The economy is picking up steam. State, city and county employees have willingly accepted millions upon millions of dollars in cuts to their pensions. California’s largest pension fund has recouped every single investment penny it lost from the Great Recession. So I thought perhaps California police officers, teachers, firefighters, and other public employees could finally exhale. I hoped we could finally enjoy relief from daily attacks for the modest pensions we count on for retirement security.
Buddy Magor, Peace Officers Research Association of California
Public CEO, January 27, 2014, “Stop Blaming Public Employee Pensions for Problems

Whether or not the economy is “picking up steam” at a rate sufficient to rescue California’s financially challenged public sector pension funds is a debate that is by no means over. But let’s consider Mr. Magor’s other point regarding the “modest pensions we count on for retirement security.”

By now everyone should be familiar with the so-called “three-at-fifty” pension formula which, starting in 1999 with the passage of SB 400, was steadily adopted throughout California’s cities and counties for public safety employees. Simply stated, “three-at-fifty” means that public safety employee pensions are calculated as follows:  Their final salary is multiplied by 3.0%, with the result multiplied by the number of years they worked. For example, if a public safety employee’s final salary is $100,000, and they worked for 30 years, then their pension would be $100,000 times 3.0% times 30 (years), equaling $90,000 per year. The “fifty” in the pension formula refers to the minimum age of eligibility.

In some cases, recent reforms have moved the age of eligibility to age 55, meaning the formula is unaltered, but the retiree isn’t eligible for their pension until they’re 55 years old instead of 50 years old. Other reforms have increased the amount public safety employees need to personally contribute to their pension benefits via payroll withholding, although in virtually all cases these increased contributions only apply to the “normal” payment and not to the monstrous unfunded liabilities. But let’s not get into the weeds, because the real question is this:

COMPARISON TO SOCIAL SECURITY

How does this “modest” (and reformed) pension formula, “three-at-fifty-five,” compare to Social Security? Perhaps an “apples to apples” comparison will establish which of these benefits is modest (and sustainable), and which is not.

In the spreadsheet analysis which anyone who wishes to verify these calculations can download here, an attempt is made to express the Social Security benefit in the same terms as a public sector pension formula. Instead of 55, the age of eligibility is 68. Instead of 30 years as the typical term of service – representing age 25 through age 54 for a public safety employee – the multiplier is 43, representing age 25 through age 67 for a Social Security recipient. By entering a birth date of 12-31-1945 in the Social Security Administrations “Quick Calculator,” along with a final salary of $80,000 per year, it is simple enough to verify that a 68 year old retiree would be eligible for a 2014 Social Security benefit of $26,532.

Here is the comparison between this Social Security benefit and a pension for a 55 year old public safety employee who retires after working for 30 years, who also had a final salary of $80,000 in 2013:

Public Safety:  “3.0% @ 55,” Multiply $80,000 x 3.0% x 30 = pension benefit of $72,000 at age 55.

Social Security: “0.77% @ 68,” Multiply $80,000 x 0.77% x 43 = Social Security benefit of $26,532 at age 68.

This is the true apples to apples comparison that renders any suggestion that public safety retirement benefits are “modest,” even at the reformed “3.0% at 55” formula, to put it charitably, highly questionable. Are these pensions, fantastically better than Social Security, meant to make up for a career of modest earnings? That’s also debatable.

A recent California Public Policy Center study entitled “How Much Do California’s State, City and County Workers Really Make?” estimated the average pay and benefit for full time state/local government employees in California. The study used data provided by the State controller’s office and includes downloadable spreadsheets for anyone who wants to verify the findings. The average 2012 base pay – pension eligible pay – for full-time public safety employees in California was estimated (ref. Table 3 in the study) at $76,251 for state agencies, $76,864 for counties, and $91,782 for cities. And these numbers are not skewed by the presence of executive positions – repeated analysis has demonstrated that median figures are consistently higher than averages for public sector compensation, especially for public safety employees.

