*UPDATE* I've learned from SUAA that the "actuarial formula minus six percent" (in effect after three years of pension reform) WILL be higher than the 15.3% pension contribution set for 2013-2015 (could be up to 28%; be grateful, it is less than the 34% demanded of judges now).
Get off your Tier I pension or lose it all. A lose-lose scenario. The beauty of the thing: while legislators will have to stand and vote for 15% (12.75 percent K-12), the actuaries will do the real kill job in three years. Brilliant!
ORIGINAL BLOG:But, remember, we will earn at least the equivalent of Social Security! Now there is another "contract between generations" that will stand the test of time (snark). Unless they spend our newly "deleveraged" dollars on something else and decide that we only need 3% and throw us on Social Security like they did federal employees.
This is written fast and furious because the hearings are tomorrow. Excerpts from the gobbledygook amendments made to SB 512 below:
Great indeterminacy. The only definite thing is a) the state won't pay more than 6%. Your retirement will be at least equal to Social Security benefits (what a joke).
To keep (for now) our "constitutionally guaranteed" defined benefit packages, we must all pay more, 15.31% of compensation (presumably salary and not all "compensation" including benefits?). Thereafter it is based on some actuarial formula that is in the hands of the state with history of rigging numbers. So your future contribution amount may be higher or lower (assume higher).
Sum up: it reads like it was written by mafia lawyers: sign or we kneecap you.
..
Sec. 8-103.3. Traditional benefit package. "Traditional
benefit package": The defined benefit retirement program
maintained under the Fund for employees who first became
participants in the Fund before January 1, 2011.
. . .
(1) Participants who elect the traditional or portable
defined benefit package shall contribute:
(A) In fiscal year 2013, fiscal year 2014, and
fiscal year 2015, an amount equal to 15.31% of salary [teachers only increase 3.35% but SURS employees must pay 7.3% more than we are now].
(B) In fiscal year 2016 and in each fiscal year
thereafter, a percentage of salary equal to the
actuarially determined normal cost of the traditional
defined benefit package ["We'll tell you later and you accept the numbers we give you, sucker!"], minus employer contributions [6%]
...
The following clause is a puzzler: they want us in Self-Managed Plans but no more than 20% of us?
Sec. 10-110. Maximum self-managed plan participation. By
July 1, 2012, the Fund shall certify the total active
participant population. When the number of participants that
elect the self-managed plan is equal to 20% of the total active
participant population, then no participant may elect the
self-managed plan.
RETIREMENT SALARY CAP:
(e) Notwithstanding any other provision of this Article,
the required contribution of a participant who first becomes a
participant on or after January 1, 2011 shall not exceed the
contribution that would be due under this Article if that
participant's highest salary for annuity purposes were
$106,800, plus any increases in that amount under Section
2-108.1.
But they will adjust it for cost of living increases which are half the rate of inflation or 3% whichever is lower (if inflation is 4%, then you get 2%!). Not clear whether the half-inflation adjustments are annual DURING employment (i.e., cumulative increases) or only when you retire. If you start work now and retire at 67 (another requirement), then $106,000 will be worth a fraction of $106,000 today. Makes for good envy-based politics though and people (voters) don't think ahead.
Good news (cough, cough): The state promises -- PROMISES! -- that your retirement package will at least equal what you would get under Social Security. OMG! My wife worked for social security and the motto was "retirement is a three-legged stool; Social Security is only one leg, a good pension is another, then there is savings." Unless you work for the State of Illinois.
9 comments:
I'd rather be thrown on Social Security.
Most residents of Illinois don't know and don't care that state employees only have two of the three legs of your wife's stool. What do they care if pensions are gutted?
At least with Social Security, the uproar when benefits are cut will be loud and widespread, making it less likely that the cuts will be as bad as what will come from the state.
How old are you? Most people I know in the private sector have some kind of 401k program PLUS social security.
