On Thursday, the state senate will vote on a bill that substantially changes benefits for new teachers in by reducing the amount of their pensions and increasing their retirement age. It’s a high-speed, low-publicity bill. It was published Tuesday. Amendments will be accepted on Wednesday. And the senate will vote on it Thursday. Not much time for review or response by the public.
The reason (if there is one) seems to be some undisclosed actuarial numbers that suggest that teacher pensions will not be fully funded by 2040, as originally scheduled. In1983, the Commonwealth recognized that it had to deal with the unfunded liablity of teacher pensions By 1996, a plan was in place. The amount of money teachers were paying into their retirement increased from 9% to 11% and the pay-as-you-go system that caused the problem was phased out.
Suddenly, the state senate says there’s a problem, and rather than take on all teachers, that austere body hopes to make up for the alleged future underfunding of teacher retirement with a divide and conquer strategy much like proposals to scale back Medicare and Social Security. This is unfair to future teachers as the governor’s own special commission on pensions concluded in 2009: “[T]he burden of amortizing the unfunded liability from past service should be spread broadly among taxpayers and not borne by today’s public employees.” (Give you a buck if you can find the report online).
The teacher retirement system saves tax dollars. The state doesn’t contributes 2% of payroll for teachers hired before 1996 and 1% for those of us who were hired after 1996 or opted into Retirement Plus. That’s instead of paying 6.2% of payroll to Social Security, which teachers don’t receive. In short, teacher pensions save taxpayers about $373 million a year.
Please email you state senator, tell them to slow down, and look more carefully at teacher pensions. You don’t have to be a teacher to care.
That’s right. The teachers get to cover that.
Instead of paying 7.5% to Social Security, they get to pay 11% to the state so the state doesn’t have to pay a matching share to the Feds. And at the end of the day, they get to have their survivor benefit from the spouse’s Social Security reduced by the Pension Offset. Just so the state can save $373 million by screwing the personal economics of every teacher.
What a deal!
It’s time to face facts – Dukakis screwed up by keeping MA public employees out of Social Security when 40+ other states opted in back in the 1980’s. Now, the teacher share and retirement age will rise and rise as the pension system shrinks. It’s time to bring MA into the national plan for teachers still 20 years out.
Absolutely right
Retire at 65 not 50
no Billy Bulger 250K pensions.
I would love to see the 11% withheld for teachers go into individual defined contributions accounts and the little I’ve read about this the state does some matching. Won’t it be great for a teacher to have a 700K or 1M retirement account. No gaming the system – it’s their money.
$300,000 a year because I’m a teacher. What do you design, castles in the air?
The average state employee pension is about $28,000 a year, and the average teacher and school administrator pension is about $38,000 a year. In addition, the maximum annual cost-of-living adjustment is just 3 percent on the first $12,000 in pension income.
Assume retire at 55, and 30 years in retirement – 30 x 38 = 1.14M. I would assume an annuity of that size would be in the 700K range maybe more.
So yes if you are retiring at 55 – with a 38K pensions you essentially are retiring with a 700K check. For us in the private sector we cannot start collecting until 62 and we don’t get health insurance.
The cost of health insurance is not cheap, at a minimum it will cost 14K a year for 10 years until you get covered – so add 140K to the 700K.
Teachers don’t earn 300K a year but there are a fair number of state employees who do. Bill Bulger is a really bad poster child for pension abuse it needs to be fixed.
There are 0 teachers in Massachusetts who earn a salary or receive a pension anywhere near $300,000. On the other hand, lots of people in the private sector make over a million dollars/year. Should we judge the needs all private sector workers on these people? Of course not.
Stick to the facts. The average teacher pension is $28,000/year.
Pension Offset more? I don’t know about it or what it means.
At one point, you say ‘we’ in writing about this, so I had assumed you were a teacher. If not, I understand, but if you ARE – it AMAZES me that public employees don’t know about this because it impacts their financial future.
Cliff Notes version – MA is a non-contributory state which public employees do not pay into Social Security (didn’t used to pay FICA either, and that used to be a problem as some people couldn’t get onto Medicare – now, FICA is collected). So, when a MA public employee tries to collect anything from SS, the Feds do an ‘offset’ – it reduces the amount of any SS benefit by the amount of the MA pension. This was passed by Dan Rostenkowsi in the late 80’s to coerce the states that hadn’t joined in the early 80’s by penalizing those public employees.
If a public employee works 40 quarters in the private sector and can collect SS, they can apply. But if the SS benefit is $800/mo and the MA pension is $600/mo, they only get $200 from SS. If the SS benefit is $800 and the MA pension is $900, they get nothing.
But to me, it’s the widows that really get screwed. The facts of historic compensation being what they are, most women find the percentage survivor benefit from their husband is more than their own SS benefit that they earned. But – Teacher has a $1,000 MA pension. Husband has SS of $1,500. Monthly income is $2,500. He dies, and her survivor benefit is $1,000. After the offset, her survivor benefit is Zero. Monthly income drops from $2,500 to $1,000, right at the age when getting that second job is difficult in a GOOD economy.
All so the state can save the employer share.
If a public employee works 40 quarters in the private sector and can collect SS, they can apply. But if the SS benefit is $800/mo and the MA pension is $600/mo, they only get $200 from SS. If the SS benefit is $800 and the MA pension is $900, they get nothing”
I have never heard of anyone getting nothing, if they have the 40 quarters. But, yes, the benefit will be radically reduced because a diferent formula is used (one which recognizes the SS will not be the primary retirmement source. This is part of the WEP. Now, the GPO is entirely different and does, indeed, keep a spouse from getting a SS pension, if they already have one which is larger than the deceased’s SS pension. Check out: http://www.socialsecurity.gov/gpo-wep/
Is “double dipping”. Teachers can’t receive both a teacher pension and SS. However, my understanding is that a teacher with 40 quarters can receive a very small yearly amount from SS – certainly nothing that anyone could live on.
