Author Topic: Employer retirement fund mandatory. Advice on legal action.  (Read 1249 times)

Late_Bloomer

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Employer retirement fund mandatory. Advice on legal action.
« on: November 05, 2020, 02:16:37 PM »
I have been working for the city I reside in and they have a mandatory retirement amount of 220-270 taken out of my pay every two weeks. I never agreed to it, and it wasn't disclosed until after I accepted employment and went through the new hire orientation.

Normally one would say, "great, they are looking out for your best interests," but since I already own and fund my own personal account, it is hindering my savings capacity. Added the fact that I won't be working 20 more years with the city to fulfill their pension requirement.

I have no control over where they invest the money or how the assets are allocated, and observing how little my contributions have grown, this money would be better served in my personal account.

My question is, is it possible to opt out somehow? I've tried contacting the retirement fund personally but guess what? They closed shop back in March and have no information to provide. All numbers go to voice mail saying due to covid all services are closed. So I have no way of asking directly. What I'm worried about is when I do leave the employment, they will not let me move the money out. They have a vested period of 5 years so I'm assuming if you terminate employment before then, they return it to you, but I really don't know.

Anyone work for a city agency that operates this way that can shed some light on my concerns? This is in Texas by the way.

Thanks.

six-car-habit

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Re: Employer retirement fund mandatory. Advice on legal action.
« Reply #1 on: November 05, 2020, 03:08:48 PM »
 How much time passed between your actual start date, and the new employee orientation ?   Is there a reason you didn't take this up with management / request a HR meeting /  Refuse the Job , etc, when you became informed about their retirement plan ?  Or saw it deducted from the first paycheck ?    Its unclear how long you've been contributing the $200+ biweekly. 

 When you say you've attempted to contact the retirement fund, is it a private company  [ Blackrock, Fidelity, Citicorp ] that administers the program for your town , or is it administered thru a sort of "State run, Retirement fund investment council , for small town Texas employees"  ?

 I'd think You'll need to go your appropriate HR department or person, to have the deductions stopped, and not the retirement fund.

slappy

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Re: Employer retirement fund mandatory. Advice on legal action.
« Reply #2 on: November 05, 2020, 05:13:00 PM »
What does HR say?

Dicey

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Re: Employer retirement fund mandatory. Advice on legal action.
« Reply #3 on: November 05, 2020, 05:26:29 PM »
What does HR say?
They should be reachable by email. Have you tried that @Late_Bloomer?

However, I might think twice before doing so. It could be interpreted as sour grapes.

Since you're already a saver, may I politely suggest you hold your nose and distract yourself?

Don't let the perfect become the enemy of the good.
« Last Edit: November 05, 2020, 11:39:36 PM by Dicey »

reeshau

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Re: Employer retirement fund mandatory. Advice on legal action.
« Reply #4 on: November 05, 2020, 06:00:58 PM »
I have no control over where they invest the money or how the assets are allocated, and observing how little my contributions have grown, this money would be better served in my personal account.

Is this a defined benefit, or defined contribution plan?  A fixed, mandatory contribution sounds like a defined benefit plan.  But you say you are watching your contributions grow--where do you see this?

I agree with Dicey's advice.  Assuming It's the former type, many people would kill for the certainty of a traditional pension.  It may or may not be useful to you--they are usually calculated in a way that they are better, the longer you stay.  (Benefits based on years of service)  There is an employer contribution to this--large ones, often--that you might not directly see.  But given that there is a fixed payout, these act like a bond allocation in your portfolio.  Besides ignoring it, you could allow this certainty (assuming the plan is solvent) to let you play your own portfolio more aggressively toward stocks.

erutio

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Re: Employer retirement fund mandatory. Advice on legal action.
« Reply #5 on: November 05, 2020, 06:17:48 PM »
If you are a city employee, I doubt that they didn't disclose it to you before you accepted the job.  A government agency will usually have their retirement plan information available online. 
As an a responsible Mustachian, you didn't bother to look up their retirement plans before starting the job??

Paul der Krake

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Re: Employer retirement fund mandatory. Advice on legal action.
« Reply #6 on: November 05, 2020, 06:23:25 PM »
I find it hard to believe that a municipality would not disclose in very specific language the mechanisms of their pension plan in the employment offer letter, contract, or any of the documents signed when someone starts a job.

Were you under the impression that the pension would be funded entirely by them? That's rarely how this works.

Segare

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Re: Employer retirement fund mandatory. Advice on legal action.
« Reply #7 on: November 06, 2020, 05:53:42 AM »
Usually you will become vested in 6 to 8 years.
Where I work they put in some of their money and some of mine with no say from me.  I was given an option to switch to the Investment plan instead the pension plan. The Investment plan you are vested after a year as opposed to 8 in the pension. The funds I picked in my Investment plan have been averaging 10%.

yachi

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Re: Employer retirement fund mandatory. Advice on legal action.
« Reply #8 on: November 06, 2020, 06:42:50 AM »
It sounds like TMRS, the Texas Municipal Retirement System.  If so, you're very confused about whose getting screwed in this deal.  (Hint: it rhymes with Lax Layer)
Here are some key benefits:

1) Each city chooses to match employee deposits at a ratio of 1 to 1, 1.5
to 1, or 2 to 1.  Is your personal account immediately doubled or tripled?

