When we elect a representative fresh out of school, do we commit to paying him a yearly pension for the rest of his life? Or does he have to reach a retirement age? What if we elect someone a couple years younger than retirement age, does he get the same pension as someone that has served for 40 years?
Please share widely!
Unlike most public employees, who need ten years of service to vest, elected officials only need six years. With few exceptions, public employees have to reach the age of 55 to retire. There is something called a termination retirement allowance for employees who lose their jobs (or state reps who lose elections), which is available to employees with at least 20 years of service.
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A public employee’s pension is based on three factors – age, years of service, and the average of the last 3 years salary. The maximum that any public employee can receive in pension benefits is 80% of that 3 year salary average. To get the 80%, you probably need to work 35 years and reach age 65. There are exceptions, however, for teachers and public safety employees.
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You can learn all about penions from the website for the Public Employee Retirement Administration Commission (PERAC), a state agency that you can find on http://www.mass.gov.
I think you summed up the system well, but you were off on one part. I wouldn’t bother with it, but it is actually pretty significant.
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The retirement system uses the top three earning years, not the last three. Now, in 99% of cases the last three IS the top three. But, it is the top three.
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This matters a lot for say, teachers, who may take on more after school responsibilities to bump their salary in their early to mid 50’s and then give those up in their last two or three years before retirement since they have their “top three” already. Similar to fire and police who may do a lot of overtime in the same time period before retirement.
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But, don’t worry…a Blue Ribbon panel appointed by the Legislature’s Joint Committee on Public Service were seemingly just as confused in their recently released report.
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In an otherwise decent overview (Much of the report is focused on classification issues) of not only the system, but the problems facing it, they made the same mistake.
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Anyway, on page 12 they correctly state that the retirement is based on the top three:
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“Retirement benefits are determined by a formula that multiplies the employee’s length of service times the average of his highest three years of earning times a statutorily set factor that is determined by age of retirement.”
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However later in one of the appendices, on page 20 they go with the last three standard:
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“A key issue is how to measure pre-retirement earnings. Currently, benefits are based on the average of the last three years base earnings.”
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You would think a blue ribbon panel would at least have the basic facts of the system down?.Call me kooky.
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All this having been said, I still think the real issue with the retirement system isn’t so much how much they pay…it’s the cost of health care.
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The report even states that much of actual pension payments are paid for through employee contributions?while the “old timers” still only pay 5% the deal is getting less impressive for younger employees?.Many pay as much as 13% of their salary toward the pension. I actually see that percentage going up someday to help pay for health care costs. Either that or they start letting public employees contribute to Social Security – They are unable to do so now.
I just used last 3 years to simplify the system. Since most public employee salaries do go up every year, their highest 3 years are almost always there last 3. I have never heard of teachers or anyone else not padding their salary in the last 3 years before retirement by giving up extra work. The real problem is the hidden retirement bonuses that inflate employees’ salaries over their last 3 years, but I think PERAC has been good at fighting that recently.
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Right now, most new public employees are self-funding their own retirements, especially teachers who can contribute up to 13% of their salaries. Our present public retirement deficits all stem from the pay as you go systems of the past.
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The unfunded future liability for retiree health insurance is a big issue. A few communities are addressing this issue by putting money aside like they do for pensions, and every governmental entity has to calculate those costs by the end of this year, I think. Health care is the big gorilla everywhere in the public fisc. Unless we get control over health care costs everywhere – private and public sector – those costs are going to bury us.
One of the problems with the public pension system is how it can be so easily manipulated to achieve payouts for undeserving people.
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In Springfield, a long-time city councilor (part time position with a stipend of $10k) was appointed head of the election commission a few years back. He had 20 years on the council (while working in the private sector), so his $90k job for two years bumped up his pension payments way higher than he deserved.
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I’ve heard stories of part-time parks department employees, working just a little each year, but getting years into the system, they then get handed a good job in their last three years and magically get a nice pension.
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And don’t forget Billy Bulger and the Romney appointments.
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Any revamp of the system needs to figure out a way to screen out the obvious political plums from the rank and file. The social security issue is valid too — public workers don’t contribute to social security, but they also have their social security offset by their pension (or vice versa) if they happened to work in both the private and public sectors. That hardly seems right.
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A lot of people have the public pension system in their sights because the private pension system has largely evaporated, and I can see the point — if private workers can’t enjoy an 80% retirement, why should public workers get it? But we should be fighting the opposite battle, looking to restore pension and retirement stability, because 401k accounts simply aren’t going to sustain people for the rest of their lives, especially when the market tanks every so often.
Worked 3 years for Duke at $100k, went home and becme Selectmen at $1,000 – and after they turn 55, the pension will be based on 1987-1990, not the subsequent $1,000 per annum.
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This isn’t a partisan issue – there are 8,000 boards and commissions, some with and some without stipend – and thre are probably some appointments initially made by Volpe sitting there!
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And John – it isn’t just for their lives – it’s for their spouses lives, too!
That’s the kind of thing I was worried about. I think we should scrap pensions and have them contribute to social security like everybody else, and then their time working for Duke would be just another job, like my top three years back in the dot com boom of 98-2000. Will my social security be based on those three years, or the video store job I’ll probably have to get soon?