You could move them to something less demanding (e.g., desk work, policing in a small town, security for state offices, etc.) instead of just paying them to idle.
Median boomer retirement account $144,000
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You could move them to something less demanding (e.g., desk work, policing in a small town, security for state offices, etc.) instead of just paying them to idle.
But that would also require them to move in some cases, or come up with "make work" jobs for them. Not really sure how you can fix that problem in the system.
I think it's being done. The pandemic stock market doesn't help, but changes made in the last decade or so have it going in the right direction, it takes time.
Changes included lengthening the vesting period from 4 to 7 years. Basically means if one leaves covered employment before 7 years, they have not earned a retirement benefit, just a refund of their contributions, not the employer's contributions. Increased final average salary period from 3 to 5 years. Makes it harder to game the average salary and lowers the average salary.. Got permission to adjust contribution rates yearly based on actuarial determination. Before, needed legislative approval to change rates while other, smaller DB plans in Iowa had actuarially determined rates. Waiting on law makers increased the unfunded liability.
The IPERS Board decreased the assumed rate of return on investments from 7.5 % to 7.0%. This produced an immediate increase in the unfunded liability, but made it easier to decrease the liability whenever returns exceed 7.0%. Also, contribution rates are now determined on a closed 30-year amortization table. This means that each year, rates charged against wages change according to having one less year to pay off the unfunded liability. Means there is a plan to eliminate the unfunded liability rather than having an open 30-year amortization where the unfunded liability changes mostly on market returns.
I agree with you there have been improvements (and you list a half-dozen of them above), but the ~80% funding ratio implies there is more yet to do.
I disagree. I think the average retiree has worked 22 years or so in the system. Then they are retired for maybe that long. The funding arc is at least 22 years. It takes time to fully fund a retirement and it will take time to close the funding gap.
If there's a problem, it may be retiree longevity. Currently, max benefit is 60% of average salary unless one works another 5 years, earning 1 % each year to 65%. I wonder if the day will come when those numbers will need to change to something like 50% and 55%. That will shift more retirement needs to other plans - state has deferred comp, similar to 401k.
Changing to rule of 92 might help. I recall that when there was a study to identify ways to improve funding, an advisory board was adamant it liked the rule of 88 to provide early retirement with max benefit. Referring to teachers, while some stay young from the exposure, others are ready to leave the little darlin's behind.
I’ve done quite a bit of Actuarial work on private employer DB plans and helping frozen plans terminate. My question for anyone who knows about IPERS is how are the liabilities for the 80% funded measured. For private plans, the thing that trips up many is that there are at least 5-6 common measurements of liabilities that can be used for various purposes. The one that really matters if you’re going to terminate is what it’s cost to end the plan today through annuity purchase rates and 417e rates for lump sums. When I’d consult with clients some were shocked to learn that their AFTAP for minimum funding purposes was 80% but to actually end the plan today they were maybe 55% funded. I don’t know enough about public plans to know anything about the liability basis and how well funded IPERS actually is.
Not meaning this as critical of any current/ex- state employees in here...
But the terms you are having this discussion on... retire at 50 or 55... summers off, at least for teachers... gold-played benefits along the way... a DB (assuming the thing eventually pays out what it is promised to, of course)...
Pretty cushy stuff compared to the *average* of the labor market and even pretty nice sounding compared to many other college-educated professionals.
Just building on my "we are all lucky for this conversation to even be relevant to us" theme from earlier in the thread.
But the terms you are having this discussion on... retire at 50 or 55... summers off, at least for teachers... gold-played benefits along the way... a DB (assuming the thing eventually pays out what it is promised to, of course)...
Pretty cushy stuff compared to the *average* of the labor market and even pretty nice sounding compared to many other college-educated professionals.
Just building on my "we are all lucky for this conversation to even be relevant to us" theme from earlier in the thread.
I don't recall seeing a figure that gives the close-the-plan funded rate, but I think it is in the annual actuarial report.