At any rate, SSA won't be there for those of us under 50. Or, rather, it will be "means tested" (i.e., if you actually do save for your retirement, you don't "need" SSA so screw you). So the savings leg will be cut off too for those foolish enough to save in a country of debtors and voters who grab from savers.
One legged stool. Yeah, that will work.
Even if you want Social Security as your "one and only," you don't have that choice. Ha! Plus if you did work for the state, your SSA benefit will be offset.
As for "most residents of Illinois" or "most people" wanting this or that--they can go to h**l for bankrupting this country. As Mencken said
"No one ever went broke underestimating the intelligence of the American public"
(Old H.L. Mencken also thought government was a racket. He was right).
Why dont they cut THEIR pensions? They serve one term and then are set for life! I have to work a MINIMUM of 20 years for my meager pension.We need to get rid of this "elitist" attitude of these overpaid,underworked IDIOTS called politicians!!!
I'm young enough to expect that this proposal will come up several more times before I retire.
Short of the federal government stepping in and requiring states to adequately fund their pensions (and winning the legal battles that would follow), the persistent problem of the legislature raiding the pension fund to spend on the programs du jour will persist.
By the way, you probably run with the better half of the private-sector workers.
Half of private sector workers participate in an employer-sponsored retirement benefit. The percentage is higher for full-time workers and for workers with a traditional pension. The percentage is lower for part-time workers, low-wage workers (yes, there's overlap between those two) and workers with a 401K.
http://www.bls.gov/ncs/ebs/benefits/2010/benefits_retirement.htm
OK, here is the difference and it is a picture of generational warfare on pensions in the future:
The increased cost of maintaining a pension is really a transfer to CURRENT retirees. Note the difference: actuaries will usually figure out what it will cost contributors to achieve their pension objective. This reform proposal is paying for contributor's benefit AND current retirees. THEIR fund was to go broke in 2015 so current employees are having to carry that entire cost (or nearly all of it). I wonder how ERISA (not applicable to government) would play out in such a situation? But we were promised via contractual obligation something better than ERISA--constitutional amendment. In short, what began as a employee-employer mutual contributed benefit is now PAYGO.
The more far reaching change is that you can't trust government promises even when they are written into constitutions. So much for rule of law.
"Young men work so that old men can loaf" was the slogan used against the old-age movement of the 1930s. It's hitting Illinois public employees in the face first: the coming baby boomer generation will suck what remains from those working in the public (or private) sector. Welcome to what one economist called _The Coming Generational Catastrophe_, abetted by irresponsible politicians (is that redundant?).
I recommend that the State announce a day in honor of those contributing to the commonweal of retirees. Taxpayers and current employees (suckers) will parade while retirees sing an anthem to them.
PS: The grand irony (for current public workers) is that the constitutional amendment preventing a reduction of benefits appears (in the minds of legislators) to only apply to CURRENT retirees. If a company had trouble it could modify agreements with all parties. With that constitutional "guarantee," the State can't do that so it can only take from one of two sources: taxpayers OR current employees who (foolishly) thought their benefit was guaranteed too.
politicians count votes so current workers pay for two pensions now--their own and somebody else's. That would NOT have happened if there was no constitutional amendment. Instead, there would have also been a reduction to current retirees just as we are seeing with health care charges.
So this odd Illinois constitutional predicament is concentrating the generational warfare in sharp relief. No?
From State Journal Register on the idiocy of the actuarial terminology used by the politicians:
“Tying funding to state revenue is not a current or common or accepted actuarial practice,” Ingram said. “We have experienced a ramp proposal in the state twice before. It has failed to deliver both times.”
Ingram said he knows of no other state that ties its pension payments to state revenue. The bill assumes that state revenue will increase 2.3 percent annually.
“Talking to an actuary, their question would be, ‘How do I project what state revenue is going to be?’ There’s no 40-year model for that,” Ingram said. “So you have the arbitrary 2.3 percent that’s inserted into the bill, but whether that has anything to do with reality – you’re basing your funding on a factor that has nothing to do with what creates the liability. So the disconnect there could be significant over time.
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