear with one session of the state congress. I also have a 457 and am trying to encourage my colleagues to do the same.

I think my pension program is great, honestly, but it certainly doesn't sound as exciting as some of the pensions mentioned here!

Considering the 60+ hours a week we teachers put in while only getting compensated for 40 and the sumner work we rarely get paid for, I see my employer's contribution to the pension fund as fair. I like that I am forced to contribute a good chunk of my paycheck towards my future.

I think it would be wise for employers to have an opt-out system for 401(k) contributions rather than making people opt-in, but I suppose that's a topic for another thread.

Murse

  • Bristles
  • ***
  • Posts: 493
Re: $76k/MONTH pension -- NYTimes article
« Reply #41 on: April 17, 2018, 07:28:54 AM »
http://www.oregonlive.com/politics/index.ssf/2018/04/national_spotlight_cast_on_per.html

Every Oregon state employee knows oregonlive despises the Oregon Pers problems. They are not friendly to the pets problem in anyway... but I’ll just leave this here.

maizeman

  • Magnum Stache
  • ******
  • Posts: 2707
Re: $76k/MONTH pension -- NYTimes article
« Reply #42 on: April 17, 2018, 07:46:04 AM »
Are you a tier 1 employee Murse? I ask only because some of your responses seem like you're interpreting this discussion as a personal attack and that certainly wasn't intended.

More generally you asked why people keep bringing this up. As a person outside the state* this was the first time I'd heard about the Oregon pension system's messed up way of calculating the value of pension contributions. Sure in your state they finally realized how hard it was to keep up with imaginary investment accounts returning a CAGR of 17% and changed the system for new employees, but because your state supreme court has held that Oregonians who weren't even born yet are obligated to continue paying employees under the old unsustainable system, it'll be another generation before the state is out from under the consequences of that decision.

So reporting the story to a national audience is useful because, at least theoretically, it makes it less likely other states will similar poor decisions in the future.

Because "let's make it so our employees participate in market gains but protect them from market losses" is very easy idea to make sound reasonable if you don't understand the consequences of that idea.

Edit: struck through some text that is really none of my business.

*Darn, now I've outed myself as living in one of only 49 remaining states. My veil of anonymity gets thinner every day.
« Last Edit: April 17, 2018, 07:55:54 AM by maizeman »

dude

  • Handlebar Stache
  • *****
  • Posts: 2136
Re: $76k/MONTH pension -- NYTimes article
« Reply #43 on: April 17, 2018, 08:02:54 AM »
Quote
How many police departments do you know of are hiring 18yo's and are paying $200k in retirement?

Mine certainly wasn't.

My county sheriff's department retirement #'s in 2013:
# of retirees in the county with >$200k a year in pension: 4
# of retirees in the county with $100-$200k in pension: 6

I typed "police" and the first page, the lowest # on the page for the state is $600k
By page 3, you're all the way down to $449k. Yikes.

Finding my own city was trickier because of how they do the entries.  Listed not by their department, but google and all that.
A short 10 minutes and on the first page only, about 5 retired police employees at $175k and two fire employees at $160-$175k. 
Average years of service just under 30 years.
This data is useless without context.

What were their years of service? What was their rank when they retired? What's the median retirement pay for policy in your city? The standard deviation?

Basically, are you looking at an edge case (i.e., retired chief which has a median national salary between $97 - 109k) the retirement pay of your typical beat cop (median pay around $53k)?

In MA, the Boston Globe prints the highest state salaries each year.  Invariably, there are dozens of State Troopers on the list making $200k-$250k*. They make this largely by working OT sitting on construction details (i.e., sitting in their cars on their smartphones with lights flashing). Several governors have tried to curb the use of police for these details, arguing that it can be done by non-cop personnel/non-patrol car means, and there is always a huge pushback from the police union, and of course, nothing gets done. Bottom line for me is OT should not be a basis for anyone's pension. What these guys (and other state employees) do is work shitloads of OT in the final few years of their careers to jack up their high-3 average salary (the basis for their pension), and walk away with pensions that far exceed their actual salaries while working. It's a terrible system that invites gaming the system/abuses.

* the majority of non-cops tend to be school superintendents and town managers.

GU

  • Stubble
  • **
  • Posts: 211
Re: $76k/MONTH pension -- NYTimes article
« Reply #44 on: April 17, 2018, 08:10:39 AM »
My first act as king would be to ban all public sector pensions. There's no defending all of the nonsense and impending fiscal ruin these have wrought. And when a real party in interest—the taxpaying public—never has a seat at the bargaining table, the deal isn't fair.

