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Time for pension reform in San Diego
Hi boys! Miss me?— February 13, 2008 10:24 a.m.
Time for pension reform in San Diego
In post #43 JF stumbles upon a good idea. He thinks that I would be opposed to letting the DROP participants get the full return that the DROP fund earns. Quite the contrary! I think ALL pensions should pay out what they earn (net after expenses) – no less and, most important, no more. That’s the essence of a defined contribution (DC) plan. We should drop the 8% DROP guarantee, and let the participants receive whatever the fund earns. No guarantees. Of course, his idea presupposes we should continue DROP, which we shouldn’t. It’s puzzling that first the workers got their retirement age lowered, and then many more wanted to continue working in DROP. Better that the retirement more closely reflect the reality of private sector workers. No full pension retirement before age 60, and probably age 62 or later. Private sector workers are working longer, while public sector workers are retiring earlier. It ain’t right.— February 9, 2008 7:01 p.m.
Time for pension reform in San Diego
Earlier in comment #38 SDBlogger made the amazing argument that private workers pension and SS come to about what city workers get. I pointed out the huge difference in public vs. private pension payout. But I forgot to mention one important part of the ridiculous difference. SD city workers can start their full earned DB pension at age 55. Police and firefighters can retire at age 50. In the private sector, pensions aren’t available until age 60 at the earliest – and often age 65. Full SS payouts for today’s retirees can’t be received until age 66 – and that retirement year is already scheduled to rise for future retirees. Hence unfair difference in pensions are far larger than even I frequently argue.— February 9, 2008 6:59 p.m.
Time for pension reform in San Diego
JF, in comment #44, you are trying to snooker the readers by mixing apples with kumquats. The defined benefit (DB) pension has often been underfunded, though probably not much back in the early 1980s when the DB pension benefits were considerably more modest, and SPSP was first implemented. But the city's obligation to the SS benefit (6% of payroll) was never underfunded, and when it was replaced with 6% of payroll for SPSP, it was never underfunded. Not by a single dollar. EVER! And nothing was saved by the switch. This switch had NOTHING to do with the DB underfunding problem, nor did it alleviate the underfunding problem in any way. Nor was it required that a second pension be set up. The DB plan was all that was needed to opt out of the SS plan – that’s what the other cities did. How many times do I have to point this out -- switching from SS to SPSP didn't save the city a dime. SPSP was a much better deal than SS for the city workers, but there shouldn’t have been two city pensions set up in the first place. Actually, it's likely that the SPSP plan costs the city a bit more than the old SS plan, given that there is no ceiling no earnings subject to the 6% matching. In 1982 the maximum salary subject to the SS 6% employer/employee deduction was $32,400. SPSP has no such limitation. The city must match the employees' contributions up to the maximum salary paid, which, for the fat cats, is much higher than the SS ceiling.— February 9, 2008 6:58 p.m.
Time for pension reform in San Diego
JF, SPSP was not a "negotiated tradeoff" -- it was a unilateral giveaway that no other city saw fit to implement. Remember, the city's "negotiators" were awarding themselves the same percentage benefits they were giving to the workers -- a HUGE conflict of interest. The was no negotiation! The 8% DROP return apparently is a lifetime guarantee. If the fund's return drops below that, taxpayers have to make up 100% of that shortfall. Can you name another investment in America with that rock-solid guaranteed, high lifetime rate of return? Even close?— February 9, 2008 1:54 p.m.
Time for pension reform in San Diego
The city switched to SPSP to save money? How did that save the city money? With either SPSP or SS, the city paid 6% into a second retirement plan.— February 9, 2008 1:46 p.m.
Time for pension reform in San Diego
SDBLOGGER, many thanks for digging yourself ever deeper into a hole. You are already in WAY over your head. IF the city switched from SS to SPSP, kindly explain to us how come ONLY the city of San Diego has two pension plans? To my knowledge, EVERY OTHER CITY IN SAN DIEGO (and perhaps the state) has ONE pension plan -- AND does not pay into SS. IF a second pension plan was required to replace SS, how come our city's police and firefighters have no second pension plan, and no SS? Hmmm????? You make an amazing assertion that further demonstrates how incredibly out of touch city workers are with the private sector. You claim that the typical private sector pension coupled with the SS payments "are close to the same" as the city's double pension plans. Is three to five times a pension payment "close to the same"?? There are absolutely zero reasons for the city to have two pension plans. It was an incredible, needless giveaway, and should be ended ASAP. The best choice is to drop the DB plan, and continue only the SPSP plan, perhaps matching another 2% of employee contributions. That would eliminate the chronic underfunding, and the unfunded liability problem. Finally, you are of course aware (but somehow forgot to mention) that it is the rare city employee who does not receive a modest social security pension on TOP of the other two pensions. 40 quarters (10 years) of minimal SS payments over the worker's lifetime qualifies him or her for SS. Since the worker receives a government pension, there is an offset formula -- though that only reduces, but does not eliminate the SS penalty.— February 9, 2008 1:39 p.m.
Time for pension reform in San Diego
Whoops! I take back what I said about you being knowledgeable. You're not. Since there is an outside chance that for you, repetition is the key to learning, let's review. There are TWO city pensions for non-safety employees and lifeguards. It doesn't matter if they are DB or DC plans -- they are both pension retirement plans: 1. The DB plan. For a 30 year non-safety employee, that comes to 75% of his highest salary -- capped at 90%, as you say. Well, not really, as government DB pensions get up to 2% annual COL increases, something unheard of in the private sector. 2. The SDSP DC plan. Assuming that the money earns 8% on average while accumulating, and assuming that the employee opts to receive annually ONLY the annual 8% earnings, that payout comes to about 65% of the employee's highest salary. The COMBINED annual retirement income comes to 140% of the retiree's highest salary. The same math applies to a 35 year employee who goes 5 years into DROP (and five more years of compound growth). For this employee, the COMBINED pensions (actually, for a DROP participant, there are FOUR pensions) with the 8% payout comes to 225% of salary. I'm prepared to provide the documentation and spreadsheet. Have you got the guts to send us your email address, Mr. Anonymous?— February 8, 2008 7:24 p.m.
Time for pension reform in San Diego
The problems with DROP are many. But most of all, come back to the fundamental question – why should taxpayers pay a retiring age 60 employee an opulent 225% pension? There is zero justification – it is legalized theft of taxpayer assets.— February 8, 2008 4:40 p.m.
Time for pension reform in San Diego
SDBLOGGER, the last part of your comment tries to deflect blame for this mess to a few key bureaucrats and politicians – claiming that the rest of the city’s hard working employees are innocent babes in the woods, and deserve all that they get. Granted, many of our past key decision making miscreants should be stripped of their pensions and deserve jail time – especially the politicians. But I don’t buy for one minute the “innocent employee” pitch. It’s true that an INDIVIDUAL general employee could not have influenced this, but the employees’ labor unions certainly could – and did. The city labor unions are the key who wins elections – and they’ve put in the most compliant politicians they could find – and have always retained a majority of them in your pocket. You labor union employees voted for the leadership you wanted, and they did what you wanted. You reaped the benefits – accept your share of the blame as well. The key is that we have to put a tourniquet on this fiscal hemorrhaging ASAP. That means two tier benefits for new employees, employee labor contract concessions and aggressive competitive bidding out of as many city services as possible.— February 8, 2008 4:39 p.m.