Public Pension Plans
http://thedianerehmshow.org/shows/2010-10-07/public-pension-plans
Federal, state and local budget deficits prompt a hard look at what some say are generous pensions promised to government workers: Pension plan problem and underfunded retirement in both the public and private sectors.
Guests
Leigh Snell
Federal Relations Director,the National Council on Teacher Retirement
David John
senior research fellow, The Heritage Foundation
Norman Stein
professor of law, Drexel University
Tom Shoop
editor in chief,Government Executive Magazine
Comments
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For decades many state legislatures have voted for budgets that actuaries predicted would not provide sufficient funding to create reserves adequate to meet the obligations of state employee pension plans. Now in an era of anti-government sentiment state employee pensioners are at risk of paying the price for this shortfall.
For the anti-government segment of the population, undermining the faith of current and future talented employees in the promises of pensions to cover their old age, is an excellent tool to destroy the capacity of governments to attract competent persons to public service.
I hope voters strongly resist any attacks on pension arrangements for current and past public employees and also be wary of cutting pensions for future employees.
Most people that complain forget the other side of the equation the government workers pay when they were working was less then in the private sector. They stayed in the job at the lower pay because of the retirement benefit. If the retirement disappears you are going to pay more upfront.
Mark
Laurinburg, NC
I wonder where all those high end pensions are. I worked 23 years for the State of Maine, and my annual pension is under $15,000 a year. Many of those years Maine did not participate in social security so I have a large gap in my SS earnings which affects those benefits. I am still working in the private sector at age 67 to maintain a meaningful income stream.
How can we continue to afford extravagant pensions for military personnel, including retirement after only 20-30 years of service, regardless of the type of assignment?
There never will be a viable retirement program as long as corporations and the government are allowed to pilfer the funds.
I am 41 and have been employed by my local County government for 10 years. I qualify for Social Security about the time it is projected to run out of money in 2042. I still have a guaranteed benefit pension at work (I contribute 6% of my gross pay to the pension), but I wonder if the pension will be there when I retire. We started a 401k in 2002, but they stopped the match due to budget cuts this year. I used to think if 2 out of three (SS, pension, 401k) were OK then I would be able to retire. Now all are at risk and I am actually considering leaving public service to make more money (giving up my pension) so I can start saving more (I work in Information Technology - the private sector pays 10-30% more). Every move seems risky and I worry a lot about this because I have a family to support.
according to the American Acturary Association (?), a straightforward fix for Social Security is to eliminate the cap on income for contributions. That, taken with the information from a news story today on WAMU, leads me to think that doing so migght not be as impossible as it has seemed in the past, IF the process is carefully and fully explained.
People criticize teacher pension plans that allow for retirement after 30 years, yet Michigan offered incentives to get teachers to retire in order to replace them with new teachers at lower salaries. We can't have it both ways: push teachers in their 50s out after 30 years and then complain about early retirement. Furthermore, because pension formulas are based on not only final average salaries but also years of service, teachers who retire after 30 years draw a much smaller pension than those who retire after 40 years.
Glenn Roehrig
Kalamazoo, Michigan
I am a recently retired teacher from Indiana, and I was encouraged to retire early by my district in order to replace me with a new teacher (at a much lower pay rate) so that the district could more easily handle the budget cuts madated by the state. So talk of extending the retirement age would not be feasible as long as school districts are tempted to balance their budgets any way they can.
Diane --
Please ask your guests to talk about the "elephant in the room" on this topic:
No matter what pension reform policies are enected, they will not satify the goal of providing retirement security to the majority of Americans unless the average income and purchasing power of Americans keeps dropping with respect to inflation.
As long as 80% of the wealth created in the country goes to the top 5% of income earners the fate of average retirees will be always to be on the edge of catastrophe.
The problem is not so much how much Americans are saving as it is how much they are being paid. You can't save 15-20% of your income for retirement as long as your average purchasing power is dropping by about 3% per year.
Regards,
Ray N.
Annapolis MD
Sounds like "no senior left behind." Note that most answers serve as apologies for a system that protects itself from fluxuations felt by the public. Yes or no - social security has been pilfered by the very structure that set it up for the benefit of the public? How much has been taken out and how much is owed in return plus interest?
Lots of illegals work for many years with fakes SSN, where all that money is? They never get retired or get none beneffit
Diane,
How can people save money if the very ground under their feet keeps getting more expensive?
I don't understand how we can have a housing market that's expected to constantly grow, even when people's incomes don't or cannot keep pace.
All realestate is affected, including commercial and residential rents. We NEED affordable housing but we live in a world that treats housing as investments and not homes.
I think this is the root cause to our financial problems.
