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Many states have already made those changes - to a defined benefit or lower percentage of contribution to the pension.
What is reprehensible are those states that change the rules on the already retired. It's one thing to change the calculations for people BEFORE they retire - it's another to change it after people are out of the workforce.
Many states have already made those changes - to a defined benefit or lower percentage of contribution to the pension.
What is reprehensible are those states that change the rules on the already retired. It's one thing to change the calculations for people BEFORE they retire - it's another to change it after people are out of the workforce.
COLA adjustments are not usually afforded the same protections as the actual defined benefit and are more easily changed. It is one of the more effective ways at capping future pension costs. It is unfortunately a reality that many of us may be looking at moving forward. That is why I have often mentioned creating the ability to provide yourself with a COLA yourself. Changes are coming and the more they delay doing what is necessary then greater the probability of us as current recipients will be impacted. I realize it is not unreasonable to see up to a 25 percent reduction in our pensions and or SS based on a financial meltdown which courts can'tprotect against.
Many states have already made those changes - to a defined benefit or lower percentage of contribution to the pension.
What is reprehensible are those states that change the rules on the already retired. It's one thing to change the calculations for people BEFORE they retire - it's another to change it after people are out of the workforce.
I agree it's reprehensible, but I didn't know it happened outside of rare cases such as the Detroit bankruptcy. In California (at least for teachers) changes apply to new hires only unless there is some provision which had a sunset clause when the provision was first put into effect. The courts have ruled that pensions are contractual agreements which cannot be breached or modified by the state legislature. Of course, every state's laws are different.
My govt. pension doesn't work that way. After you're vested, 5 years of service, they multiply your years x's 2 to figure your percentage. Say you started at 40 years old, worked 15 years and retire at 55 years age. You'd receive 30% of your highest year pay for life. So the earlier you started, the more years of service increases your percentage. That is the 2% at 55 retirement.
For new hires in 2012 it was changed to 2% at 60. Then again in 2013 it changed to 2% at 62.
Most all of California state and local govt. pensions are on this retirement formula now.
I work for govt. in Minnesota. Here, people hired after 1989 get (after being vested at 5 years) 1.7% of their salary times years of service at age 66! If they retire before age 66 they get a 6.5% hit for every year they retire before 66. So someone who worked for 40 years from age 26-66 would get 68% of their high 5 year avg. The same person who worked from ages 22-62 would lose over a quarter of that through penalties. I am lucky I started before 1989 so I am under the "rule of 90" where when your age and years of service add up to 90 you can retire without penalty at age 55 or later. So I can retire at the relatively young age of 57 without a reduction. But in Minnesota as I think in most areas of the country the public pensions are getting much less generous to early retirement.
I work for govt. in Minnesota. Here, people hired after 1989 get (after being vested at 5 years) 1.7% of their salary times years of service at age 66! If they retire before age 66 they get a 6.5% hit for every year they retire before 66. So someone who worked for 40 years from age 26-66 would get 68% of their high 5 year avg. The same person who worked from ages 22-62 would lose over a quarter of that through penalties. I am lucky I started before 1989 so I am under the "rule of 90" where when your age and years of service add up to 90 you can retire without penalty at age 55 or later. So I can retire at the relatively young age of 57 without a reduction. But in Minnesota as I think in most areas of the country the public pensions are getting much less generous to early retirement.
Your post is an excellent counterpoint to the posters who complain about "cushy" public pensions. First, every state is different, so all the broad generalizations are not very meaningful. Second, 68% of salary after 40 years at age 66 is the extreme opposite of generous. Interesting that Minnesota made changes to reduce the pensions in 1989 - 27 years ago already.
To what extent do employees in Minnesota contribute to the pensions through deductions from salary?
Tuborg is it? I understood several other cases nationally the COLA was upheld.
Some of the pensions will still qualify for COLA since they meet the funding standard.
Yes, it is a mixed bag but there is a definite finance directed reality. It may all come to a head soon in Illinois in which the court has upheld the constitutional protection of the pension but the states inability to pay bills may create a financial v legal quagmire. Just the ability of a few states with questionable finances to manage mandatory education spending, safety management along with pensions and and Medicaid will be interesting. Take California for instance. The top 1% pay half of the income tax in the state. That is a fragile base for a state with a lot of people and bills. What if just a 1/4 of those folks got tired of taxes and moved out of state? Property taxes get distributed how and for what purpose? Gasoline taxes used for transportation needs? The sales tax probably goes in the general fund but you know where I am going.
Judges are more sympathetic to revisions of these "extras" that do not alter the basic pension plan benefit, and seem inclined to accept arguments that failure to suspend the COLAs and fix ill-founded supplemental benefits will actually jeJopardize the basic benefit plan. (In this context, the basic benefit is what courts may deem the "reasonable benefit," a special term in such proceedings, as I will explain shortly.)
In this context, the three federal court threshold conditions are essential to any rational discussion and defense of COLA freezes and impairment of contracts.
Any who wants can read the link for the three condition threshold.
Your post is an excellent counterpoint to the posters who complain about "cushy" public pensions. First, every state is different, so all the broad generalizations are not very meaningful. Second, 68% of salary after 40 years at age 66 is the extreme opposite of generous. Interesting that Minnesota made changes to reduce the pensions in 1989 - 27 years ago already.
To what extent do employees in Minnesota contribute to the pensions through deductions from salary?
Actually, it isn't so much that Minnesota pensions are opposite of generous. It's that California pensions are almost absurdly generous (before PEPRA went into effect in 2013). Hey, I'm getting one of those absurdly CA pensions and I'm not giving it back, but in my opinion they are still absurdly generous. And likely there will be issues with funding them down the line. I should be dead by then.
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