Recently, candidates for office in Iowa have been asked to promise future Iowa public employees that they will make no changes to the Iowa Public Employment Retirement System (IPERS) retirement plan. Instead, politicians need to state clearly that they make no promises to future employees about their retirement benefits. The fact that IPERS is currently underfunded by about $7 billion shows clearly that we already have over-promised benefits when compared to what we expected taxpayers and public employees to pay.
(When government has a defined benefit plan, the participants seem to think that any over-funding is their asset, but any under-funding is a liability of the taxpayers. In the past, when IPERS was over-funded, benefits were increased!)
The way to make sure that we don’t make retirement benefit promises that turn out to be more expensive than we expect to pay is to put new government employees on a defined contribution retirement plan – just like most employees in the private sector. This will cause the unfunded liability to come due over the next 50+ years, but at least it won’t get worse.
Des Moines Police Chief Judy Bradshaw has been an exemplary public servant. She has served us very well as a police officer and as an administrator. It’s too bad that we are losing her services in the Des Moines Police Department because of the overly generous pension benefit that we have provided for her.
It is no coincidence that she is “retiring” at age 55, and yet will be taking another job very soon. The current pension benefit provided for all police officers and firefighters in Iowa’s largest cities allows them to retire at age 55 with full benefits if they have worked at least 22 years. The maximum benefit is 82% of their highest three year’s pay if they have worked at least 30 years.
Bradshaw has worked for the DMPD for more than 30 years. So, her benefit, payable for the rest of her life, beginning as soon as she retires, will be about $130,000 per year! The fact that she will immediately begin working at another job will not reduce that benefit. I don’t blame her one bit for doing the best she can for herself. She is playing by the rules that we have set for her. I would do the same thing if I were her.
Most Iowa taxpayers work for private employers that do not offer such a generous retirement benefit in either the dollar amount or the retirement age. If we offered police officers and firefighters the same dollar benefit at age 65 it would still be very generous but it would also save taxpayers a lot of money.
In order to fund these benefits, our municipal governments are currently being required to pay over 30% of the employee’s pay into the retirement system. This is causing great stress on city budgets and pushing up property taxes. We clearly need to reform this system to bring it more in line with the kind of retirement benefits that most Iowans receive. Please urge your state senators and representatives to do something about this during the next legislative session.
Steve Lamansky’s letter to the Register on 1/11/2014 regarding the U.S. Postal Services’ required pension payments perpetuates a mis-characterization of what the Post Office is required to do. The Post Office is not being required to “…pre-fund 80 years’ worth of retirement benefits at 100 percent over a 10-year period…” They are being required to fund the pension promises that they already owe to their current employees and current retirees. In the past, they made the promises to employees about future retirement benefits, but did not fund any of it. If the Post Office goes broke, I’m just guessing that taxpayers will be on the hook for $40+ billion unfunded balance. What they are being required to do is catch up on the funding of promises for past and current services so that their pension fund is actuarially sound.
Link to Register article: http://www.desmoinesregister.com/article/20140111/OPINION04/301110036/Letter-editor-Big-postal-problem-created-by-Congress
Thanks to the Des Moines Register for its expose’ on Iowa state worker’s overtime pay. It appears very clear that much of the excessive overtime worked is during the last few years of employment before retirement for the purpose of “spiking” pension benefits. That is just plain wrong. The calculation already includes only pay during the last five years of employment – presumably the highest five years. So why should we add overtime pay on top of that? Overtime pay should especially be excluded from the pension benefit calculation since, as reported by the Register, overtime is offered first to those with the most seniority. This clearly creates a system that can be “gamed” by those who are close to retirement. We need to change the law to disallow the inclusion of overtime in the calculation of state worker’s pension benefit.