Retirement Benefits Going Forward

**MikeyinBrooklyn** · July-20-13, 04:55 PM

Not referring to current debt owed by the city to pension funds [[that will end up however court settles it), I think the entire notion of benefits should be changed. The city should pay it's contribution to an employee's retirement and health care on an ongoing basis, while that person works for the city. Something like a 401K contribution, matching up to a certain amount, that the employee puts in. "Legacy" costs should not be incurred going forward. At the end of a fiscal year, all costs associated with the work done by city employees that year should be paid. Today's labor dollars should go to today's workers [[even if in the form of retirement or medical savings accounts). This would cause people to have a better handle on their money [[because they could monitor what was in an account, not just expect an arbitrary fixed payment to start on a given date). It would also prevent a growing/shrinking tax base from having to shoulder an unsustainable burden. Lastly, it would prevent people with multiple governmental careers from collecting outsized or duplicative pensions. Your money would be tied directly to what you paid in. Didn't put much in, don't get much out. And all "senior officials" and politicians would get the exact same deal as the rank and file. No more Turkia Mullins or people who collect full pensions for several different jobs they held over the years.

**Wesley Mouch** · July-20-13, 05:05 PM

Originally Posted by MikeyinBrooklyn

Not referring to current debt owed by the city to pension funds [[that will end up however court settles it), I think the entire notion of benefits should be changed. The city should pay it's contribution to an employee's retirement and health care on an ongoing basis, while that person works for the city. Something like a 401K contribution, matching up to a certain amount, that the employee puts in. "Legacy" costs should not be incurred going forward. At the end of a fiscal year, all costs associated with the work done by city employees that year should be paid. Today's labor dollars should go to today's workers [[even if in the form of retirement or medical savings accounts). This would cause people to have a better handle on their money [[because they could monitor what was in an account, not just expect an arbitrary fixed payment to start on a given date). It would also prevent a growing/shrinking tax base from having to shoulder an unsustainable burden. Lastly, it would prevent people with multiple governmental careers from collecting outsized or duplicative pensions. Your money would be tied directly to what you paid in. Didn't put much in, don't get much out. And all "senior officials" and politicians would get the exact same deal as the rank and file. No more Turkia Mullins or people who collect full pensions for several different jobs they held over the years.

Mikey, what you propose is of course a great idea. The problem isn't that we can't devise a great system. The problem is political. Politicians who promise things to people get elected, and re-elected. Those who tell the financial truth don't get elected.

The system we have isn't a mistake. Its the result of years of politicians extracting money from future taxpayers to get elected today.

The real question is how can we get politicians to manage our finances responsibly. Those who try [[Walker, Snyder) become public enemy #1 to a majority in many areas. Its dangerous work.

If the usual chorus of Snyder haters erupt in response here, you'll see what I mean. Attempts at reform are touted to the Democratic faithful as part of a right-wing plan to oppress workers. And I see their point -- it can oppress some. Done right, it'll oppress Mullins and not ray1936.

**MikeyinBrooklyn** · July-20-13, 05:45 PM

Hey Wes,
I think a state constitutional amendment enacting the elimination of standard pensions [[going forward) and deferred employee compensation of any kind for public workers of any kind is the way to go. Kind of like a Hedley Amendment for public spending. It should be for every governmental entity in the state, from schools to police to politicians. And anyone caught abusing would lose [[with interest) everything the taxpayers paid in.

**Ray1936** · July-20-13, 05:50 PM

Mikey, some municipalities are indeed going over to a 401k plan. It would work fine, only employees would have to discipline themselves to submit the max allowable [[which is 15% of one's salary) to enjoy a comfortable retirement. And never, never dip in to it for some half-assed emergency. My wife had a 401k plan at work, and thanks to her contributions and savings, we will survive comfortably even if my pension goes belly up. I think.

**MikeyinBrooklyn** · July-20-13, 06:06 PM

I'm glad that you'll [[probably) be okay, Ray. So many people misunderstand the concept of saving. I am glad some municipalities [[and so many businesses) are switching over. Ultimately, you are responsible for your own retirement. Spend it all while you're earning, expect to work a lot longer. It seems totally fair. I do not subscribe to the notion of a "right" to retire. If you plan and save, you're good to go. If not, that's your choice, and enjoy it. My grandfather went to the office every day until he died. He had his own business and 10 kids. His retirement came in the afterlife.