You are correct: if someone has the 40 quarters, they will receive a reduced amount, certainly not enough to live on. (The whole of idea of the Windfall Elimination Program was to do just that, because someone would already be receiving a pension elsewheres)
I will collect social security. I certainly don’t have 40 full-time quarters of work in the private sector. And I’ve always understood that I won’t have social security. My father, a former administrator, does get some social security. My mom, a former educator, gets her pension, but I doubt she has enough quarters for social security.
Thanks for explaining the offset, I never heard about it.
The complicated part about retirement is when to retire and at what rate. If you take 80%, you leave no benefits for your spouse. If you live long enough, 80% is worth taking. If you don’t, you can take less and leave your spouse some income, but sacrifice on how much you collect.
If you are younger than 40, you are gambling that MA will be able to support the current sustem. This is doubtful.
If you are married, your spouse will have thier pension reduced by the amount of your pension, unless you are married to another publicn employee.
When your dad dies, your mom will lose his SS and her income will decrease, if you describe their situation accurately.
For yoru own good, please investigate the WEP and other offset provisions now, while you are still working.
look into it. I’m 47 and in Retirement Plus.
http://www.docstoc.com/docs/45294861/Home-The-Final-Report-of-the-Special-Commission-to
Although the chinese site, offers a surreal thrill…
http://wenku.baidu.com/view/cba60dc7aa00b52acfc7ca6f.html
you a dollar.
The state ignores its obligations, and decides that working families have to make up for it. Too bad we’re not all bankers. There’s always money for them.
MA taxpayers have paid billions of dollars into retirement systems. The majority of that goes to satisfy the impending unfunded liability requirement, but a healthy 20% goes to satisfy payments to current retirees. See the earlier cited report as well as the financial statements available on the MTRS website.
A teacher who retires at 63 today with 30 years and an average salary of $70,000 will receive an annual pension of $56,000. Women in the US have a life expectancy of 83, so the average pensioner will receive over $1.1 million dollars in pension benefits.
Assuming they began teaching in 1980 at a salary of $20,000 and earned 4.5% annual raises over the next 30 years, at a contribution rate of 11% earning a 10% annual rate of return, they would have contributed only $550,000.
Who do you think makes up the difference?
There are several advantages to replacing the MRTS with social security:
1. It will allow a free flow from the public schools into the private sector and back. This will bring new skills into schools and classrooms where they are needed to modernize the curriculum and operations.
2. Salaries can be made more on par with private sector equivalents. This would provide a compensation boost, particularly in the early years when it is needed to pay off student loans and other expenses of starting out on a first job.
3. Long-range compensation planning for municipalities would be more simplified and predictable.
4. The incentive to double dip and game the system is removed.
The point you’re missing is that the state got the service of that employee for 30 years at a wage that is lower than the employee could have received had she chosen to apply her skills elsewhere.
It’s hard to know career values in 1980, so let’s look at today’s numbers. (I’m sure we’ll haggle over “summers off” versus how much out-of-class work is required, but let’s stick to salaries for now).
Springfield Public school teachers have a starting salary of $41,723, if you have a master’s degree (which is basically required). The salary for someone with 20 years experience is $64,048. That’s the range.
Let’s look at other professions (I went to PayScale.com and took the median point of their high and low range for various professions).
Registered Nurse: $60k
Insurance Claims Adjuster: $55k
Pharmaceutical Sales: $50k (entry level)
Training coordinator: $46k
Paralegal: $46k
Staff Accountant: $44k
Web Designer/Developer: $51k
Research Scientist: $76k
Project Manager: $70k
Speech Pathologist: $65k
Many of those salaries also have a lot room to grow – but the teacher salary has a narrow band – between $41k and $64k (though they can go higher with more education attained).
So although you’re couching this as “teachers getting much more than they paid in”, which is true, you’re ignoring that the state got people for less than they could have earned had they chosen different, but comparable professions.
Now you may want to include other lower-wage professions into the mix, but that would be wrong, because someone capable of 6 years of college and capable of being in front of a room of kids has the skills to not work as a grocery store clerk or an administrative assistant. So yes, teacher retirement is pretty good, but if you’re going to try and quantify numbers, then add about $20k to the salaries out there in lieu of a defined benefit pension (keeping in mind most of the defined contribution plans have employer matching) which is what you’d need to make the position equally attractive.
I’d love to read the report, but for some reason, I’d have to pay for it. Even though my tax dollars contribute to the government that produced it.
Since 1996, teachers have been funding 95% of their pension. The unfunded liability comes from the state not meeting its obligation back in the day, not teachers.
Replacing MTRS with social security….
New teachers, particularly those who haven’t student taught, bring very little to the classroom, aside from inexpericence. Not a great reason to give teachers a worse pension.
Municipalities pay teacher salaries, not the state, which manages the MTRS. The incentive for them to increase salaries as the state cuts aid is? Bupkis.
Municipalities don’t contribute to teacher retirement. No issue here.
Double-dip into what? We don’t get social security. It’s true in the past. Not true now.
We’re getting 0% now, for years in a row. During boom times, we get a 2% raise. Equivalent salaries will not happen in my lifetime or yours.
There is no “gaming” the system for teachers. We are not Billy Bulger – we are the people who educate your children.