Small Pensions & Double (and Triple) Dipping
Justin Katz
Today, on the Rhode Island Center for Freedom & Prosperity blog, I've reviewed pensioners with very low pensions as well as those who receive more than one pension from plans administered by the state.
On the latter count, many appear to involve survivor benefits bequeathed by a deceased spouse who would have received the pension upon retirement, which is a reasonable benefit to offer. But with combined survivor payments coming in at over $60,000 per year for life, it's quite a benefit. Moreover, the number of such payments going to individuals with their own public pensions, combined with the repeated last names on the total pension role, really begins to give one the sense of a class set apart from the rest.
"That still isn’t a great deal of money, but the relevant point is that many of these pensions are so small that it isn’t reasonable to present them as the retiree’s livelihood"
So when the data seems to prove the retirees point that the loss of the cost of living increases to their paltry earnings would have a significant impact on their lives, you just wave off any of their concerns with what is close to a Marie Antoinette dismissal of the hungry.
"really begins to give one the sense of a class set apart from the rest"
Recipients of defined pension benefit plans? With decades of compounding COLA's??? "A class set apart" is certainly a fair description.
Hey, AARP-RI! How many of your non-public retirees receive defined pension benefits?
Not at all, Phil.
The point is that a 3% COLA on a $300 annual pension isn't going to drive somebody into or lift somebody out of poverty. It just isn't fair to present pensions as if they constitute the entire livelihood of everybody who receives them, and if they aren't the entire livelihood, then it isn't clear that it is the responsibility of Rhode Island taxpayers to be the one source of income that insures against inflation.
Phil misses the point, again. Justin's actual point was that the current RI pension system is failing on every front and rewarding some people disproportionately at the expense of others and has nothing to do with actual retirement needs. Nobody here is arguing that every pension is too high - that is a straw man argument torn down again and again by obstructionists like Phil. The real lesson from the data is that the current fixed payment spoils system is both inequitable and unsustainable, and a 401k system would better address actual retirement needs instead of functioning as a late-life jackpot or trust fund for the privileged few at the expense of the many. If we focus on actual retirement needs, then we can design a system that fulfills those needs, but the progressives think every firefighter deserves a $500k house and a fishing boat in Florida so they go to war over common sense reforms that should have been made decades ago (and were made by the Feds, very successfully).
I don't see anything wrong with COLAs as a concept, but defining it as '3% annual' is a BIG mistake. A COLA should either be indexed to the CPI (or another indicator of the actual Cost of Living) or to median household income for a given area.
A predetermined COLA is dangerous in two ways: It could pay much more than the actual Cost of Living, putting taxpayers in a bad position; or it could pay too little during times of high inflation, which would make it ineffective at its purpose.
Again from what you wrote:
brings the average MERS pension up to $15,842,
You admit that this is not a lot do you not? Even if this amount does not constitute a retirees whole annual income a loss of cost of living increases on a large portion of their income will cause hardship.
I can't say, as a blanket statement, and neither can you.
If inflation is low, then "hardship" is minimal. Similarly, if other income is high or expenses are low. Also, if the retiree is still young enough to seek supplemental income.
In the face of this individual variation, it's inappropriate to stifle reform on the grounds that some retirees might, conceivably be adversely affected.
I think it is appropriate to try to stifle reform that targets aging retirees.
Do you want your generation to be the one that breaks contracts and faith with your elders once they have stopped working?
Phil - two questions. Please answer honestly and succinctly.
1) Do you agree that the central purpose of public retiree pensions should be give retirees a basic level of support when they are old or otherwise no longer able to work?
2) Do you believe that public pension amounts should be tailored to that purpose?
If the answer to either of these questions is "no," please explain why. And please don't just do your usual bit of complaining that the questions are unfair. If you believe they are unfair, explain why and answer what you believe to be a fairer version of the questions.
Dan
No and No.
The IRS treats public employee pensions as income. This is deferred compensation. The public employees have through the years through collective bargaining taken less money in their paychecks and paid a portion for their pensions and expect to be paid in full when they have met their obligation. You can either pay me now or pay me later and they choose to be payed later.