My husband and I planned for out retirement 3 different times. We had to keep doing it because the tax laws kept changing. My husband died in 2009 and he thought he had left me in good shape, which he did until the changes that are going in effect in the next few years with the prospect of increased taxes, less benefits from Social Security, etc. We always paid the maxamium amount in SS and never had any expenses covered by a corporation for which he worked. He was a doctor in private practice, faithfully contributed 20% of his time to the indigent and we contributed generously to our community and national causes. I am 69 years old and becoming angry that all his work and planning was for not. Our government can take my security any time it likes through taxes and cutting my SS for which we more than paid.
I must ask how we are going to pay for the trillions of dollars we now owe to public sector pensioners that we must pay no matter what, even in default, regardless of what what changes state and local governments make now?
Read this story!
http://www.franklincenterhq.org/1934/taxed-25-billion-more-but-its-not-e...
If they were not illegal they would not have that problem. If they go back to where they are legal then they would not have the job. Anyone except young kids brought by their parents made the choice to break the law and game the system when they came here. Not getting SS is the price they pay.
1. If only the guests would have addressed the giant elephant in the room: if wages continue to stagnate and benefits continue to be eliminated in the private sector (while productivity and GDP rises), they will also stagnate in the public sector, as less money is available for the tax base. Demand will continue to fall in our economy and thus contraction of enterprises will follow, jobs continue to be lost and public spending inevitably be cut, which will hurt ALL of us, not just public employees. Demand has already fallen for decades in comparison to what it could have risen to, were more wealth being distributed to the population via higher wages. The real value of the minimum wage is over 33% LESS today than it was in 1968, and now we have enormous inflation in the entry barrier cost of education expenses (a cost that is NOT included in the CPI). The real value of the min. wage is at an all time low in relationship to the average wage, since 1947 (Jared Bernstein and Isaac Shapiro, "Buying Power of Min. Wage at 51 Year Low". EPI. 20 June 2006). Pensions are long gone from the private sector and now the 401Ks are even a rarity.
2. The real value of median income has fallen for most workers since the late 1970s, even though productivity has skyrocketed. It's time to restore the health of our markets, the opportunities for our citizenry and the prosperity of the workforce by requiring companies to pay their employees more justly and provide basic benefits. Unregulated markets cause markets to contract, not expand. States with higher minimum wages have higher demand and - with the exception of LOW-END manufacturing only (clothing, for example) - have been shown to have net job gains in comparison to states with lower minimum wages (David Card and Alan Krueger, "Myth and Measurement: The New Economics of the Minimum Wage," 1995; and "Minimum wages and employment: a case study of the fast-food industry in New Jersey and Pennsylvania: reply." American Economic Review. Vol. 90, No. 5, pp. 1397-420. See also Jeff Chapman "Employment and the Minimum Wage," EPI Briefing Paper #150, May 11, 2004). We need a re-invocation of the New Deal, or else we will continue to slide toward the Third World.
I am a 55-year old professions who has worked all his life. I do not have a company pension plan and I am 100% dependent on my 401K and Social Security for my retirement. This is probably a fairly common situation. My main limitation now is the $20,000+ limit tax-protected on my retirement account. I simply can not put enough money into me 401K to provide a reasonable retirement in 10 years. If I could put up to $50,000 of tax protected retirement per year I would be able to expect a reasonable retirement.
Why is there the $20,000 401K limit on tax-protected savings?
I've been a working engineer for over twenty years and now business owner since 2008. I argue with friends and family that we will never see a Social Security check and if we do, it will barely enough to feed oneself. I've got another thirty years left to be productive and my gamble is that I will make my engineering company a success and will be able to make enough money to retire on my own. My wife on the other hand has a good government job with a good retirement plan. So we'll have to see which works best.
If I had it to do over, I would have learned German and moved to the Netherlands as soon as I graduated from engineering school. Since that is not the case, I will work for as long as I can and probably die at my desk and I hope that I will have saved enough to pay for the cremation (a casket and plot are just to expensive).
Yes, this is a sad and depressing point of view but, it is what it is. Until people get their priorities straightened out and stop "worshiping" athletes and movie actors, we "kill all the lawyers", and we start respecting and honoring the professions that truly contribute to society (engineering and teaching), America will get what it deserves.
jmkport missed the point made - the question was "where is all the money contributed by illegals." They and their employers pay in, but since they get nothing out, the amounts of money they contribute remain in the system.
There was no suggestion that undocumented workers should get Social Security benefits. The suggestion was made that we all benefit from the extra money added to the Social Security funds because of their contributions, yet no one mentions all that added money.
How many times will the guest say "not a Cadillac plan"? While it is true that many public workers do not have cadillac plans, they are not unusual, especially as compared to private sector workers.