Most efforts with IPERS have been to propose all new employees go into a different plan, as a hybrid plan, and let the old one play out. Problem is, that does not address the baked in unfunded liability. Makes people concerned that the state would somehow abandon the retirees when the fund is out of money.
Law enforcement could retire at 50, not sure what level of benefits. Regular IPERS could retire at 55 with rule of 88. But that's 7 years without any SS, so presumption is they may have other paid work to help out. I don't know what the gold-plated benefits are. Was the case that government paid less than private, so DB plan was the soft landing for taking lower pay. That may be less true now than it was a couple decades ago.
Yeah, that's been a discussion for a long time - they want 12 months pay for 9 months work? Teachers and spouses may have a different angle on that.
Correct, over 65 there is no cap, and when you hit 70 you must start drawing it.
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It is probably closer to 10 months, all things considered. But still a good gig.
You have spent this whole thread touting the benefit of 401K plans, and now you are soundling like the defined Benefits are the way to go.
Most people are not going to get out at 55, because they are going to have to purchase insurance somewhere else, unless they can get a decent early retirement package to leave. Which does happened to time to time.
You have to put up with a ton of crap for 30 years to get that retirement. Its harder every year to teach kids that do not care, and parents that think their kid, never does anything wrong. Plus you have the state always coming up with a new plan to make your job more difficult.
It has it moments, and I still enjoy it, but truthfully, if I was 18 and heading off to college again, I would never go into education. I say that after 32 years in the field.
I have said on here several times that I find the whole DB v. DC thing pretty far inside baseball to make much of a difference for most people on the street. Each have their relative merits, each kind of regresses to the same returns and benefits paid for the exact same investments in the long-term, and it is more important that you have something there for you than it is one particular pension configuration versus the other one.
I was speaking more about the outward appearance of the superiority of a DB plan compared to a DC plan for the man or woman on the street. People are risk-adverse, and a DB plan appears to (outwardly) to remove a significant amount of risk and exposure to the market. Of course, that is nonsense -- both types' eventual payments are functions of returns, but I think you know that. A DB sounds nice, but most people are not going to adjust for the long-term risk that promised benefits will need to adjust to market returns.
Which... is what DC plan does. The math wins in the end.
You say all those things about education, but I do not think I have yet to find a career that does not come with its own set of gripes. I cannot count the number of times I have heard, "If I could go back and do it all over again, I would go into finance/education/medicine/law next time around," and very often one person telling me their field is not all it is cracked up to be is telling me they want into the field the last person said they regretted.
I know teachers work hard, but there is not a career worth having where you do not have to work hard. Having three months off each year, though, is pretty nice.
I feel sorry you have to play game warden, though. One of my best friends from graduate school was an ex-high school history teacher. He said the kids were great, but if that he had to take one more phone call from an irate parent in small town northeast Iowa about how giving little Susie or Johnny a C+ was going to keep them from getting into Harvard, he was going to jump in front of a train. He sells insurance now.
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Isn’t part of what makes a DB better for the regular Joe is that it requires relatively proper contributions. A DC doesn’t require participation. A properly funded DB is also a selling point. Yeah it can still run the risks but the argument is that the employer hires people specifically to manage them as their job instead of someone who doesn’t have time.
My grandfather just didn't want to go anywhere. They could have. They did have fun socializing locally. After years on a farm somewhat isolated they took full advantage of a what a small town offered for social interaction.
I think this is a weak point in favor of a DB at the very best. This has to do more with the structure of contribution requirements than the plans themselves.
My previous employer was a DC with a 401(k). They did not require you to put anything into your 401(k) each paycheck, but at the end of the year a substantial part of your compensation was based on discretionary bonuses and profit sharing. Much of the bonus and profit sharing was not paid as a check, but rather went into the DC.
Is that not basically requiring participation in a DC? Salaries there could feel a little low even after commissions, but when you added up the substantial company-paid DC contributions, the total for the year looked much better.
On the DB side, while this is not a typical offering, there are DB programs that allow you to either not participate/take the money as salary or to cash out early.
I do not think there is really an ironclad rule that a DB is superior because it effectively forces you to save more. I have seen plenty of counterexamples.
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