Tuesday, October 4, 2011

Is Rhode Island being lied to about pensions?

I suppose because I have a direct interest in the outcome, I've studied this issue fully. The brickbat bullies that dominate the airwaves and printed word have not done their homework. Some folks are just fighting for the sake of fighting. They truly believe that they are paying my pension. They are very wrong.

I paid for my pension. Any problem with the system is a direct result of the leadership in this state not living up to it's promises. Are there problems? The current issue has been largely driven by the move of the State to decrease the actuarial growth chart and assume a longer living period for it's retirees. The power of a defined benefit pension plan is in the long-term cost averaging advantages that the state will realize. Individuals may be vulnerable in a defined contribution plan because of market fluctuation and timing associated with retirement dates.

While there may be small problems to deal with, we are being lied to and I mean a whopper of a lie. Rhode Islanders are being told that the state will have to now contribute 35% of salary to save the system. What? Are you fucking kidding me? 35%? Nobody has said that this is a one year issue to infuse the system. We are being led to believe that this is for the future - the foreseeable future at least. Please everyone, I beg you to get out your calculator and do the math. A school teacher that starts at $40,000 per year and tops out at $100,000, 35 years from now would have contributed somewhere in the vicinity of $5 million. Now the teacher retires and let's assume a small actuarial growth of only 5 percent annually, the teachers pension check should be $250,000 per year. This is how absolutely crazy the sob story is. For those of you that are math checkers, don't forget that the teacher is contributing 9.5 % each year (total annual contribution would be 44.5% of salary and don't forget the 7% compounded growth).

Now I know that there were tremendous abuses that the system is still paying for, but those problems are dying. Abuses have been addressed during the past 25 years. Did you know that the Rhode Island system grew by over 20% this year and the actuarial certainty being provided to our citizens is based on old data? Do you know that Rhode Island finished last year with a $60 million surplus which brings the rainy day fund to $130 million?

Now our infamous "Republican" Treasurer (she calls herself a Democrat - just another lie) wants to establish a hybrid plan so that retirees share the risk of the system. Are you kidding me? Do you know what a money maker this is for the state? If the state only met it's fair contribution, dollar for dollar, and made minor adjustments to pay for the sins of the past, a defined benefit pension plan is a huge money maker for the state. Pensions are paid from the accumulated wealth of the system generated by the hard working employees. When the employee or spouse dies, the system swallows the principle. In the case of a school teacher, 19% contribution, half from the teacher, is more than enough to meet the defined benefit.

I know that there are certain jobs that might really want to swing the way of the 401K plan that the General Treasurer is proposing. If I were press secretary to the governor, I'm probably only there for a short time. If you are a school teacher and have chosen the career for your future, you want a defined benefit plan. We need this in place to retain and recruit the best teachers. For new hires, I am not opposed to a choice. Treat the employees like people not pawns. Provide a choice even if you decide that the employee contribution needs to increase to pay for the sins of the past. Give the employees that are not fully vested a choice! Stop shoving things down our throats and try a little honesty.


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