It used to be that public workers traded off higher pay for job security, good benefits, and a decent pension. Now, for many, the pay is better than the private sector, the benefits (vacation, leaving at 5:00, holidays, health insurance, vested sick pay, etc) are fantastic. When you throw in the very early retirement ages for many public workers, there is no comparison for the average private sector employee.
However, the guests and many defenders of the extremely good deal that many public workers get still use the out-of-date arguments that public sector workers are paid less or contribute to their pensions. It seems that public workers believe that everyone in the private sector is rewarded with huge salaries and stock options.
When the deal that many public workers get is compared to private sector professional workers have (scant vacation, age discrimination, routine 60 hour weeks, constant job insecurity, no pension, high cost of health insurance, no recourse for grievances), the difference is night and day. The private sector has become a painful grind for survival for most professional workers in our supposedly most dynamic economic sectors, e.g. high-tech and finance.
There is also the possibility of an additional limit through the "top-heavy" test that tests the participation employees by income level. So, if you work at a manufacturing company, for instance, and lower-paid employees do not participate enough, your contribution will limited far below your "maximum" limit for no reason relative to you or your desire to save for your retirement. Unbelievable.
I worked for the state of MI for 15 yrs and was put off work because of serious disabilty 16 yrs ago. I was to receive long term disability until the age of 70. I am now 56. 4 yrs ago, a new contractor took over and started sending me around to their "drs." They are "paid for performance" which is a catch-phrase for deny, delay, terminate, and defend. I have seen several of their drs. The first did not pretend to do an exam and threatened me pretty much for 20 minutes. He did not have my records nor did the contractor have a copy of the policy I was covered under and as it turned out had no legitimate reason to open my claim for review. This dr, I discovered later, served 5 yrs in prison for attempting to kill his wife with a claw hammer to the head multiple times and the state gave him his license back. Another dr, who is not a MD but a PhD was to examine a TBI that had been diagnosed by one of the finest neuros in the country and confirmed by a previous insurer's dr. This dr got $2500 just for reading my records and should have known of my long-existing history of hand and upper spine problems. He made me write for hours and do things that hurt me but I was told I had to cooperate. I've had 2 extremely extensive and complicated C-spine surgeries and face more. I continue to leak spinal fluid, a painful and crippling condition, because the top layer of the cord had to be removed and patched. I have yet to have any benefits restored despite having an attorney and the state has gone so far as to claim it has not received electronic records that were sent well before a deadline for an appeal that they subsequently denied. I cannot sue any of the parties as the state, the contractor, and their "drs" all have immunity. Under the law, I was assaulted by the dr who hurt me. Again, he has immunity.
I want to continue my story. I am about to lose my paid for home and am essentially homeless. The LTD was half my income and the state paid the contractor a bonus for doing this to me and they have manipultated at least one dr into changing his mind and the state has denied an appeal stating they never rec'd electronic records that were sent well within the time-frame. They refuse to trace them. I have been twisting in the wind for almost 5 yrs with no end in sight. Within the first 3-4 months the contractor spent $10-12000 that I know of (there's more) to stop $800/mon. I am the age I would have been eligible to retire if I'd stayed at the service I was commiitted to but I cannot retire for another 4 yrs. I have endured terrible physical and emotional pain but there is no end in sight and I have contemplated ending my life many times. They have had what they need to resolve this but will not settle with my attorney. Public servants may be getting a good deal elsewhere but those who serve and become ill or injured had better have something put aside and be ready to fight.
Diane, You did your listeners a disservice by not presenting a balanced view. While your guests consistently stated that the average public pension was around $21,000, here in California (and, I'm sure many other states too), we have firemen, police officers, prison guards, and thousands of others retiring in their mid 50's (as you did say) with annual pensions of $80,000 and much higher. In addition, what about all the city, county, and state government managers who are retiring with pensions of $150,000 and up. In our small town of Pacific Grove (less than 20,000 residents) , the retired police chief receives an annual pension of $139,000 and the retired interim city manager (about 2 years with the city) receives $159,000 - for the rest of their lives ! Bordering on bankruptcy, the city is trying to limit its contribution to employee pensions and is now being sued by the police department. Your guests absolutely pooh-poohed this unsustainable situation. The beaurocrats' unrealistic salaries and pensions were negociated behind closed doors with the unions because the unions and the then-governing bodies thought they could always raise taxes. Now that things are coming out in the open, the public is mad. You really didn't address that.
I love the DR show. Thank you for both the content and the style in which information is offered.
Re: the issue of saving for retirement. I believe there is one option that people do have that is really out of the public awareness or attention, and to that end, I would encourage you to invite Pamela Yellen to be one of your guests to simply talk about the strategy of using life insurance as one of the tools to build a predictable and safe retirement income. She is a bright and articulate advocate for this planning tool. The concept/strategy could help many many people, and it would be a great service for you to provide people the chance to learn about this.
Thanks