Saturday, March 11, 2006

Ralph Lloyd explains Defined Benefit Pensions and how they work; some scary implications for retirees

From Ralph Lloyd, March 11, 2006
Recently there has been a big shift in Industry and Manufacturing away from Defined Benefit Pensions. Defined Benefit Pensions work this way: You pay in some money, the company matches your sum and pays in some money and after X number of years you retire with an amount based on your years of service and a average of your final 3-7 years of salary. Why is this pertinent to teachers? Hang on and I will explain.
The reason Industry and Manufacturing are shifting away from DBP is because the number of retirees still living has exceeded the number of workers paying in, and this is cutting into the Companies' Profits. Most of these Pensions have Healthcare provisions in them also. Does this sound familiar?
Jacob Hacker, a Yale University Scientist has written a book, "the Great Risk Shift: The New Economics Insecurity- And What Can Be Done About It" Wow a long title!
Our Teachers Retirement System is a DBP, we pay in an amount, the school pays in an amount, in X years we retire with a pension based on an average of our last three years of salary and how many years of service we have.
If we do not get Legislation passed that will increase the teachers' contribution and employers' contribution by 2.5% just for Healthcare we will be in the same position, but because we are Contributing to a State fund and the contribution is by a fixed financial entity, the only way the deficit can be made up is to decrease the pension. In other words if Healthcare goes up, Pensions come down. Simple Mathematics.
We need to also Stress to the STRS Board that they need to be extremely frugal with OUR Money and the TAXPAYERS' Money, and that the money they use is OUR and the TAXPAYERS' Money and NOT theirs to spend as they see fit.
Ralph L Lloyd
Larry KehresMount Union Collge
Division III
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