In response to a previous post on pensions, Shawn D. of Quincy said:
Ken,
While it seems that a lot of time and effort went into the pension series, you guys missed a few very important points. Key to this whole discussion should be the fact that public employees, hired after July 1994, are funding their entire pension themselves. They contribute 11% into the system, which is nearly double the 6.2% private sector employees contribute toward Social Security.…
In fact, the real story should be that our current system is actually saving Massachusetts taxpayers hundreds of millions each year. The taxpayer obligation to current public employees ranges from 3-4% of payroll, while the normal contribution under Social Security would be 6.2% from both the employee and the employer. If Massachusetts were to switch from a defined benefit program to a defined contribution plan the taxpayers would be required, by federal law, to contribute 6.2% toward the DC plan, or join Social Security.
Thanks, Shawn, for commenting. Here’s a few points I’d like to make, with the assistance of the reporters and editors who actually worked on the pension series:
Private employees actually are contributing 12.4 percent of their pay to Social Security. Splitting the contribution among the “employee” and “employer” is an illusion aimed at making the huge bite the system takes more palatable. An employer considers its 6.2 percent share part of “compensation” — it’s part of the cost of having that employee. If it weren’t going to the Social Security system, that money could be in my pocket at NO ADDED COST to the employer.
For these hefty payments, private employees get a smaller return. Had I spent my entire working career in the state’s employ for the same money I’ve made in the private sector, at retirement I would get a pension more than double what I will receive from Social Security. Plus, if I were a lifetime state employee, I would continue to have state health insurance after retirement. Instead, I will have to pay for Medicare.
Even at an 11 percent contribution, it’s easy for some public employees to draw out far more money than he or she ever put into the system.
The point of the pension series was not to condemn the average public worker who retires with a modest pension but to point out that the system is easily and frequently abused. It’s wrong to begin paying pensions to people who have “retired” with 10, 15 or even 20 years of working life ahead of them. Basing pensions on the three highest years, rather than the lifetime earnings record, invites abuse. The system favors the politically connected rather than the little guy.
Finally, cities, towns and the state all have big bills coming due for the promises they made so easily years ago. And who will be forced to pay those bills? Why the taxpayers, of course.