**DetroitPlanner** · July-20-13, 09:32 PM

I still am a big fan of pensions. I would rather see my retirement being managed by professionals. 401k's [[or in my case 457's) still are risky in that most of the folks are on their own to determine what to put the money in. It make shock most of you but I am no arrogant enough to think I know how to invest better than someone who studies the market every day.

I'd like to see the City get out of the pension business all together and join my pension: MERS of Michigan. I see that the larger pool would help mitigate the fewer paying in, not to mention keep folks like Zajac and politicos hands out of the kitty.

Even though I have a pension, I am still saving in a 457 as well as other investments as I will not have medical or other 'perks' after retirement. None of these legs of my retirement stool are safe.

**Novine** · July-20-13, 09:52 PM

You forgot the other half of the equation - communities used deferred benefits to compensate people with something other than pay. Are those communities willing to boost salaries to compensate employees for the benefits they are being asked to give up? If the answer is no, you'll find even fewer people willing to go to work in the public sector.

**professorscott** · July-20-13, 10:45 PM

Originally Posted by Novine

You forgot the other half of the equation - communities used deferred benefits to compensate people with something other than pay. Are those communities willing to boost salaries to compensate employees for the benefits they are being asked to give up? If the answer is no, you'll find even fewer people willing to go to work in the public sector.

This may have been a reasonable argument sixty years ago but is nonsense today. Public sector pay is very reasonable and millions of people can't find any full time work. Offer to pay an unemployed person $45K a year with some benefits and a 401K to do what is not usually dangerous or backbreaking work [[public safety folks excepted) and the line will run around the damn block.

Almost nobody in the private sector has old fashioned pensions anymore and the Federal government is backing away from that kind of retirement benefit. There's no logic to cities continuing to put future generations at risk with what has become, in an era of declining populations and declining workforces, an accidental Ponzi scheme.

**MikeyinBrooklyn** · July-20-13, 11:27 PM

Originally Posted by professorscott

an accidental Ponzi scheme.

It has been clear to government officials, union bosses, and economists for more than a generation that the "pension model" isn't sustainable. To ask taxpayers to buttress pension fund shortfalls would have been like GM asking everyone whoever bought a Chevy in the last 50 years to send a $10,000 check to cover their pension gap [[note: TARP cannot be lawfully used to infuse the city with cash). No "accident" in the pension ponzi scheme. Just because your union and your politicians lied to you doesn't mean that there is money anywhere in the city to pay for fictitious pensions & health care funds.

**mwilbert** · July-21-13, 12:08 AM

The replacement of defined benefit plans with 401k-type defined contribution plans has resulted in vast numbers of people nearing or reaching retirement with no pensions and inadequate savings. I don't agree that traditional pensions are unworkable, but they are definitely prone to abuse by employers, are an accounting problem for corporations, and are becoming rarer and rarer, so some kind of replacement is needed. We could look at something like the Singapore Central Provident Fund, or one of the many other models that exist in other parts of the world.

**Lowell** · July-21-13, 12:39 AM

Originally Posted by MikeyinBrooklyn

It has been clear to government officials, union bosses, and economists for more than a generation that the "pension model" isn't sustainable. To ask taxpayers to buttress pension fund shortfalls would have been like GM asking everyone whoever bought a Chevy in the last 50 years to send a $10,000 check to cover their pension gap [[note: TARP cannot be lawfully used to infuse the city with cash). No "accident" in the pension ponzi scheme. Just because your union and your politicians lied to you doesn't mean that there is money anywhere in the city to pay for fictitious pensions & health care funds.

So the pension model isn't sustainable and shall I assume that means social security too? Why not? Why was it sustainable when per capita GDP was much lower but is not now? It is because the distribution of wealth has broken down.

For several decades tax cuts primarily for the wealthy, unfavorable trade agreements, globalization of manufacturing and finance, mobility of capital, robotization and other factors have combined to squeeze money out of the working peoples' paycheck and into the hands of fewer and fewer.

Pension theft is just a more recent domino to fall in this process. Wages are so depressed, if one can even get a job, that it is ludicrous to think the average working stiff can save for retirement. He can't even afford health insurance let alone set aside money. How is the $8-$10 an hour Walmart worker is supposed to achieve this? I know. I have been there. It can't be done.

