Steve Buser replies to Molly re: the 35 year study
From:Molly Janczyk
Sent: Monday, November 21, 2005
Subject: RE: Fwd: 35 yr rule Study
Good point regarding systems offering the incentive AT ALL vs. INCENTIVE TO RETIRE: Drop the 35 yr. incentive to work 5 more yrs and work statewide to offer only incremental steps as with any add'tl yr. AND work with employers to encourage retirement at 30 yrs. This was clearly an OEA active board members padding their own retirement. And many, I think, would retire w/o the incentive to keep working. You made it 30 yrs.; you can make it 5 more for an addt'l 20+%points for your pension.
From: Steve Buser
Mon, 21 Nov 2005
The report had been due at the last meeting, but staff reported that Buck was not ready and now hope to have a report next month. The hang up is apparently on providing reliable estimates of the impact of the premium years on the pattern of retirements.
Here is the financial issue as I understand it. For anyone who was going to serve 35 years anyway, it is a clear loss for the system. However, (and this came as a surprise to me) for a member who would have retired with 30 years but elects to delay retirement for 5 years, STRS actually saves more money from not paying the member any benefit for 5 years than it costs in terms of the increased rate of payment over the remaining life of the member.
The net effect on STRS, which is what we asked Buck to evaluate, thus depends on how many members there are of each type - those who would have gone 35 years anyway and those that would have retired after 30 years but now go to 35. Normally we could just check for a rate of decrease among those retiring with 30 years, 31 years and so on. That is why Buck had to wait 5 years to even attempt the study.
Unfortunately, the test has become more complicated because some school districts are playing the reverse game by providing incentives for members to retire early. School districts figure they save more than the cost of the incentives if they can either replace older members with lower paid younger workers, or rehire the retirees at lower rates while enabling the members to double dip.
By the way, I do not expect the Buck study to even address, let alone resolve, the issue of inequity across groups of retirees. In my opinion, that is going to take more creative thinking.
Sent: Monday, November 21, 2005
Subject: RE: Fwd: 35 yr rule Study
Good point regarding systems offering the incentive AT ALL vs. INCENTIVE TO RETIRE: Drop the 35 yr. incentive to work 5 more yrs and work statewide to offer only incremental steps as with any add'tl yr. AND work with employers to encourage retirement at 30 yrs. This was clearly an OEA active board members padding their own retirement. And many, I think, would retire w/o the incentive to keep working. You made it 30 yrs.; you can make it 5 more for an addt'l 20+%points for your pension.
From: Steve Buser
Mon, 21 Nov 2005
The report had been due at the last meeting, but staff reported that Buck was not ready and now hope to have a report next month. The hang up is apparently on providing reliable estimates of the impact of the premium years on the pattern of retirements.
Here is the financial issue as I understand it. For anyone who was going to serve 35 years anyway, it is a clear loss for the system. However, (and this came as a surprise to me) for a member who would have retired with 30 years but elects to delay retirement for 5 years, STRS actually saves more money from not paying the member any benefit for 5 years than it costs in terms of the increased rate of payment over the remaining life of the member.
The net effect on STRS, which is what we asked Buck to evaluate, thus depends on how many members there are of each type - those who would have gone 35 years anyway and those that would have retired after 30 years but now go to 35. Normally we could just check for a rate of decrease among those retiring with 30 years, 31 years and so on. That is why Buck had to wait 5 years to even attempt the study.
Unfortunately, the test has become more complicated because some school districts are playing the reverse game by providing incentives for members to retire early. School districts figure they save more than the cost of the incentives if they can either replace older members with lower paid younger workers, or rehire the retirees at lower rates while enabling the members to double dip.
By the way, I do not expect the Buck study to even address, let alone resolve, the issue of inequity across groups of retirees. In my opinion, that is going to take more creative thinking.
posted by Kathie Bracy at 6:23 PM
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