2) Your contributions are always yours to keep - If you leave before 5 years you have the option of leaving it in the plan for a maximum of 5 years.  They aren't stealing it...

3) After 5 years of service (10 in some cities) you get a pension.  It's payable when you turn 60, or at any age if you have 20 years of service (25 in some cities).

https://www.tmrs.com/pubs_benefits.php
https://www.tmrs.com/down/pubs/TMRS_Facts.pdf

yachi

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Re: Employer retirement fund mandatory. Advice on legal action.
« Reply #9 on: November 06, 2020, 07:04:17 AM »
OP can ignore my previous post.  I found the city he works for in another post.  Here is the appropriate information:
https://www.dallaserf.org/benefitTierB

"Any employee who has contributed to the Fund for five years or more is considered to be vested in the Fund." This means you qualify for the pension after only 5 years of working there

"If you leave the City before completing five years of service, you are not vested and must take a refund of your contributions or roll them over into another qualified plan."  This means they aren't keeping your money.

Following is the formula used to calculate your pension:
(Years of Service) x (2.50%) = % Monthly Salary Earned
(Average Monthly Salary) x (% Monthly Salary Earned) = Estimated Monthly Pension
This means if you worked full time at $20 per hour for 5 years, you qualify for a pension of $433 per month.

Every year, ERF uses the Consumer Price Index to calculate a cost of living adjustment. These adjustments are made in January and may not exceed 3% of your base pension, the pension amount you received when you first retired.  This means your benefit is protected from inflation.

There are three ways to retire from the City of Dallas:
Normal Retirement - Under Normal Retirement, you can retire at age 65 with five years of pension service credit.
Service Retirement - Service Retirement states that you can retire after 40 years of credited pension service, if you are under age 65 at retirement, your pension will not be reduced.
Rule of 80 - The rule of 80 states that if your age and years of credited pension service add together to equal 80 or more, you can retire. If you are under age 65 when you retire, your monthly benefit will be reduced.

The first way you can collect your pension at age 65, but there are other ways of collecting earlier if you have lots of years of service.

yachi

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Re: Employer retirement fund mandatory. Advice on legal action.
« Reply #10 on: November 06, 2020, 07:08:12 AM »
Another thing to note:
The City makes their contribution to the Fund on behalf of its members because the City does not participate in the Federal Social Security System.
This means working for this city does not count toward your social security benefits.  Also, it means you aren't having social security taken out of your paycheck.

Michael in ABQ

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Re: Employer retirement fund mandatory. Advice on legal action.
« Reply #11 on: November 06, 2020, 07:49:59 AM »
2.5%/year, that's pretty generous - no wonder their pension fund is in such terrible shape (at least the police/fire one). I work for the federal government and it's a 1.0% multiplier per year, or 1.1% if you stick around long enough. In my case they take 4.4% of every paycheck for that pension. I fully intend to withdraw every penny when I leave. For now it's a forced savings account with little or no return. Even the military pension was reduced recently from 2.5% to 2.0% per year - though that now includes a 5% 401k match to make up for the difference, and most people are still grandfathered in to the 2.5%/year pension after 20 years of service.

I would say you have zero chance of not participating in this. It's not being invested efficiently, but you will get it back when you leave for a new job.

spartana

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Re: Employer retirement fund mandatory. Advice on legal action.
« Reply #12 on: November 06, 2020, 09:11:57 AM »
Another thing to note:
The City makes their contribution to the Fund on behalf of its members because the City does not participate in the Federal Social Security System.
This means working for this city does not count toward your social security benefits.  Also, it means you aren't having social security taken out of your paycheck.
But he/she will be subject to the Windfall Elimination provision (WEP) reduction on any SS that was earned from other jobs. Although many government jobs now pay into both SS and their pension so those employees will get both once vested and old enough.

For for the OP - usually the big advantages of a defined pension is the tax deferral and the matching from your agency. In my case (CalPERS public safety pension) I put in 7% of my pay before taxes and my agency matched it with 7%. I didn't pay into SS. I could take it as early as 50 with 5 years vested either as a monthly benefit for life with an annual COLA  (what I choose) or a lump sum. If I took it out before vested I got all my contributions back plus any tax deferred interest that it earned - which was a guarenteed 6%. I was even allowed to "buy back" some of my military time tax deferred  to add extra service credit (years) to my pension. So a sweet deal for me and once you look further into your pension plan it might be for you too.

I "retired" about 10 years before I was eligible to start collecting my pension at 50 and it was nice to know that was there. My eventual SS benefit will be reduced because of my pension though.
« Last Edit: November 06, 2020, 09:16:52 AM by spartana »