I have been blessed to later succeed in business and have reasonable security for the future, but I will never forget those hard times and all those who worked just as hard as I did but did not have my luck. They have no health care, have no savings and are hanging on thanks only to the meager drippings of medicare and social security.

The money is there. It just isn't trickling down any more.

**Cliffy** · July-21-13, 06:58 AM

Of course the money is here, its just growing at the top and us at the bottom aren't getting anything. Everything has been moving into third world countries. You have Ford making cars in Mexico and shipping them back here for sale. Not to mention all the factories that moved everything to China. The jobs that are available now are all retail and service jobs that have no benefits and $9 hour. Not sure how the 401k people expect someone to survive let alone save for retirement. Then you got health care that has become unaffordable so these people don't even have health insurance. This is all happening at the richest country in the world but then you have people making $10 hour voting Republican and protesting in the streets for tax cuts to billionaires so sometimes I wonder if maybe we deserve this.

**DetroitPlanner** · July-21-13, 07:17 AM

Originally Posted by Novine

You forgot the other half of the equation - communities used deferred benefits to compensate people with something other than pay. Are those communities willing to boost salaries to compensate employees for the benefits they are being asked to give up? If the answer is no, you'll find even fewer people willing to go to work in the public sector.

This is a good point. My siblings don't work public sector jobs and make much more working a lot less harder than I do. If we want to treat the public sector as a business when it comes to retirement then it is only fair to treat it the same when it comes to wages and time off. Over the last few years I have been asked to quadruple what I pay for things such as medical care, the defined part of my 457 was dropped, as was paying for things such as professional certifications. Add to this stagnant wages and it is becoming harder to get qualified people to work in the public sector.

When I hired in, it was sold to me that yes I could work for a consulant doing my job and make a lot more money, but the benefits with public sector made it to be an attractive option. Now it is not. Cops starting with Detroit are bringing home $10 an hour after taxes, medical, and other deductions. They also have a lot less job satisfaction than they did in the past. Who is going to want these jobs?

**Jimaz** · July-21-13, 08:05 AM

Originally Posted by Lowell

... The money is there. It just isn't trickling down any more.

Whoomp! There it is.

Yet worker productivity increases show it hasn't been unearned. Money earned is not necessarily paid. Slavery may be illegal but there's no law against approaching slavery asymptotically.

Maybe there should be.

**Hermod** · July-21-13, 09:04 AM

Originally Posted by Jimaz

Whoomp! There it is.

Yet worker productivity increases show it hasn't been unearned. Money earned is not necessarily paid. Slavery may be illegal but there's no law against approaching slavery asymptotically.

Maybe there should be.

A rickshaw runner can be a lot more productive if you give him a car for a taxi and his physical labor is a lot less. How much of the improved productivity is due to the rickshaw driver's efforts? How much is due to the automobile that the taxi company's owner bought and paid for?

**Hermod** · July-21-13, 09:13 AM

A little story on pensions.

Once upon a time there was a "Hatters Union". Because most of the hat making companies were small, the pension fund was administered by the union [[and wonder of wonders was administered honestly). The hat making companies funded the pension fund via a surcharge on their payroll that went to the union. The union invested the funds and paid pensions to retired hatters. All was well.

In January 1961, John F. Kennedy went to his inaugural without wearing a hat. Suddenly it became fashionable and acceptable for a gentleman to appear on the street without a hat. People quit buying fedoras, homburgs, derbies, and other dress hats. The hat companies slowly, but surely went out of business. Fewer and fewer funds went to the union to support the pension program. The union began to cut benefits to keep the pension fund viable. They finally got down to where they were giving pensioners $30 a month in benefits.

Where is the "greed" in this sad tale?

**Wesley Mouch** · July-21-13, 10:09 AM

Originally Posted by DetroitPlanner

This is a good point. My siblings don't work public sector jobs and make much more working a lot less harder than I do. If we want to treat the public sector as a business when it comes to retirement then it is only fair to treat it the same when it comes to wages and time off. Over the last few years I have been asked to quadruple what I pay for things such as medical care, the defined part of my 457 was dropped, as was paying for things such as professional certifications. Add to this stagnant wages and it is becoming harder to get qualified people to work in the public sector.

When I hired in, it was sold to me that yes I could work for a consulant doing my job and make a lot more money, but the benefits with public sector made it to be an attractive option. Now it is not. Cops starting with Detroit are bringing home $10 an hour after taxes, medical, and other deductions. They also have a lot less job satisfaction than they did in the past. Who is going to want these jobs?

