3 ms·

Can someone explain how pensions are calculated? How do they get so high? From what I hear in Canada, university professors get some percentage per year of ser

by acchow 10y ago

Can someone explain how pensions are calculated? How do they get so high? From what I hear in Canada, university professors get some percentage per year of service of their average salary, but it is capped at 75% or something. No professor has $200k annual pension payments. Also, what is the purpose of such high pension promises? Does the government really have such a high talent retention problem?

jbarham 10y ago
> Can someone explain how pensions are calculated? How do they get so high? It's based on peak earnings, including overtime: http://dailycaller.com/2014/06/20/california-public-employees-making-bank-on-pensions/ http://dailycaller.com/2014/06/20/california-public-employee... So naturally California public employees will rack up huge amounts of overtime in their final year of employment. > Also, what is the purpose of such high pension promises? Well funded public sector employee unions donate huge amounts to Democrat politicians and strongly encourage their members to vote for the same. More simply, it's outright corruption. > Does the government really have such a high talent retention problem? Based on my visits to the California DMV, no.
- acchow 10y ago
  It's based on peak earnings, including overtime This seems beyond broken. You can double your pension forever by working extra hard for 1 year?
- trhway 10y ago
  >It's based on peak earnings, including overtime: http://dailycaller.com/2014/06/20/california-public-employee.. http://dailycaller.com/2014/06/20/california-public-employee.... plus saved vacation and sick days, including carryover from all the previous years. The number of such saved carried over days are usually not capped. As result the last year total may easily double the previous years yearly income. It is called "spiking".
cortesoft 10y ago
It depends on the pension (in California, there are a number of big ones.) Here is the calculator for calstrs, the teacher's pension fund: http://resources.calstrs.com/CalSTRSComResourcesWebUI/Calculators/Pages/RetirementBenefit.aspx http://resources.calstrs.com/CalSTRSComResourcesWebUI/Calcul... I think it is about 2% of your highest salary per year of service (once you hit 60). In other words, if you work 40 years and made $100,000 in your highest paid year, you would get $80,000 (80% of 100k). Some of them take highest 3 year average, or something like that. The pension promises are absolutely about solving a talent retention problem. They pay way under market, and try to make up for it by offering amazing retirement benefits. If they were funding the pension properly, this wouldn't actually gain anything (since you could just give the employees more money instead). However, the government never funds them properly, and is basically borrowing from the future to retain employees today. It should be noted, however, that governments aren't the only ones who do this. Detroit motor companies did the same thing (offered amazing pension plans in lieu of more money to keep workers), and also failed to properly fund them. The difference is that auto companies can file bankruptcy and not be obligated for the pensions. Because of this threat, unions were more willing to negotiate a lower pension rate in return for no bankruptcy. Personally, I think a deal is a deal. If a worker chooses to give up salary in return for a pension, you shouldn't be able to just revoke that when you realize you promised too much.
- acchow 10y ago
  highest salary per year of service WHAT? Why not the average? This is crazy. you shouldn't be able to just revoke that when you realize you promised too much. So I've read more about it, and turns out this isn't the problem. They are retroactively INCREASING the pension numbers to existing employees to something higher than what they signed up for. See also https://www.city-journal.org/html/pension-fund-ate-california-13528.html https://www.city-journal.org/html/pension-fund-ate-californi...
  - jcranmer 10y ago
    > WHAT? Why not the average? This is crazy. Inflation. If you work for, say, 30 years at 2% annual inflation, that comes out to about 81% total inflation by the end of it--that makes weighting early years the same as later years completely untenable.

by acchow 10y ago

jbarham 10y ago

> Can someone explain how pensions are calculated? How do they get so high? It's based on peak earnings, including overtime: http://dailycaller.com/2014/06/20/california-public-employees-making-bank-on-pensions/ http://dailycaller.com/2014/06/20/california-public-employee... So naturally California public employees will rack up huge amounts of overtime in their final year of employment. > Also, what is the purpose of such high pension promises? Well funded public sector employee unions donate huge amounts to Democrat politicians and strongly encourage their members to vote for the same. More simply, it's outright corruption. > Does the government really have such a high talent retention problem? Based on my visits to the California DMV, no.

acchow 10y ago
It's based on peak earnings, including overtime This seems beyond broken. You can double your pension forever by working extra hard for 1 year?
trhway 10y ago
>It's based on peak earnings, including overtime: http://dailycaller.com/2014/06/20/california-public-employee.. http://dailycaller.com/2014/06/20/california-public-employee.... plus saved vacation and sick days, including carryover from all the previous years. The number of such saved carried over days are usually not capped. As result the last year total may easily double the previous years yearly income. It is called "spiking".

cortesoft 10y ago

It depends on the pension (in California, there are a number of big ones.) Here is the calculator for calstrs, the teacher's pension fund: http://resources.calstrs.com/CalSTRSComResourcesWebUI/Calculators/Pages/RetirementBenefit.aspx http://resources.calstrs.com/CalSTRSComResourcesWebUI/Calcul... I think it is about 2% of your highest salary per year of service (once you hit 60). In other words, if you work 40 years and made $100,000 in your highest paid year, you would get $80,000 (80% of 100k). Some of them take highest 3 year average, or something like that. The pension promises are absolutely about solving a talent retention problem. They pay way under market, and try to make up for it by offering amazing retirement benefits. If they were funding the pension properly, this wouldn't actually gain anything (since you could just give the employees more money instead). However, the government never funds them properly, and is basically borrowing from the future to retain employees today. It should be noted, however, that governments aren't the only ones who do this. Detroit motor companies did the same thing (offered amazing pension plans in lieu of more money to keep workers), and also failed to properly fund them. The difference is that auto companies can file bankruptcy and not be obligated for the pensions. Because of this threat, unions were more willing to negotiate a lower pension rate in return for no bankruptcy. Personally, I think a deal is a deal. If a worker chooses to give up salary in return for a pension, you shouldn't be able to just revoke that when you realize you promised too much.

acchow 10y ago
highest salary per year of service WHAT? Why not the average? This is crazy. you shouldn't be able to just revoke that when you realize you promised too much. So I've read more about it, and turns out this isn't the problem. They are retroactively INCREASING the pension numbers to existing employees to something higher than what they signed up for. See also https://www.city-journal.org/html/pension-fund-ate-california-13528.html https://www.city-journal.org/html/pension-fund-ate-californi...
- jcranmer 10y ago
  > WHAT? Why not the average? This is crazy. Inflation. If you work for, say, 30 years at 2% annual inflation, that comes out to about 81% total inflation by the end of it--that makes weighting early years the same as later years completely untenable.