In reality, the final year salaries that public safety pensions are calculated on are much higher than these mid-career averages. Most public safety employees retiring today after a 30 year career in California can expect pensions of about $100,000 per year. Since Social Security benefits are progressive, and pensions are linear, an apples to apples comparison using larger examples would yield even greater disparities. But we’re getting into the weeds again.

RETURN ON INVESTMENT FOR SOCIAL SECURITY CONTRIBUTIONS

Here’s one more statistic that should be of interest. Public sector pension funds earn 7.5% per year. That’s pretty much guaranteed, because if they don’t, the taxpayer covers the difference, not the beneficiary.

What about an independent contractor in the private sector who turns over 12.4% of their gross earnings to the Social Security Administration, year after year, and retires after earning $80,000 in their last year of work? What’s their return on investment? It is a whopping 1.5%. For all practical purposes, middle and upper income Social Security participants earn nothing on their Social Security contributions.

It isn’t necessary to eliminate defined benefits for public employees, nor is it inappropriate for public safety employees to earn better retirement benefits than private taxpayers. But to earn three times as much, thirteen years sooner, is not affordable or fair. It is certainly not “modest.”

*   *   *

Ed Ring is the executive director of the California Public Policy Center

28 Responses to How Does “Zero-point-Eight at Sixty-Eight” Sound for a Pension Plan?

  1. Tough Love says:

    Quoting…” nor is it inappropriate for public safety employees to earn better retirement benefits than private taxpayers.”

    Ed, you opened a wide door there w/o qualification …. and Public Sector Unions are known for driving very large benefits even through small doors.

    Their ability to retire earlier (and therefore COLLECT one’s pension for many more years) is by itself a VERY generous and VERY costly TAXPAYER-funded benefit. Run it through your own spreadsheet to measure the singular incremental “value” of that benefit.

    That’s ENOUGH … the $$$ pension should be no greater than the typical employer-provided retirement benefits afforded equally paid Private Sector worker.
    ————————-

    And let’s not “forget” the the HUGE Taxpayer-funded cost of the free or heavily subsidized retiree healthcare that Public sector worker’s get …. almost unheard of via Private Sector employment any longer.

  2. Tough Love says:

    Ed,

    There is one weighty Public Sector pension benefit I never see mentioned (neither in blogs nor in academic studies) which I’m certain is quite substantial in added “value”.

    In the many discussions of Public vs Private Sector compensation “advantages”, putting a “value” on this advantage would be both enlightening and helpful. Sure, I can do the math, but it will be more “believable” coming from you, and your pension calculation spreadsheet can easily be modified to determine it’s incremental “value”.

    Specifically……

    Most Private Sector workers (these days) have half a dozen jobs during a career, and even if each position had the identical Defined Benefit (DB) pension (of the ”traditional” type afforded Public Sector workers) the sum of the 6 separate pensions would be considerably less (possibly even HALF) of what it would be if the entire career had remained with one employer in one DB Pension Plan. A good example might be an engineer or an accountant, or even an attorney.

    In the Public Sector ONLY, the workers can move from Department to Department (often to completely new agencies) yet remain in the same DB Plan throughout their career. The ability to remain in ONE Plan has huge benefits because, under a final-average-salary-pension, regardless of these jobs movement ALL of the service years use the final pay from the FINAL job as the “pensionable compensation” in calculating the pension.

    The “advantages” available ONLY to Public Sector workers are many, often being VERY costly and unjust to the Taxpayers who pay for them. While I’m NOT saying that THIS one should be eliminated, quantifying it’s incremental “value” would be enlightening and helpful in discussions of such advantages.

  3. YEEEHAAA says:

    Yeeeehaaa –

    Well, someone needs to keep Ed from slipping down the slope to oblivion. Here I am, to save the day!!