What may further be unfair about your world is that the senior staff will get theirs, and you won't get yours -- but you will pay. I've watched union negotiators tilt the tables time and again away from the new kids and towards senior members.

**Novine** · July-21-13, 02:54 PM

"Offer to pay an unemployed person $45K a year with some benefits and a 401K to do what is not usually dangerous or backbreaking work [[public safety folks excepted) and the line will run around the damn block."

I'm sure you can. I'm sure you'll also find that 90% of the people are unqualified for the work. People already complain about the quality of the workforce in the public sector. Racing to the bottom on pay and benefits only guarantees that you'll chase away the good workers and end up with people who can't hack it anywhere else. Want good employees? Offer good pay and benefits and be competitive with the private sector.

**Novine** · July-21-13, 03:04 PM

People like MikeyinBrooklyn who trumpet the benefits of the 401k programs are simply providing cover for the skimmers of the financial world. Most 401k plans are set up with high fee funds that benefit the advisors who promote them at the expense of the people who are expected to use them. Realize that you're in over your head when it comes to financial matters as many people are? The 401k plans will offer you "professional" guidance which means another layer of fees and the "professionals" directing your retirement funds into more high fee funds at the expense of your retirement funds. When people reach retirement without the necessary funds to provide a decent retirement, we blame them and not the system which is rigged to rob them blind at every step of the way. Have a great 401k plan with low fee funds and honest advisors? Consider yourself lucky.

**Wesley Mouch** · July-21-13, 03:39 PM

Originally Posted by Novine

People like MikeyinBrooklyn who trumpet the benefits of the 401k programs are simply providing cover for the skimmers of the financial world. ...

Agreed -- but so what? Do you avoid going to a restaurant because the owner 'skims' money from you?

My retirement is 75% 401k. Invested for 25 years in a not great, but not terrible company plan. Managed by Fidelity. They do skim from overall money managed, and of course even more if you invest in their own funds. Took terrible losses in last two crashes. Made a good retirement by pretty aggressive picks bought and held.

I was skimmed for thousands and thousands. But I made hundreds of thousands.

**DetroiterOnTheWestCoast** · July-21-13, 04:10 PM

Actually, Fidelity's fees are lower than many many other providers. What do you mean by not great but not terrible for a company plan - just curious.

**Jimaz** · July-21-13, 04:14 PM

Originally Posted by Wesley Mouch

... Managed by Fidelity....

Uh oh. You might want to read Lobbyists Rally to Ensure Brokers Can Scam Your 401[[k). Fidelity is mentioned twice. You're not alone though. A lot of other companies are mentioned in the article too.

**DetroiterOnTheWestCoast** · July-21-13, 04:30 PM

I've worked in 401[[k) admin for many years. I highly doubt reform is very likely.

**Wesley Mouch** · July-21-13, 04:57 PM

Originally Posted by DetroiterOnTheWestCoast

Actually, Fidelity's fees are lower than many many other providers. What do you mean by not great but not terrible for a company plan - just curious.

I think I was being unfair to Fidelity. Early on [[1985-1995) the fund choices were very limited. Six actually. After that, they increased the choices to about two dozen funds. Also meant to mention. Consistent 12% investment of earnings starting when I earned very little. Never withdrew anything even during bad times. Dow has gone from around 800 when I started to 15,500 today. About nearly 20 times increase in value before you count tax-free dividend income or subtract inflation.

**MikeyinBrooklyn** · July-21-13, 05:17 PM

The ultimate problem with a "pension" system, as opposed to a set-aside savings program, is that no one can predict how many taxpayers or employees or whatever will be around to pay into it in the future. Regardless of your political preference [[I detect a lot of "rights of the little guy" soft-core socialism in responses to this thread), it is completely illogical to put your money [[and faith) in a system that has no predictable future. A pension system is literally structured like a ponzi scheme. As long as more people keep putting in, it works fine. But populations can shrink, along with employment numbers and tax bases. Most people would not actively choose to build a house on loose sand. It's not stable. And no one entity [[certainly not government; very many municipalities and states across the country are in dire financial straights) can stabilize a pension. If both the worker and the employer payment occur in the present, there is no debt obligation awaiting a generous and prosperous set of people in the future to pay it.