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"That still isn’t a great deal of money, but the relevant point is that many of these pensions are so small that it isn’t reasonable to present them as the retiree’s livelihood"
So when the data seems to prove the retirees point that the loss of the cost of living increases to their paltry earnings would have a significant impact on their lives, you just wave off any of their concerns with what is close to a Marie Antoinette dismissal of the hungry.
Posted by: phil at November 15, 2011 7:56 AM"really begins to give one the sense of a class set apart from the rest"
Recipients of defined pension benefit plans? With decades of compounding COLA's??? "A class set apart" is certainly a fair description.
Hey, AARP-RI! How many of your non-public retirees receive defined pension benefits?
Posted by: Monique at November 15, 2011 8:50 AMNot at all, Phil.
The point is that a 3% COLA on a $300 annual pension isn't going to drive somebody into or lift somebody out of poverty. It just isn't fair to present pensions as if they constitute the entire livelihood of everybody who receives them, and if they aren't the entire livelihood, then it isn't clear that it is the responsibility of Rhode Island taxpayers to be the one source of income that insures against inflation.
Posted by: Justin Katz at November 15, 2011 10:22 AMPhil misses the point, again. Justin's actual point was that the current RI pension system is failing on every front and rewarding some people disproportionately at the expense of others and has nothing to do with actual retirement needs. Nobody here is arguing that every pension is too high - that is a straw man argument torn down again and again by obstructionists like Phil. The real lesson from the data is that the current fixed payment spoils system is both inequitable and unsustainable, and a 401k system would better address actual retirement needs instead of functioning as a late-life jackpot or trust fund for the privileged few at the expense of the many. If we focus on actual retirement needs, then we can design a system that fulfills those needs, but the progressives think every firefighter deserves a $500k house and a fishing boat in Florida so they go to war over common sense reforms that should have been made decades ago (and were made by the Feds, very successfully).
Posted by: Dan at November 15, 2011 10:39 AMI don't see anything wrong with COLAs as a concept, but defining it as '3% annual' is a BIG mistake. A COLA should either be indexed to the CPI (or another indicator of the actual Cost of Living) or to median household income for a given area.
A predetermined COLA is dangerous in two ways: It could pay much more than the actual Cost of Living, putting taxpayers in a bad position; or it could pay too little during times of high inflation, which would make it ineffective at its purpose.
Posted by: mangeek at November 15, 2011 2:52 PMAgain from what you wrote:
brings the average MERS pension up to $15,842,
Posted by: phil at November 15, 2011 6:26 PMYou admit that this is not a lot do you not? Even if this amount does not constitute a retirees whole annual income a loss of cost of living increases on a large portion of their income will cause hardship.
I can't say, as a blanket statement, and neither can you.
If inflation is low, then "hardship" is minimal. Similarly, if other income is high or expenses are low. Also, if the retiree is still young enough to seek supplemental income.
In the face of this individual variation, it's inappropriate to stifle reform on the grounds that some retirees might, conceivably be adversely affected.
Posted by: Justin Katz at November 15, 2011 8:21 PMI think it is appropriate to try to stifle reform that targets aging retirees.
Posted by: phil at November 16, 2011 3:44 PMDo you want your generation to be the one that breaks contracts and faith with your elders once they have stopped working?
Phil - two questions. Please answer honestly and succinctly.
1) Do you agree that the central purpose of public retiree pensions should be give retirees a basic level of support when they are old or otherwise no longer able to work?
2) Do you believe that public pension amounts should be tailored to that purpose?
If the answer to either of these questions is "no," please explain why. And please don't just do your usual bit of complaining that the questions are unfair. If you believe they are unfair, explain why and answer what you believe to be a fairer version of the questions.
Posted by: Dan at November 16, 2011 4:09 PMDan
No and No.
Posted by: phil at November 16, 2011 9:08 PMThe IRS treats public employee pensions as income. This is deferred compensation. The public employees have through the years through collective bargaining taken less money in their paychecks and paid a portion for their pensions and expect to be paid in full when they have met their obligation. You can either pay me now or pay me later and they choose to be payed later.