State Workers Wary of Pension Idea(stopping defined benefit pensions hurts

[papau]

http://www.latimes.com/news/local/la-me-pension23jan23.story
State Workers Wary of Pension Idea
If fixed-benefit system is replaced, some predict, government jobs may become harder to fill.
By Catherine Saillant
Times Staff Writer

January 23, 2005

With a college degree in planning, Cesar Rincon could have landed a job with any number of private consulting firms in Los Angeles.

Instead the Boyle Heights native applied to the Los Angeles County Planning Department shortly after getting his diploma five years ago.

The private sector might have paid more, Rincon said, but the stability of his county planning job and the promise of a good retirement were more important.

"Working in the private sector, you just don't know how long your job will last," said Rincon, 29, recently married and hoping to start a family soon. "With a government agency, you know that if you work hard, you will have a secure job with excellent benefits."

That deal, long embraced by the state's public employees, could change dramatically in the months ahead.

Citing runaway costs, Gov. Arnold Schwarzenegger endorsed a proposal earlier this month to convert public employee retirements from a traditional defined-benefit system to the 401(k)-style plans held by most American workers.

The governor is also recommending that 326,000 state workers double the amount they contribute to their retirement funds. The proposals, which Schwarzenegger said were necessary to rein in state spending, are expected to face fierce opposition from unions. <snip>

[Maria Celeste]

1. He is going to win this one

Similar article in the NYT yesterday and a thread here: http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=102&topic_id=1175457&mesg_id=1175457&page=

As I posted there, I think he will win this one for a variety of reason. Defined benefit plans are all going away. Even the Feds killed theirs almost 20 years ago.

[papau]

2. The Feds still have a very nice defined benefit plan.

Social Security plus Thrift Plan Savings plus defined benefit plan under FERS (or Civil Service Retirement System


1% of your high-3 average pay
times
years of creditable service
If you retire at age 62 or later with at least 20 years of service, a factor of 1.1% is used rather than 1%

[Maria Celeste]

3. TSP

Is defined benfit and provides the bulk of the current Fed retirement. A quick scan of website did not say if the 1% portion one is fixed or indexed. I want to remember that it is fixed, but am not sure.

[papau]

4. It is indexed in the sense that it is a final pay average plan-and usually

you have your highest pay at the end.

The calculated benefit does NOT have a legal indexing requirement after you start to recieve.

33% of pay at 50,000 average final pay for 30 years is 16,777 per year which is worth about $350,000.

I do not think most folks hit 62 with more than $350,000 in TSP.

[SoonerShankle]

5. Remember that teachers fall under this too...

We CANNOT draw Social Security because of the SS Windfall...This is federal law.

Losing the defined benefit hurts workers. Just because others don't do it, doesn't mean that they shouldn't. CalSTRS and CalPERS are two exceptionally well-funded plans that have a high rate of return and are strong. If we move to the 401k model, then individuals will be making these investments and paying multiple fees for investment that they currently don't have to because STRS and PERS do it in lump sum. Wall Street is all for dumping the defined benefit because it would mean more money in broker fees etc. for them....