Considering that said pension includes cost of living increases and a spousal death benefit, the actuarial present value of said pension is between 1.1 and 1.2 million dollars, depending on your assumptions.
Contrast this in the private sector. The maximum pension in 2008 that can be paid is the lesser of $185,000 and 100% of pay, commencing at age 62. So if somehow you were making $185k and managed to accrue that full amount by age 43 (doubtful, since these accrue between when you start and when you retire), and you wanted to take the lump sum equivalent of this amount at age 43 and roll it to an IRA, the IRS limits this lump sum to 823,837. Think about that for a minute:
If you were making $185,000 per year and had accrued that full amount by age 43, the most that the IRS would allow to be paid to you is $823,837.
However, under the MBTA plan, we have an MBTA worker whose earnings topped out at $72,000 gets to collect a pension with a starting present value of almost $1,200,000.
And we won’t even get into any “retiree” medical insurance provided to him.
To anyone else out there in the private sector making a $72k salary, do you have $1.2m in your 401(k) at work at age 43?
charley-on-the-mta says
Right, Mike. No Howie or Herald here.
http://vps28478.inmotionhosting.com/~bluema24/s…
Check the ninth bullet point down. (I know, I know, too many bullet points.)
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p>We link to Casey Ross, Wayne Woodlief, Jay Fitzgerald … even Howie. True, not as often as the Globe.
mike-from-norwell says
I’m an enrolled actuary. That means that I am certified (and know how) to quantify the impact of these pensions. The reality here is that the MBTA pension scheme (which we are funding BTW out of all of our pockets) is way over the top and beyond what the IRS allows for those of us in the private sector. This is the MBTA, not Delta Force, not SWAT teams. Why are we funding pensions that start at 43 years old? If this can’t be addressed before raising taxes (and I’m not blaming DP for this, because he landed in the middle of this quagmire), don’t rag on regular taxpayers who don’t want to throw a nickel more to the Commonwealth because we have some pretty concrete examples of what they do with the extra revenue.
they says
I assume we can legally, because in the private sector I’ve heard of people losing their pensions. Let’s assume the only reason these ever got approved was because it was a back-room deal under cover of darkness. Now that the light has been shed on this, what will it take to get out from under these pensions and stop having to pay for them?
mike-from-norwell says
but watch for tremendous resistance, to say the least.
ryepower12 says
Seriously, can’t we stop picking on the middle and working class in this state… and work on, I don’t know, the real problems?!? Does that make too much sense or something?
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p>Did you consider how much these people pay into their pensions? It amounts to way more than what you pay into Social Security, that’s for sure. It’s probably more than 10% of their total salary. So, puh-leaze, if you want to pick on economic problems, forget pensions. It’s not a winning issue – for you, or Massachusetts.
gary says
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p>Sure, compare the two. State employee contribute 11% into the pension, if they earn over $30K, and they don’t pay tax on the 11%. Private employees pay 7.5% in SS and they pay tax on it first.
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p>State employee can retire after 10 years of service and at age 55, unless of course, they’re participating in one of the myriad plans that are scattered randomly throughout the state, in which case, who knows what the rules are. Or, they can retire AT ANY AGE after 20 years!
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p>Private employees can retire with reduced benefits only at age 62, or at full benefits after 65.
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p>So, take your pick, but MikefromNorwell’s point is, and it’s irrefutable, that the State plan is far better than the private employee’s plan. Fair? Hardly.
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p>Contrast also, Social Security is currently solvent whereas the State pension is enormously underfunded. Our (the taxpayers) dime.
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ryepower12 says
While I can’t attest to every kind of public job in the state, at least teachers have to face stiff penalties for retiring early. The further after those twenty years, the less stiff those penalties are… however, it takes a good few years beyond 20 to make retiring early make fiscal sense.
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p>First, I’m not going to disagree, but I will point out two things: 1. private sector employees often make far more in salaries than public sector counterparts. Many of these particular pensions that rile people up are earned by people who could have made hundreds of thousands more per year in the private sector. 2. If the problem is that private-sector employees aren’t receiving fair compensation, wouldn’t it make more sense to build a wall instead of tear each other down? I don’t get why so many people are so interesting in tearing each other apart when we could work together and actually make things fair for everyone.
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p>I’m not going to disagree with the greater point – that it’s not fair – but I do disagree with the fact that the solution is making things unfair for public-sector employees too. The near insanity and bickering pensions cause among people that ought to be supportive of the working and middle class (because most of these people are a part of it) is beyond stupid. The fact that pensions get so many people to support policies that are against their best interests, and draw people away from common solutions to the greater problems facing society is why I keep saying, over and over again, that pensions have become the new third rail of Massachusetts politics.
gary says
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p>Even a broken third rail should be repaired. What’s the argument: pensions are unfairly generous to government workers, but because they really don’t want to give them up, we should ignore the problem.
mike-from-norwell says
You pay 15.3% to Social Security (certainly you don’t think the Employer pays that matching part of the Social Security you see on your pay stub out of the goodness of their heart). Just because you don’t see it doesn’t mean you don’t pay it. Just ask anyone who is self-employed.
mike-from-norwell says
The fact of the matter is we’re focusing on the MBTA plan here, which is clearly egregious in its terms. If you want further, look at this from last summer:
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p>http://www.boston.com/news/loc…
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p>Age 48 collecting $130k a year. Do you know how far and above that amount is over the IRS 415 limits? About a factor of two.
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p>My point is that the state has legitimate things to pay for; the MBTA plan is certainly not one of them (and BTW, look into that Globe article: MBTA contribution is 4% of salary, AND they get free health insurance for life – do you have any idea how costly that is?).
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p>Ryan, I’m not taking down the state plan here; read that Globe article linked above and you might see that this isn’t “bashing on working class folks”; this is bashing on a secretive scam on the part of the MBTA.
they says
Did they find there was a dearth of qualified people applying for jobs, so they had to promise these huge pensions? But that doesn’t make sense, since the pensions encourage experienced workers to retire and then they have to be replaced by unqualified new workers again.
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p>And is Ryan’s point really that we should only try to solve one problem at a time? I don’t think any of us think this is the only problem we have.
mike-from-norwell says
Sometimes those stories Howie Carr tells have a basis in reality. Think you have to be somewhat connected to get these jobs (and the lucrative payout) in the first place. Hence the problem here. We dedicate 20% of the sales tax collected to the MBTA; if these types of gilded pensions weren’t there, think there might be some additional funds available to the Commonwealth to fund more desirable goals?