Friday, July 28, 2017

Wayne Clark shows us what MANY retirees are losing because they retired at the wrong time of year -- read it and weep if you're one of them!

STRS Retirees Suffering Huge Losses, Some More Than Others
The examples below reflect retirees that retired in 2012 with a $40,000 pension and a $1200 annual COLA.  The first two June and July columns (A and B) show the results of what the STRS retirees would have been granted without COLA suspensions and/or COLA percentage reductions.  Columns A and B show that the June and July retirees would have received the same pension amounts through 2021.  Until July 1st 2013 the annual COLA was 3% and a COLA was paid every year to all retirees since 1971.
The third and fourth columns (C and D) show the actual reduced retirement payments due to the STRS changes, reductions and finally the total elimination of the COLA at least through 07/01/21.  This results in a minimum loss of $28,800 on an original annual pension of $40,000 for the June retiree.  So you are basically losing over 70% of a year's pension over the time covered in this chart if you are a January-June retiree.
The other travesty is the disparate treatment of the July through December retirees. As the result of STRS's use of the Fiscal Calendar in lieu of an Annual Calendar for COLA suspensions and/or percentage reductions during the 4 year period between 2013 and 2016 July-Dec retirees were behind in purchasing power by over 1% on average.  When the STRS Board terminated the COLA on 07/01/2017 this purchasing power loss grew to 3% or $1200 per year since the Jan-June retirees received another 2% COLA on their anniversaries that the July-Dec retirees did not get.  Therefore, Jan-June retirees have a $1200 pension benefit advantage that is additive every year going forward starting July 1, 2017 through July 1 2021.  This advantage is $1200 x 5 years, at minimum, before the next quinquennial review.  That's $6000 more in pension payments over that period for about half of all retirees while the other half receive $0.   Therefore, when you add the losses since July 1, 2013 through July 1, 2016 which is $2400 and the $6000 they will lose over the next five years the July-Dec retirees will end up at least $8400 behind the Jan-June retirees in total pension payments over the period described, a loss of 93% of their original yearly pension.  If the suspension of the COLA continues beyond 2021 the $8400 difference will continue to grow by $1200 for each additional year. 
Approximately half of the 160,000 STRS retirees have retirement anniversaries between January and June.  Therefore, 80,000 X $8400 = $672,000,000 will be paid to the Jan - June retirees at the pension asset expense of the 80,000 July-Dec retirees. 
This is why the SERS System is asking for a January, 2018 COLA cessation date.  It eliminates the inequity that the STRS plan has promoted.
(Click image to enlarge)
Created in collaboration with Bob Buerkle; much appreciation to both Wayne and Bob!
Larry KehresMount Union Collge
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