    Ed, Ed…Ed. You say you do an ‘apples to apples’ comparison, by comparing social security (which is meant to be a PIECE of retirement) to a CalPers pension (which is meant to be the ENTIRE retirement). Since you are wanting to do an ‘apples to apples’ comparison, this would be akin to taking one piece of the fruit salad – say the APPLE. Taking just that piece of the salad and holding it up against the rest of the food group, and saying ‘our apple isn’t as nutritious as what that other guy is getting’ – it isn’t an ‘apple to apple comparison’. It is manipulation of the facts to influence stupid people (you’re sole reader/supporter knows who he is). Now if you were to compare something like the FERS to CalPERs that would be a bit more realistic. And since I brought it up – let’s do that.

    FERS and it’s three legged stool
    Retirement factor 1%
    Social Security
    TSP (with employer match)

    PERS
    Retirement factor 2.5% (the new highest model)

    NOW FOR THE FUN PART!!!

    EACH JOB BASED OFF 100K/YEAR TO MAKE IT SIMPLE WITH 30 YEARS ON JOB

    FERS
    30K/YEAR RETIREMENT
    33.165k/SS
    32.5/TSP @ 5/5 MATCH 6% COMPOUND X 30 YEARS, WITH 5% DRAW AT RETIREMENT

    FERS TOTAL PER YEAR $95,675

    PERS
    75k/PERS – 2.5% x 30 years x 100,000
    THAT’S IT – nothing else

    ———–

    Now I’m not the great mathematics professor that you are, but that seems like (and please correct me if I’m wrong) 20k difference per year – to the negative for our CalPERs guy. What’s that you say – the CalPERs guy could do something like the TSP…NOPE – there is no TSP with employer match with the state. There is no social security for safety employees. That brings up a good point – you ALWAYS use safety employees to illustrate you’re points because it throws the stats so far off that the uneducated buy into the bovine defecation. How about using the teachers with their 1% per year (plus SS)?

    Anyhow…enough. Perhaps you are destined to become another Boringstien.

    Yeeeehaaaa

    • Ed Ring says:

      YEEEHAAA – The gentleman quoted at the beginning of the post claims that public safety pensions are “modest.” They are not.

      A “modest” pension is Social Security, where – if your final year of earnings are $80,000 – you pay 12.4% of your lifetime earnings, at a rate of return of about 1.5%, in order to get an annual benefit of $26,000 after 43 years.

      If we are going to save the defined benefit for public sector employees, and I think we should, then maybe it’s time to come down to earth and admit that pensions that pay 3% at 55 and rarely, if ever, require employee contributions of greater than 9%, are not “modest.” Nor are they affordable.

      If we moved everyone in public employment back to the defined benefit formulas that were in effect in the 1990’s, retroactively, we could save the defined benefit. Alternatively, if we were to reduce all defined benefits, for active and retired employees, proportionally, by an amount sufficient to restore full funding, we could save the defined benefit. To do that, of course, we’d have to agree on a realistic rate of return.

      We are preparing new analyses of CalSTRS in order to shine the spotlight on their challenged pension fund, by the way. You’re quite right that public safety pensions are not the only source of financial distress to ordinary Californians.

    • Tough Love says:

      YEEEHAAA, You fool nobody. It’s not surprising at all that YOU (as a Public Sector worker riding this gravy train and not wanting your grossly excessive Taxpayer-funded pensions & benefits appropriately reduced) choose to compare one PUBLIC-Sector-Worker Plan to another PUBLIC-Sector-Worker.

      We BOTH know that that’s NOT the relevant comparison. Since Public Sector workers make no less in “cash pay”, and with EQUAL Public/Private Sector “Total Compensation”(cash pay plus pensions plus benefits) the appropriate goal, then YOUR Public Sector Plan benefits should appropriately be compared to what the Typical PRIVATE Sector worker gets from his/her employer in retirement benefits

      We ALSO know why you would never do that Apples-to-Apples comparison …. because (taking into account BOTH the MUCH richer pension formulas AND the MUCH more generous Plan provisions… e.g.,VERY young retirement ages) non-safety worker pensions are always AT LEAST 2x greater in value at retirement than those of their Private Sector counterparts, MOST OFTEN 3x-4x greater, and for Safety workers, usually 4x-6x greater.

      Readers who have been following pension reform discussions for some time already know all of the Union/worker BS, lies, omissions, false statements, distractions, and distortions … and the masses are rapidly coming up to speed.

      Your greedy days are numbered.

    • Tough Love says:

      YEEEHAAA, While as I said earlier, State & Local Public Sector worker pensions (actually, “Total Compensation”) should be compared to PRIVATE sector pensions, not the retirement benefits of Federal workers, your attempt at demonstrating that FERS provides for a greater retirement package thank PERS is so loaded with errors and improper comparisons that I thought I would point them out and correct the comparison.

      First, your PERS pension would be correct for NEW employees, but since those workers won’t retire for 20+years, the proper PERS pension against which to compare to FERS is the PERS 3%@50 pension yielding a starting annual pension of $90,000 and COLA-increased thereafter,

      Here is a correct work-up for FERS:
      (1) The FERS 1%-factor DB Plan would yield a $30K annual COLA-increased pension as you stated
      (2) Your SS annual payout of $33,615 is materially overstated. In fact, the MAXIMUM SS payout for retirement in 2014 at full SS retirement age of 67, and with 35 years of contributions (all of which were at the contribution year’s maximum wage base) is $2,642/mo ($31,704 annually). Since in your example this worker only worked for 30 years, 5 years of ZERO wages are factored into the SS calc., and the that ”maximum” drops to $31,704 x 30/35= $27,174. And with a $100,000 salary in 2014, this worker isn’t even near the 2014 Maximum wage base of $117,000. Assuming the same relationship (of actual wages to the SS Maximum wage base) in each prior year, and we can further reduce this worker’s SS benefit to approximately $27,174 x 100,000/117,000 = $23,226
      (3) The Federal employee TSP Plan does indeed include a Taxpayer ”match” up to 5% of pay. THAT should be included for an Apples-to-Apples comparison with PERS, but the employee’s own contributions should not as it would be analogous to outside savings for the PERS employee (which you have NOT included).You have also materially overstated the payout from the TSP accumulation. A worker earning $100,000 today would have started with about $20,000 30-years ago. Seems reasonable as it would imply a 5.7% compound annual wage increase over the 30years to reach $100,000 at the end of the 30-th year. Taking 5% of each of the 30 year’s wages and accumulating each to the end of the 30-th year at 6% results in an accumulation of $160,812. Using your 5% withdrawal rate gives an annual TSP payout (from the Taxpayer ”match”) of $160,812 x 0.05=$8,041.

      Summary:

      PERS payout = $90,000

      FERS (with TSP including only the Taxpayer ”match” portion):
      = $30,000 + $23,226 + $8,041 = $61,267

      But even THAT is NOT yet apples-to-apples. An adjustment is needed because the PERS payout typically starts at age 55 while the FERS workup assumes age 67 (or if earlier, we would have to reduce the SS payout using the SS early retirement reduction factors) and a pension starting earlier is more ”valuable”.

      Using Life Annuity factors from a pension mortality table, a life annuity that begins at age 55 is 36% more “valuable” than one that begins at age 67.

      This means that a PERS pension of $90,000 that begins at age 55 has the same ”value” as a $90,000 x 1.36 = $122,400 annual pension beginning at age 67.

      THAT’S the figure that is apples-to-apples with the $61,267 federal pension…..the PERS pension is TWICE AS GREAT on an apples-to-apples basis.

      And given that Federal pensions are typically 50% to 100% greater than Private Sector pensions (of comparable workers), that suggests that the PERS pension is 3-4 times that of the comparable Private Sector worker …. just like I have been saying for a long time.

  4. YEEEHAAA says:

    “A “modest” pension is Social Security”

    Ed – SS is NOT a pension. It is a supplement.

    3% @ 50 has been replaced with 2.5% @ 57, which is the actuarial equivalent of 2% @ 50 or 2.5% @ 55. This effects new hires of course.

    NEXT.

    • Tough Love says:

      No YEEEHAAA, the fact that the drop from 3% to 2.5% (an insufficient decrease in itself, and still “excessive” relative to Private Sector “pensions”) applies ONLY to NEW workers and not to the FUTURE Service of all CURRENT workers makes it almost financially meaningless over the next 20 years.

      CURRENT workers will CONTINUE to dig the financial hole we are in deeper every year as they continue to accrue additional pension accruals far in excess of what is necessary, reasonable, affordable or “fair” to Taxpayers who pay for almost all of fit.

      I understand pensions too well to be BS-ed and can’t be fooled …. and I’ll continue to show how each offer, compromise, or proposal from your UNIONS is full of holes and rarely of any material value.

  5. Ed Ring says:

    YEEEHAAA – Here is where perhaps a bit of empathy is called for on the part of public sector employees, active and retired, who have never had to pay into Social Security as independent contractors. And no, it doesn’t count if a public employee uses their ample paid time off to work as an independent contractor to earn “supplemental income.”

    Just imagine if your entire income – 100% of your earnings as an independent contractor – were taxed at a rate of 12.4% – in order to fund Social Security. Under threat of imprisonment, you will fork over 12.4% of your gross earnings in order to earn 1.5% on your money.

    In the real world, YEEEHAAA, when you invest 12.4% of your earnings, you have a right to expect more than a “supplemental” annuity when you retire.

    It is time for public sector employees to empathize with the private sector taxpayers who pay them, and work with the moderate reformers to enact (1) financially sustainable pension plans for ALL public employees, not just the new hires, and (2) eventually move on to a system where taxpayer funded and government administered retirement security programs (and that would definitely include CalPERS, CalSTRS, and all the rest) are earned by ALL American workers, public or private, according to a common set of formulas and incentives.

    Otherwise, every law and ordinance passed by public entities is suspect, because the interests and agenda of these public sector union controlled public agencies and the workers in them, along with their entire financial reality, is completely divorced from the people they supposedly serve.

    • Tough Love says:

      Ed,

      Please ….

      Sorry, but pussyfooting around with these Unions/workers will get us nowhere. “Empathy” they’ll give us by the boatload … but nothing of material financial value.

      The material changes needed for the FUTURE Service of all CURRENT workers will need to be forced upon them … via bankruptcy, outsourcing, cash pay (and hence pension) reductions, or an outright refusal to pay CalPERS on the basis that funds are ONLY sufficient to pay for “essential” services ….. of which pensions is NOT one.

  6. reality check says:

    S/S = 7% employee input, take a look at what Government employees pay into to PERS. If You want to do honest calcs at least use the right numbers.

    Also, misc employees do not make near what public safety makes in their job or in retirement.

    I am not saying we do not have a good retirement. Work someplace for 30-35 years and then ask us to have our standard of living drop in half or less is what you folks seem to think is “fair”…

    Look in countries that do not pay public servants enough to live and see how much corruption are in those countries.

    Would you rather have loyal public workers or corrupt ones?
    (This is really something you folks need to think about)

    Because we are going to pay one way or the other.

    • Tough Love says:

      Quoting … “I am not saying we do not have a good retirement. Work someplace for 30-35 years and then ask us to have our standard of living drop in half or less is what you folks seem to think is “fair”…”

      No, we’re saying that YOU … just like all PRIVATE Sector workers … should have to independently “save” out of your net paycheck to fund 1/3-1/2 of your retirement needs.

      The Taxpayers should fund no more of YOUR pension than Private Sector employers fund of their worker’s pensions.

      You’re NOT “special” and deserving of a better deal … on the Taxpayers’ dime.

      • reality check says:

        Nice of you to ignore the rest of what I said.

        And some of us pay a lot more into our retirement then what people pay into S/S.
        Most of us have paid into S/S and won’t get a dime or get a reduced amount because we have the other retirement plan.

        Some of us even pay some of what you are calling the taxpayers dime because we pay part of the employer share… and much as you don’t want to believe it, we are taxpayers too.

        I agree that the ones that do not pay anything into their retirement and all of it is on the employer is wrong, but that is not all of us.

        What upsets some of us is you lump all of us into the worst case you can find, many do not make over $100k a year, yet you lump us in with the ones that make $200-$300k or more.

        The Average payout per month from PERS as of Oct, 2013 was $2629.00 a month(That is $31.5k per year)

        And… how long have you been at your current employer?

        • Tough Love says:

          Reality Check,

          Every one of your points does not hold up under scrutiny:

          (1)Quoting … “And some of us pay a lot more into our retirement then what people pay into S/S. Most of us have paid into S/S and won’t get a dime or get a reduced amount because we have the other retirement plan.”

          The SS Administration (for good reason) calls the provision that reduces your SS benefits the “Windfall Elimination Provision” because it “eliminates” the receipt of an UNJUST windfall. You can read about it here:
          http://www.ssa.gov/pubs/EN-05-10045.pdf

          (2) Quoting…”Some of us even pay some of what you are calling the taxpayers dime because we pay part of the employer share… and much as you don’t want to believe it, we are taxpayers too.”

          There are only 2 groups that regularly support(and even rally for) tax INCREASES … those who pay no taxes and Public Sector workers. The former support tax increases because they like Govt-provided services w/o paying for them. Public Sector workers support tax increases because they know that for every $1 in incremental taxes THEY pay, they will get back about $5 form the incremental taxes paid by everyone, most of which goes to nothing other than supporting the excessive Public Sector pension & healthcare promises.

          (3)Quoting…”I agree that the ones that do not pay anything into their retirement and all of it is on the employer is wrong, but that is not all of us. What upsets some of us is you lump all of us into the worst case you can find, many do not make over $100k a year, yet you lump us in with the ones that make $200-$300k or more.”

          ALL of the pension contributions directly from Public Sector workers throughout their career and accumulated to the date of retirement INCLUDING investment earnings RARELY accumulate to a sum sufficient to buy more than 10-20% of the VERY generous pension they have been promised. Taxpayer contributions and the investment earnings thereon are responsible for the 80%-90% balance … and in the absence of the need for such high Taxpayer contributions, the earnings on those Taxpayer contributions would have stayed in the Taxpayers’ pockets, perhaps to help fund their much smaller retirements.

          (4)Quoting …”The Average payout per month from PERS as of Oct, 2013 was $2629.00 a month(That is $31.5k per year)”

          Another classic Union-encouraged tactic aimed at distracting the reader from the relevant figures. That “average” that you quote is deceptively low because it includes
          (a) retirees of LONG AGE who made much lower wages,
          (b)part-time workers with correspondingly low pensions,
          (c)short-career workers with correspondingly low pensions,
          (d)50%-share survivor beneficiaries of deceased workers

          The relevant figure (for comparison with the pensions of similar Private Sector workers) should be the pensions received by full-time, full-career very-recent Public Sector retirees. But of course, that figure likely being 2x-3x times your figure wouldn’t support your agenda to falsely minimize such pensions ….. now would it?

        • SeeSaw says:

          Reality, For part of my career I paid 7% of my gross salary as part of my contribution to CalPERS. As time went on, that percentage was slowly bargained down to the point where all of my share was paid by the employer. It really makes no difference whether the employee paid all, or part of it, or whether the employer paid it. The details were all worked out in the bargaining process. My salary was a lot lower than that of my counterparts in other municipalities.

          PEPRA requires all public employees in CA to be paying their whole pension shares no later than 2018. Fortunately the law caps those amounts at no more than 8% for miscellaneous employees–I believe the cap is 11% for public safety. The haters will never be happy because they can’t bring the public sector workers down to the level of the poor private sector workers who got screwed.

          • Reality says:

            SeeSaw, The 8% cap is not correct, I pay a higher percentage than my employer. That is well above the 8% “employee responsible amount”. It must be nice that they paid your percentage also, but not all of us were so lucky.

            and for Tough Love…
            “Quoting” “The relevant figure (for comparison with the pensions of similar Private Sector workers) should be the pensions received by full-time, full-career very-recent Public Sector retirees.”

            You are as guilty as anyone of being slanted in your opinion.

            You think every Public Worker is paying the least and getting the most, That is where you obviously have your agenda and it simply is not correct. Some pay more than others and get less.

            Those long term benefits were used to entice people to work for the government because they did pay less then the private sector in the 70’s & 80’s.

            Few public sector employees can afford the $700k average house cost in the SF Bay area.
            Some can, Top Managers & Top level Public Safety, but not the rest. They commute from 30/40/60+ miles away to be able to buy a house.

            Changing things going forward is what is starting to happen, good luck getting public service in the future. Call for Police assistance in San Jose now that they changed things. You will be directed to an online form more than likely.

          • Tough Love says:

            Quoting …….. “PEPRA requires all public employees in CA to be paying their whole pension shares no later than 2018.”

            Oh my oh my, how lucky for the Taxpayers … giving the Public Sector workers 4 MORE years just to pay the peanut-sized share of total Plan costs assign to THEM !

          • Tough Love says:

            Quoting Reality says (6:35 PM comment)…… “Those long term benefits were used to entice people to work for the government because they did pay less then the private sector in the 70′s & 80′s.”

            Glad you admit that since the 1980s Public Sector cash pay is no less in the Public Sector, which of course covers almost all current “actives”. So, earning no less in cash pay, together with the fact that EQUAL “Total Compensation” (cash pay plus pensions plus benefits) is an appropriate goal, what justification is therefore ANY greater pensions or benefits … as they ROUTINELY are today ?

  7. Reality says:

    Did you also know that there was a time the employer paid percentage was %0 into PERS? I don’t recall anyone complaining then about public retirements. I also do not recall that money being giving back to the taxpayer.

    The employer percentage fluctuates over time, going both up and down, and yes… even down to zero.

    I have myself, never seen the employee percentage go down, 7… 8… 10… 11…15.. 20 % and still climbing for the employee too. So quit acting like it is all one sided as the costs have risen.

    And thank You Tough Love, You are an inspiration to me to point out the other side of the story since you are so one sided.

    • Tough Love says:

      Reality says,

      It’s the “promised pension” and the cost-share attributed to the worker vs the Taxpayer that is important …… and of course the follow-up analysis of the pension’s “generosity” as to whether it is “fair” to the Taxpayers.

      Theoretically, as long as you receive your promised pension, it would not matter one iota if the employer(meaning the Taxpayers) pre-funded 100% on day 1, level-funded it over your career, or paid for it on a pay-as-you-go-basis. The “timing” of Taxpayer contributions is simply “accounting”.

      As I stated earlier, ALL of your contribution (INCLUDING investment earnings) only pay for 10-20% of your VERY rich pension …. with the Taxpayers responsible for the balance … HOWEVER they choose to pay for it.

      To fully fund your pension over your working career, the Taxpayer “share” can easily be demonstrated to require a level annual 20-40% of pay for non-safety workers and 40-60% of pay for safety workers.

      With Public Sector workers earning no less than their Private Sector counterparts in “cash pay” and EQUAL “Total Compensation”(cash pay plus pensions plus benefits) the “appropriate” compensation goal(for Public/Private Sector “fairness”), how can such huge taxpayer-funding requirements be justified when THEY typically get their employer’s SS contribution on their behalf plus 3-5% of pay into a 401K Plan?

      It cannot … and as I said earlier, you are NOT “special” and deserving of greater pensions and better benefits on the Taxpayers’ Dime.

  8. SeeSaw says:

    I’m confused, Reality. How can you be required to pay more than your employer? I remember reading the numbers that I quoted.

    • Tough Love says:

      Last time I looked, I noticed that (to have a reasonable retirement), Private Sector workers have to fund 75+% of it by saving and investing from their own net pay.

      Heavens …. can you imagine the nerve of Taxpayers thinking that perhaps Public Sector workers should have to do the SAME?

  9. SeeSaw says:

    TL, the majority of workers in this country do not make enough money to be able to do that, without some extra benefits. That is why the DB pension plans for the public-sector retirees are the life-blood for them and also for those that benefit from the ability of those beneficiaries to spend those retirement funds. You take the attitude that public workers don’t also save on their own. I’ve got news for you–we have 457 Plans, in addition to the pension, and 15% of my salary went into mine–I don’t get any spousal SS by the way, due to my government pension. Yes, TL you do have some nerve!! There are many ways for people to save for retirement and working for the public sector and getting a DB pension is one way. You are not the be-all and end-all of humanity, TL! And certainly not the know-it-all, even though you think so!

    • Tough Love says:

      Quoting…”TL, the majority of workers in this country do not make enough money to be able to do that, without some extra benefits. That is why the DB pension plans for the public-sector retirees are the life-blood for them and also for those that benefit from the ability of those beneficiaries to spend those retirement funds.”

      It’s that 2-nd sentence that gets me. Every time you say that, I want to puke.

      Hey clueless …. would the shopkeepers be in a worse position if those purchases were instead made from the increased funds that would be in the PRIVATE Sector Taxpayers’ pockets if they didn’t have to pay such high taxes to support the grossly excessive pensions promised all PUBLIC Sector workers ?

      • Douglas47 says:

        Yes, they would be worse off. Ask WalMart what happens to their profit margin when there is a reduction in SNAP benefits.

    • Douglas47 says:

      SeeSaw,

      ” TL, the majority of workers in this country do not make enough money to be able to do that, without some extra benefits. That is why the DB pension plans for the public-sector retirees are the life-blood for them…….”

      The majority of government workers don’t make enough to do that, either. But they have NO choice. It is automatic. You cannot opt out.

      If, as several studies show, a private sector worker makes 10 to 12% more than an *equivalent* public sector worker, and he diligently funneled that excess into a retirement account, he should have an adequate retirement income.

      IF the state or local government gave the worker a choice:

      A. deduct 8% from your pay and the state will “match” that with 10% contribution to retirement account.

      or B. DON’T deduct anything, AND put that 10% into cash pay instead of pension fund.

      It’s a safe bet that a lot of government workers would opt for the up front cash.

      Then, about retirement time, they would bitch and moan about how “those other guys” got a better deal. When I was 23, I didn’t even KNOW for several years they were taking 5% of my check.

      Same idea holds true for Social Security. Pundits over the years have said that, if the taxpayer were allowed to invest that 12.4% himself instead of being forced into SS, he would end up with MUCH more for retirement. I think we all know, most people won’t, and they will end up on the dole.

      Imagine if GB had been able to “privatize” SS when he wanted to……just before the DOW took a dump.

  10. Pensionista says:

    Interesting article and nice spreadsheet. I’ve been trying to think of a way to compare Social Security plan “benefits” to CalPERS pension formulas so the public and public employees understand the difference. I looked at PERS 2012 State and Schools valuation http://www.calpers.ca.gov/eip-docs/about/pubs/employer/2012-st-body.pdf

    Assuming all plans “earn” the same rate of return, a simplistic approach is to identify a PERS plan whose normal cost is the same as Social Security’s (presently 12.4%). In Appendix D, page D-1, the Normal cost chart shows a Schools 2%@62 normal cost is 11.9% and State Miscellaneous 2%@60 is 13.2%, both with 3 year Final Avg Compensation.

    Assuming PERS normal cost rate estimates are in the ballpark, Social Security would be equivalent to something like a 2%@60 plan. As you pointed out, the Feds don’t give a real rate of return on taxpayer contributions. Which means, surprise!, the Feds are fleecing the taxpayers. In fact, all contributions go into the Fed’s general fund, not the fictitious “lockbox”.

    The US Supreme Court ruled in Helvering v. Davis, 1936, “proceeds of both taxes [employer and employee] are to be paid into the Treasury like internal-revenue taxes generally, and are not earmarked in any way.” http://www.socialsecurity.gov/history/supreme1.html

    Keep up the good work!

    P.S.
    A couple technical points that don’t affect the conclusions.
    1) Social Security contribution rates have increased to 12.4% over the years. Started as 2%!
    2) spreadsheet type SS rate 12.8% should be 12.4%

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