The reality is starting to hit home with State pension fund managers: the fun times are over. Heavily invested in the stock market, most public pension funds looked good as long as times were good, when in fact, they were sitting on the same shaky foundations that were holding up the rest of the Wall Street Casino.
Now, with many funds losing 40% and 50% of their value, and having to fund a golden pension plan that has to deal with people living longer, and the same retirement age from- oh, 30 years ago, there are starting to be cuts. Karl Denninger of the Market Ticker makes some suggestions based on changes being implemented in Florida. Ohio leaders still have their fingers in their ears saying “nah, nah, nah” in total denial:
- Increases employee contributions to the pension plan ?for all future hires and many current employees by 1%.
- Actuarial disclosure (and public posting of same) must be regularly performed and corrective steps identified to halt and reverse any unfunded liabilities.
- Pensions are now computed based on the average compensation during the employee’s term of employment, not the last five years, and explicitly exclude any and all overtime or other “cramming” attempts. Further, the pension paid is capped at that average compensation. All “hazard pay” riders (e.g. additive amounts for police, fire and similar employees) are ended. Lump sum payments, annual leave payments (for vacation not taken) and similar are excluded. In short, only your base salary counts, and the average across your entire term of service is used, ending the abuse of playing games in the last couple of years to “goose” pension returns.
- Retirement ages go up materially. The minimum retirement age is now typically 60, and with the exception of “special risk classes” (e.g. cops) you now need 33 years of creditable service. Pension payouts now cannot start before age 62 if retiring before July 1, 2011, and 65 thereafter. For “special risk” classes the prior 55 year age lifts to 60 as of July 1, 2011.
- Municipalities can close their defined benefit plan, choosing instead to offer defined contribution plans (e.g. 401k equivalents.) An existing employee can transfer out of the pension system to that 401k-style system, but if they do they cannot transfer back to the pension system.
- Finally, there is no grandfathering – this applies to all current and future employees, without exception.
If we also stopped the practice of double-dipping (working another government job while getting a government pension) we may automatically either get more use out of people- as competent people stay on- and incompetent ones get cut loose after years of sucking at the public teat. Please also note how a some x-politicians end up with amazing pay state jobs after they lose an election for at least three years so they can get a bigger pension for life- this practice has to stop.
If the pension were really a pension- it would only be for when you stopped working, and allow those of us who are still working and paying for it, a chance to build our own pension plans- which are nowhere as rich as those provided to public servants. But, that’s a total pipe dream. Thankfully, our health care system is still not optimal and we can count on lower life expectancies since we still think it’s important to put 25% of our health care money into hands of paper pushers instead of into actual medical care. Just think if we cut that unnecessary expense and actually spent it on health care- how much longer the pensioners would collect.
Here’s the Dayton Grassroots Daily Show on the subject: