Employees of Maryland May Need a Bail Out in the Future

Alan3413 said:

33% of your highest earned salary is a good deal, especially since SS is looking to be increasingly a joke. I've heard that you Fed works can keep their employee healthplan even after retirement.

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All workers can keep their health plan upon retirement. COBRA makes that happen.

However, most workers have to pay the entire bill, both the part they have been paying, and the part the employer had been paying.

Fed workers, who are fully vested when they retire, can continue their health plan, and only pay the employee portion.

HUGE benefit.

Alan3413 said:

33% of your highest earned salary is a good deal, especially since SS is looking to be increasingly a joke. I've heard that you Fed works can keep their employee healthplan even after retirement.

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33% would require working 30 years, and being at least 62 when you retire.

The old plan (CSRS), was even better. My neighbor retired on 85% of his high 3 salary.

Just do what PA did. Raise the gas tax 20+ cents a gallon and divert 4.5 BILLION (with a B) dollars from road repair to fund the state police pension.

Uncle Duke said:

This describes every state in union, to at least some extent. Some are far worse than others.

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Yeah I think MD is around the 30s out of 50 for how well off the pension plan is, you don’t want to know how bad the states around in the high 40s or number 50.

Pinecone said:

Federal retirement under FERS goes like this.

Minimum retirement age (MRA) varies by when you are born. 55 for those born prior to 1948, and 57 for those 1970 and later. With a sliding scale between.

You can retire at:

62 with at least 5 years service.
60 with at least 20 years service
MRA with at least 10 years service.

However, if you retire with less than 30 years of service and before age 62, your retirement is reduced by 5% for year year under 62 when you retire.

So someone who retires at 60 with 20 year, loses 10% of their retirement income versus someone who retires at 62 with the same number of years.

A person who retires at 56 with more than 10 years, but less than 30 years, loses 30% of their retirement income.

Another thing about waiting, if you retire at 62 or older, with at least 20 years, they RAISE your retirement by 10% (they calculate based 1.1% of high 3 per year worked instead of 1.0%).

One neat thing is, your high 3 years does not have to be your last 3 years. So you get promoted to a high grade. Then with 3 years to go, you quite your high pay, high stress job, and find a GS-1 job somewhere. It really does not reduce your retirement.

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Pension is not reduced at your MRA if you have 30 years, which I will by MRA (I will have 36 years in by then). Also many agencies offer early out, which is 20 years of service and age 50 normally (at least at mine). Since I started working I want to say my agency has offered early outs at least 10 out of the last 15 years.

An early out for FERS doesn’t reduce your pension and allows you to collect your benefit immediately, which is what is required for health insurance to continue in retirement.

So long as you have 5 years, you can quit and get a pension some day (62) it’ll just be reduced if you opt to collect it at MRA and 10 years.

Constant talk last decade from Republicans in Congress of knee capping FERS. Generally change it to average if your high-5, increase pension contributions to 7% of your pay check (new hires it is 2.7% and people who predate 2012 I think it is, is .7%), increase retirement age to 64 and also take a chainsaw to the retirement health benefits (also change employee split on current employee health coverage to I think it is 50/50, rather than 30/70).

Which would gut any reason for me staying. GS pay is typically very good (and the hourly WGS categories) for blue collar and low level clerical positions. Management and white collar jobs the pay is a joke compared to the private sector. Benefits at least usually make up for that, but gut the benefits and no reason for me to stay. I know I can get a private sector job making 20%+ more than I am now as an IT or business Program manager, or hell even find a project manager job.

But I like my work life balance, leave and health/retirement benefits.

Oh and Trump has been pushing changing leave to combine sick and annual leave, and reducing the number of days. Current is 13 days of sick leave a year and 13 days of annual as starting, 20 days of annual after 3 years and 26 after 15 years of service. The proposal IIRC changes it to TEN total days of combined leave entry level and only ever moves up to I think 20 after some number of years of employment.

As I sit, I’d be losing almost half my leave a year between the two and an entry level employee would see their leave cut to 2/5ths what it is currently.

The fact that states have to balance their budgets against revenues gives you the false impression that they have to be fiscally responsible. Any area they can **** up will be ****ed up, and pensions are a perfect example of this. Where does all that money from the casinos and gambling go? Remember it was supposed to go towards education. But, I believe it goes into the General Fund, so they can take the money and do whatever they want with it. Laws to force them to spend the money on what they promised to spend it on are quickly dispatched without fanfare. The government no longer represents we the people and the further away the government is from where we live, the less it cares about we the people.

This has been an interesting thread. I'll add my two cents as I work in finance and manage money professionally, that includes working with many state of MD employees.

First and foremost, pensions will be a thing of the past 15 years from now. Will be interesting to see what happens with Social Security as well. Taking a finite amount of assets and extending the length of payout no matter what underlying asset you invest in... is a losing proposition. The fact that we have extended life expectancy so far is the reason these programs are failing. As far as Maryland goes, it is practically in the middle of the road as far as funding status. These statuses are commonly misunderstood, you rarely see pensions fully funded for 1.) tax purposes and 2.) it is all dependent on the assumptions the governing board and actuaries utilize. Maryland could say they were 100% funded if they assumed a 10% rate of return, although that would be wildly unrealistic. CalPERS (California) recently upped their return assumptions to 7.5% despite mounting evidence that returns may be lower in the future across most traditional asset classes. I think it was largely political, another problem with pensions is you get a new board of directors every so often who has their own agenda. Unfortunately, the CIO's rarely get much wiggle room and are forced to listen to the politicians.

Second, pensions are flawed for many reasons, but the un-realistic expectations, misunderstanding of the impact of cash-flows and political involvement are the worst. You could invest MD pension 100% in passive equities and while there would be no fees, and equities have never had a negative 15 year period, the short-term volatility is a huge issue when you have monthly cash-flows. A portfolio totally passively invested 20 years ago in 100% S&P500 index with a 4% withdrawal rate (pensions and non-profits are usually higher) your corpus amount wouldn't have grown a cent. You just can't capture those actual dollar returns on a disappearing capital base. That is where asset classes like hedge funds and private equity come into play to reduce short-term volatility and generate differentiated and non-correlated return streams. There is no science to this stuff, the math is just impossibly difficult.

Anyway, as a final point every employee should ALWAYS invest in their defined contribution plans. You control the assets in those plans and at the end of the day provides a huge amount of flexibility to you in retirement. There is absolutely zero reasons why you shouldn't contribute to a 401k, 403b, TSP etc. even if you have a pension. The future is uncertain, and while your pensions won't be going anywhere (taxes & contributions will go up) you can't count on someone else to provide you with retirement security.

Great thread and a lot of good points.

Pinecone said:

All workers can keep their health plan upon retirement. COBRA makes that happen.

However, most workers have to pay the entire bill, both the part they have been paying, and the part the employer had been paying.


HUGE benefit.

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COBRA only lasts for 18 months, after which period you're on your own.

And it's pricey. It may make you appreciate, in retrospect, how much your employer paid to cover your medical plans.

Bob A said:

COBRA only lasts for 18 months, after which period you're on your own.

And it's pricey. It may make you appreciate, in retrospect, how much your employer paid to cover your medical plans.

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Cobra also allows the past employer to charge up to 125% 120% of the full premium (employee and employer portions), to pay for the administrative processing also.

https://insurance.maryland.gov/Insurer/Documents/bulletins/0015.pdf

I believe many of the City/State/Fed/County pensions are over estimated/under perform due to the implantation of Social Engineering, Cultural Fairness, Todays Hot Topic investment restrictions. How many voted to restrict any investment in gun manufacturers? Corporations that are not Green enough? Limit investment in Israel? The list goes on...




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j_h_smith said:

Does this surprise anyone? I'm kinda surprised it's that high. Corruption doesn't end with a DA or a mayor. It's a systemic problem and won't go away until the citizens demand a change. Which in my opinion will not happen in my lifetime. Republicans are so rare in the city, most are never seen on the ballot.

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... And, just having an (R) after their name doesn't necessarily mean they're any better...

172pilot said:

... And, just having an (R) after their name doesn't necessarily mean they're any better...

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I guess Baltimore City will never know.

lazarus said:

Pension is not reduced at your MRA if you have 30 years, which I will by MRA (I will have 36 years in by then). Also many agencies offer early out, which is 20 years of service and age 50 normally (at least at mine). Since I started working I want to say my agency has offered early outs at least 10 out of the last 15 years.

An early out for FERS doesn’t reduce your pension and allows you to collect your benefit immediately, which is what is required for health insurance to continue in retirement.

So long as you have 5 years, you can quit and get a pension some day (62) it’ll just be reduced if you opt to collect it at MRA and 10 years.

Constant talk last decade from Republicans in Congress of knee capping FERS. Generally change it to average if your high-5, increase pension contributions to 7% of your pay check (new hires it is 2.7% and people who predate 2012 I think it is, is .7%), increase retirement age to 64 and also take a chainsaw to the retirement health benefits (also change employee split on current employee health coverage to I think it is 50/50, rather than 30/70).

Which would gut any reason for me staying. GS pay is typically very good (and the hourly WGS categories) for blue collar and low level clerical positions. Management and white collar jobs the pay is a joke compared to the private sector. Benefits at least usually make up for that, but gut the benefits and no reason for me to stay. I know I can get a private sector job making 20%+ more than I am now as an IT or business Program manager, or hell even find a project manager job.

But I like my work life balance, leave and health/retirement benefits.

Oh and Trump has been pushing changing leave to combine sick and annual leave, and reducing the number of days. Current is 13 days of sick leave a year and 13 days of annual as starting, 20 days of annual after 3 years and 26 after 15 years of service. The proposal IIRC changes it to TEN total days of combined leave entry level and only ever moves up to I think 20 after some number of years of employment.

As I sit, I’d be losing almost half my leave a year between the two and an entry level employee would see their leave cut to 2/5ths what it is currently.

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I doubt they will change that much with FERS. More likely do the same thing as the 80s with the CSRS - FERS changeover.

Too many lawsuits over it.

Leave changes will be difficult. Especially for those already in the system. The gov worker unions will be in an uproar.

speaking of changing pension benefits...


https://www.baltimoresun.com/news/m...i-pension-lawsuit-opinion-20190513-story.html

A Baltimore circuit judge has ruled that retired police officers and firefighters are entitled to damages resulting from a nearly decade-long contract dispute with the city.

But the court also ruled in favor of the city in requiring employees to work more years to receive pension benefits.

Judge Julie R. Rubin ruled last year that the city breached the unions’ contracts when it changed pension benefits for people who were already retired. She said retirees and retirement-eligible police officers and firefighters should be able to receive a “variable benefit,” an annual increase tied to the stock market.

In Monday’s ruling, she said those retirees are entitled to seek damages for the lost benefits. But she also ruled that the city could make modifications to the pension contract that extended the years of service from 20 to 25 years for employees to receive pension benefits.

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probably correct: benefits cannot be changed for existing retirees, but future benefits for the not-yet-retired can be changed.

The changes to the pension benefits were passed in 2010 under then Mayor Stephanie Rawlings-Blake at a time when many municipalities made changes to pensions following the recession.

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The next recession, there will be more cuts. Bigger, deeper cuts. We will be talking about the "municipal pension bubble."

Incidentally, last I checked, the police and fire pensions were fully funded, nearly 100%. Its the teachers pensions which are larger and largely unfunded.

danb said:

Incidentally, last I checked, the police and fire pensions were fully funded, nearly 100%. Its the teachers pensions which are larger and largely unfunded.

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While I agree on your "bubble" statement that is not nearly true. A "healthy" fund is something in the mid to high 70's. I believe Baltimore City is well below that as the government always over estimates the market to justify putting less in to cover the loses.

I'm not really sure of any pensions systems that are 100% sustainable by members only contribution. If there are any out there still that's awesome. Most are supported by a big money donation from the employer each year to make up the difference.

Name Taken said:

While I agree on your "bubble" statement that is not nearly true. A "healthy" fund is something in the mid to high 70's. I believe Baltimore City is well below that as the government always over estimates the market to justify putting less in to cover the loses.

I'm not really sure of any pensions systems that are 100% sustainable by members only contribution. If there are any out there still that's awesome. Most are supported by a big money donation from the employer each year to make up the difference.

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I am not sure what you mean by "mid to high 70s." The assumptions that go into calculating the 70% funding level apply future stock market returns that are simply unattainable. What matters for funding levels is to a large extent not simply contributions but investment returns. If the pension is 50% invested in stocks, and equities decline 30% during a recession (not unheard of), the investment balance will decline 15%. This is basically what happened to pensions in 2007-2009.

So... 90-100% "funded" according to the assumptions that go into this calculation, is more like 70-80% funded in reality. Still good. Last I checked, police and fire pensions were in this category.

however, 70% funded (as reported for teachers pensions), is probably more like 50-60% in reality (using more accurate assumptions and lower investment returns).

No pension is sustainable by members or employer contributions, the pension relies on building up an investment balance (essentially a "super 401k" invested in stocks and bonds) and then drawing the investment balance when pension payments come due. Assuming terrific unsustainable investment returns allows pensions to make promises that the laws of economics wont allow them to keep.

Pension funds though are no longer about guaranteeing member retirement. They are used as a huge crony money pool and get Democrat and union appointees onto boards of large companies. Its more about power than actual retirement. CALPERs is politically one of the most powerful lobbys in the country, the have 200 billion under management. And its no coincidence that a lot of the push for socialized medicine is coming though pension funds via their influence on health care boards.

danb said:

I am not sure what you mean by "mid to high 70s." The assumptions that go into calculating the 70% funding level apply future stock market returns that are simply unattainable. What matters for funding levels is to a large extent not simply contributions but investment returns. If the pension is 50% invested in stocks, and equities decline 30% during a recession (not unheard of), the investment balance will decline 15%. This is basically what happened to pensions in 2007-2009.

So... 90-100% "funded" according to the assumptions that go into this calculation, is more like 70-80% funded in reality. Still good. Last I checked, police and fire pensions were in this category.

however, 70% funded (as reported for teachers pensions), is probably more like 50-60% in reality (using more accurate assumptions and lower investment returns).

No pension is sustainable by members or employer contributions, the pension relies on building up an investment balance (essentially a "super 401k" invested in stocks and bonds) and then drawing the investment balance when pension payments come due. Assuming terrific unsustainable investment returns allows pensions to make promises that the laws of economics wont allow them to keep.

Pension funds though are no longer about guaranteeing member retirement. They are used as a huge crony money pool and get Democrat and union appointees onto boards of large companies. Its more about power than actual retirement. CALPERs is politically one of the most powerful lobbys in the country, the have 200 billion under management. And its no coincidence that a lot of the push for socialized medicine is coming though pension funds via their influence on health care boards.

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I don't do this for a living. But a simple look at Baltimore City's Police and Fire pension show something like a 70% liability funding.

So it fits the 50% teacher pension thing you were saying.

I don't think the Police and Fire have it figured out while the teachers are clueless. They are all in the same boat when it comes to promises made that aren't sustainable in the system.

Name Taken said:

I don't do this for a living. But a simple look at Baltimore City's Police and Fire pension show something like a 70% liability funding.

So it fits the 50% teacher pension thing you were saying.

I don't think the Police and Fire have it figured out while the teachers are clueless. They are all in the same boat when it comes to promises made that aren't sustainable in the system.

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so, yeah they are not as funded as I thought.

This will straighten things out

https://wtop.com/local/2019/05/maryland-official-urges-divesting-from-alabama-over-abortion/

I sure miss Louis Goldstein