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Summary and audio linked here.
Chicago’s political leadership is floating a pension buyout program as evidence it is seriously addressing the city’s thirty-six-billion-dollar unfunded pension liability, but Mark Glennon, founder of the Illinois policy research organization Wirepoints, said that the proposal moves debt from one column to another rather than reducing it, and that the broader fiscal picture facing the city continues to deteriorate across every measurable dimension. Audio here.
Expect no retraction or apology. This what they do.
The state’s existing buyout program for its own pensions is the precedent for Chicago, which should be a warning: Look out for similar exaggerated claims and shoddy analysis.
Full interview and summary linked here.
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It’s not a good article because Hinz omits two key facts.
1. Average years worked to achieve the average $34,000 pension.
2. Average employee contribution to achieve the average $34,000 pension.
Taxpayers United of America includes those two metrics when they report on pensions, for example.
I recommend Hinz and the rest of the media learn from Taxpayers United of America and start giving the whole story to taxpayers.
Hinz has been around for a long time reporting for a major Chicago “business” publication.
Wake up Hinz and Crains Chicago Business.
One more trick the pension funds and unions use when reporting pension statistics.
What was the average pension for workers retiring last year?
Was it $34,000?
Or is the $34,000 the average pension paid out for all workers in the system.
That’s important because of legislative benefit hikes and salary hikes over the years.
Looking at the actuarial report and CAFR would reveal more details.
Maybe HInz wants to do that.
Pension Pickups are a reason average employee contribution is important. Check this out. The first few sentences is just a lead in to the pension pick up. MEABF Tier 1 Handbook Participant Contributions Participants contribute 8.5% of salary as follows: 1) 6.5% made from each salary payment for the purpose of providing an annuity for the Participant. 2) 1.5% from each salary payment for the purpose of providing a surviving spouse annuity. 3) 0.5% from each salary payment for the purpose of providing an automatic increase in annuity after retirement. In addition to the above deductions, Board of Education Participants… Read more »
More on pension pick ups from the MEABF 2013 CAFR.
“The employer deducts or picks up the employee’s contributions before federal income tax is withheld and remits the contributions collected to the Plan.”
– page 37 (page 41 of pdf)
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“Employees may elect to have their optional contributions “picked-up” by the employer, to be treated as employer contributions for tax purposes.
The employee election is irrevocable.”
– page 125 (page 129 of CAFR).
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Even more on employer pension pick ups (of the employee contribution) in the MEABF pension fund. This from the Municipal Employees’ Annuity and Benefit Fund of Chicago (MEABF) Actuarial Valuation and Review as of December 31, 2014 by Segal Consulting. Exhibit L – Legislative Changes in Plan Provisions 1979 Session – HB 2012 – Under IRS Code Section 414(h), employer may pick up the employee contributions for all compensation earned after December 31, 1980, by a reduction in the cash salary or an offset to a future salary increase or by a combination of both. Understanding pension pickups is a… Read more »
And there was more legislation about pension pick ups in the 2014 MEABF Actuarial Valuation report. This also shows the insanity of constantly changing pension rules, and illustrates why it is so difficult for the public to understand the pension funds…they are a moving target from year to year due to the changes…so we have a complex topic (pensions and actuarial assumptions) that is made even more complex by constant changes. 1980 Session – HB 3635 – Reversed all changes made by HB 2012 and put the pick-up section as a new paragraph; they are treated as employee contributions for… Read more »
The only way out is to end the program. Move all the jobs to the private sector. The problem is the public unions have whole staffs of people trying to figure out how to game the whole system. It’s a unionized work force with paid legislators in Springfield versus individual taxpayers. We will never fix it until the State runs out of money. Not one of these people in a pension will ever give up anything without a fight. We may think we can debt our way out or tax our way out but it won’t work. Too many people… Read more »
Greg: A quick look at the Report shows the size of the problem. First, the unaffordable pension benefits that are unbelievably superior to average private sector retmt bfts. A city ‘ee age 55 with 30 yrs service can retire with 72% of Final4AvgPay. MANY make $80,000/yr pay so the pension is nearly $60,000/yr with COLA at AGE 55 !!!! Do you have ANY idea how expensive it is to pay for this? The value of the pension is over $1.5M with a conservative investment portfolio !!! How many private sector workers get this at age 55 ? This is outrageous.… Read more »
Good work, Steve. “Sick,” you say. That’s exactly right.
Thx Mark: I should have specified my question, by stating it thusly: How many private sector people in the workforce for 30 years, have accumulated retmt assets worth $1M or $1.5M BY AGE 55 ?? And Mike: The average pay of these 55-yr olds retiring with 30 years of service is $70k — so their pension’s 72% of that, or $50k/yr. The lifespan is nearly 30 yrs so if you have a bond portfolio yielding the COLA on the pension, the value of the pension is $50k x 30, = $1.5M. That’s staggering for a 55-yr old to basically have… Read more »