Travis

  • Handlebar Stache
  • *****
  • Posts: 2267
  • Location: Arizona
Re: $76k/MONTH pension -- NYTimes article
« Reply #45 on: April 17, 2018, 10:21:25 AM »
Lawmakers have tried over and over to take away the benefits promised to tier 1 and 2 employees and the courts have repeatedly ruled that you cannot take away benefits that were promised to these employees. Those that continue complaining about it... I don’t understand what you want done?

Many of the states with these kinds of pension systems refuse to raise the revenue required to fund them.  That's one of the chief complaints. 

Murse

  • Bristles
  • ***
  • Posts: 493
Re: $76k/MONTH pension -- NYTimes article
« Reply #46 on: April 17, 2018, 11:13:49 AM »
Lawmakers have tried over and over to take away the benefits promised to tier 1 and 2 employees and the courts have repeatedly ruled that you cannot take away benefits that were promised to these employees. Those that continue complaining about it... I don’t understand what you want done?

Many of the states with these kinds of pension systems refuse to raise the revenue required to fund them.  That's one of the chief complaints.

What you say may be true of other states but Oregon has attempted to raise revenues multiple times and been shot down by voters. Just last year increasing taxes on large corporations was voted down.

To answer a question from above I am a tier 3 employee. The calculation for my pay is 1.8 percent x years of service x final average salary (highest salary averaged over a 3 year period) this is the more generous calculation for tier 3 seeing as I am considered police and fire. This means after 25 years I would get 45% of my final average 3 years salary.

My issue with these complaints is that the first solution everyone brings up is “stop this madness.” Well it has already been stopped, and nothing more can be done. After people are informed the courts have ruled you can’t touch the tier 1/2 benefits the next solution purposed is “well take away from current employees to make up for past promises.” This is unfair to current employees/future employees. If it happened the state would begin to have even more of a recruiting problem and OT would be even more available. Personally if my benefits were slashed, I would be fine as I easily would be able to find different work, likely for a 10-20% pay increase.

I agree, it is a shame the promises were made in the first place. However “we” (as in the previous generation) made our bed, now we (IE current taxpayers/government budgets) must lay in it.
« Last Edit: April 17, 2018, 11:16:56 AM by Murse »

maizeman

  • Magnum Stache
  • ******
  • Posts: 2707
Re: $76k/MONTH pension -- NYTimes article
« Reply #47 on: April 17, 2018, 11:29:10 AM »
After people are informed the courts have ruled you can’t touch the tier 1/2 benefits the next solution purposed is “well take away from current employees to make up for past promises.” This is unfair to current employees/future employees.

+1! Right now the old tier one system is already acting as a transfer of wealth from poorer young people to comparatively more affluent older people. Trying to reduce the "average" pension benefits by cutting the benefits of new employees even more to be able to afford the extremely generous benefits being given to older employees would make this even worse.

And like you said, in the end you do have to pay market rates for new employees, otherwise you won't be able to hire new employees, regardless of whether older employees are effectively getting far above market rate compensation.

Quote
I agree, it is a shame the promises were made in the first place. However “we” (as in the previous generation) made our bed, now we (IE current taxpayers/government budgets) must lay in it.

Well I think this is another reason pension shortfalls get discussed at such length. In no arena other than government can one set of people make a legally binding commitment on behalf of another set people who have not yet even been born. It's a weird problem, and I don't see any straightforward solution. But it is a problem.

maizeman

  • Magnum Stache
  • ******
  • Posts: 2707
Re: $76k/MONTH pension -- NYTimes article
« Reply #48 on: April 17, 2018, 12:00:54 PM »
Oh absolutely. I was just using the single time point comparison to illustrate how big a difference that extra 5%/year on contributions (whether employer or employee) makes over a career, since Oregon employees retiring now can decide to either take a pension based on their salary at the end of their career, or based on the balance of their hypothetical retirement account which goes up with the market, but never goes down with the market.

GU

  • Stubble
  • **
  • Posts: 211
Re: $76k/MONTH pension -- NYTimes article
« Reply #49 on: April 17, 2018, 12:16:58 PM »
Lawmakers have tried over and over to take away the benefits promised to tier 1 and 2 employees and the courts have repeatedly ruled that you cannot take away benefits that were promised to these employees. Those that continue complaining about it... I don’t understand what you want done?

Many of the states with these kinds of pension systems refuse to raise the revenue required to fund them.  That's one of the chief complaints.

Yep, no one (besides the union members themselves) wants to pay higher taxes to fund special, extremely generous pensions and healthcare benefits that only a special benighted minority receive, especially given the generally low quality of services provided by state and local governments and the entrenched corruption.

Would you agree to pay more taxes to fund extremely generous pensions for corporate middle-managers? I think not, but it might as well be the same thing.