Pension Disbursements After Only Twenty Years of Service – Yet Another Insanity of Rhode Island Government
The question below is spurred by this excellent OpEd in today’s ProJo.
Rhode Island’s pension picture is getting increasingly alarming. Soaring unfunded liabilities are pushing the state toward bankruptcy, and putting a mounting strain on both state and local budgets. …
Similarly, the League of Cities and Towns pushed a plan to require higher contributions from the employees themselves, higher health co-pays, a higher retirement age (the astonishingly early and well-compensated retirements of some public employees outrage the public), and the requirement of more years of service. Governor Carcieri proposed a similar plan, one that would, in addition, end cost-of-living adjustments. These are all good ideas.
Setting aside for a moment the question of defined benefit versus defined contribution (which, believe me, I understand, is another enormously fatal flaw in Rhode Island’s public pension systems), where did this crazy idea of handing out a pension check after only twenty years of employment come from? On that basis, pension checks could and apparently do go on for easily double the original employment period.
Where is the parallel in the private sector? [correction in response to Michael’s comment] What percentage of private sector pension checks begin after twenty years of service? Is this when our grandparents and parents began receiving pension checks? At age 45 after only twenty years of work? On a more pragmatic front, how is this remotely sustainable?
In order to simultaneously save the public pension systems and bring retirement benefits more in line with those of the private sector (i.e., more in line with the retirement benefits of those who fund public pensions), at a minimum, all of the reforms recommended by the League of Cities and Towns, as well as elimination of the fixed COLA, need to be implemented. We would be remiss if we did not also put on the table for consideration the suggestion by former Cranston Mayor Steve Laffey that we simply write everyone a check reimbursing them for their contributions and “convert all state pensions to self-directed IRAs”.
Whatever course we take to reform (save) the public pension system, the gross irresponsibility of the pension-check-after-only-twenty-years has to end and end now. For everyone, including “retirees”. Your twenty years of service is acknowledged and vested but the pension checks stop until you reach the age of 65.
Will the courts who hear the inevitable lawsuits rule against the state’s action? Possibly, though not definitely. If they do, so be it. At least we’ll know, when the pension checks of retired public workers as well as the paychecks of current ones start bouncing, that Rhode Island did everything in its power (… other than elect responsible politicians for the last three decades) to try to fix the problem.
Phrased another way, the crash of public pension systems in Rhode Island can be a controlled or an uncontrolled one. What’s not in doubt is the violent nature of the landing, now cast in stone by the (in)actions of politicians from one party who promised with a crooked smile extremely generous pension benefits but then did not see fit to fund those benefits so as to make good their promise.