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untanglingwebs
El Supremo
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August 12, 2013 at 10:54 am
Detroit firefighters, cops ineligible for Social Security
Brian J. O’Connor
Of the nearly 21,000 city retirees now collecting pensions, 9,017 retired police officers, firefighters or their surviving spouses don't get Social Security, or about 44 percent of all city pensioners. Purchase Image
Of the nearly 21,000 city retirees now collecting pensions, 9,017 retired police officers, firefighters or their surviving spouses don't get Social Security, or about 44 percent of all city pensioners. (Clarence Tabb, Jr./The Detroit News)
If their pensions are cut, thousands of city of Detroit retirees won’t have anything to fall back on other than their own savings, the support of their families or charity. That’s because the city’s firefighters and police aren’t eligible to receive Social Security benefits.
When Social Security was first instituted, the plan didn’t cover any worker with a public pension. States can opt in, and Michigan has, but each city, county, township, school board or other local government entity also has to join. Existing public pension funds can continue to operate out from under Social Security, and with generous government pensions, many workers felt they were getting a better deal from their own pension fund than they’d ever get from Uncle Sam. Instead, the contributions the employer and worker would have made to Social Security benefits went to their pension funds.
As cities, counties and states have phased out pensions that pay a guaranteed benefit in favor of plans where workers and the employer contribute to a defined contribution plan similar to a workplace 401(k) account, most government workers not covered by a public pension or a special exemption have been required to contribute to Social Security. Since Detroit’s firefighters and police officers still had a public pension plan, they continued to avoid Social Security payments
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Of the nearly 21,000 city retirees now collecting pensions, 9,017 retired police officers, firefighters or their surviving spouses don’t get Social Security, or about 44 percent of all city pensioners.
Workers who spend part of their careers working in the private sector and part under a public pension also take a hit to their Social Security payments when they retire. The amount of their public pension offsets their part of their Social Security benefits, reducing their monthly payments.
In addition, the offset also applies if a retiree with a public pension tries to claim a spousal benefit or a survivor’s benefit for a deceased spouse. Typically, the spousal benefit is 50 percent of a husband’s or wife’s Social Security payment, if that amount is more than the spouse receives based on his or her own work history. The survivor benefit pays 100 percent of a deceased husband’s or wife’s Social Security payment. Anyone receiving a public pension will see those amounts reduced or even eliminated entirely by the government pension offset rules.
boconnor@detroitnews.com
(313) 222-2145
Twitter: @BrianOCTweet
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Detroit firefighters, cops ineligible for Social Security
If their pensions are cut, thousands of city of Detroit retirees won't have anything to fall back on other than their own savings, the support of their families or charity.
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from The Detroit News: http://www.detroitnews.com/article/20130812/METRO01/308120023#ixzz2blmQEg8B
Last edited by untanglingwebs on Thu Oct 10, 2013 7:45 am; edited 2 times in total |
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Mon Aug 12, 2013 10:43 am |
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untanglingwebs
El Supremo
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| Flint cops and firefighters do not receive social security. |
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Mon Aug 12, 2013 10:44 am |
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untanglingwebs
El Supremo
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The City of Flint throughout the years made a number of bad decisions. Rather than hire more officers they made agreements to boost pensions by using unpaid vacation and sick days in the compilation of the pension. They gave free years to assist in the retirement of the higher salaried officers and to lower payroll costs. This sometimes resulted in pensions higher than salaries.
This goes back to the 1960's. Former Finance Director Olney Kraft was named as making the deal on no social security.
Now the true costs of those pensions are coming due. Retirees are paying monthly for some benefits. One retiree told me his monthly check was returned his month as Brown's letter stated the amounts were being recalculated.
Police and fire often went years without pay raises. They depended on promises made by the city. Government jobs were once seen as dependable and guaranteeing a pension. In the late 80's local governments started cutting the starting salaries for many of the entry level positions.
Yesterday's Detroit news cited employees that feared for the loss of their livelihood when they were at an age that finding additional employment would be difficult if not impossible. Imagine being in your 50's, and perhaps with some minor work related injuries, trying to re-enter the job market when all that is out there is temporary work at best. |
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Tue Aug 13, 2013 7:47 am |
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untanglingwebs
El Supremo
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August 12, 2013 at 12:00 pm
Retirees fret over lack of safety net for city pensions
Unlike those of private employees, pension funds of public workers aren't insured
Brian J. O’Connor
Detroit News Finance Editor
Comments
'I worked for the city because you had a pension ... I always thought it was a good thing, never thinking that this trouble would ever develop,' says William Schultheis. Purchase Image
'I worked for the city because you had a pension ... I always thought it was a good thing, never thinking that this trouble would ever develop,' says William Schultheis. (Brandy Baker/The Detroit News)
When the company that holds Janet Ley’s pension ran into deep financial trouble after laying her off, she got a check for the full value of her retirement benefits, to invest as she sees fit.
“I’d rather take the money,” says Ley, 52. “If you’re depending on something in the future and the company goes bankrupt, boy, that’s scary.”
If Ley wants to see just how scary, all she has to do is look at the pension for William Schultheis. His employer is facing a financial crisis, too, but instead of a check, Schultheis could get stiffed.
The difference: Ley worked at Ford Motor Co. where her pension, like all corporate retirement funds, is protected by a 39-year-old law and insurance. When Ford decided to reduce its pension liabilities after the painful auto industry restructuring, the company had to buy her out in cash. Schultheis is a retired Detroit public lighting lineman who can only wait to see if his pension is cut in the city’s bankruptcy because, like all public pensions, there’s no safety net.
“I worked for the city because you had a pension, and that’s always good for the future,” says Schultheis, who retired in 1984 and now lives in Grosse Ile. “I always thought it was a good thing, never thinking that this trouble would ever develop.”
The trouble is Detroit’s municipal bankruptcy filing and the city’s $18.5 billion in debt, including what Emergency Manager Kevyn Orr estimates are $3.5 billion in pension commitments the city can’t cover. Whether those pensions are safe from being cut is something Detroit’s emergency manager, creditors and unions will wrestle over for months — or even years —before a bankruptcy judge.
In the meantime, Schultheis and nearly 21,000 other current and retired city workers will wait and wonder what kind of hit their monthly pension checks might take.
If they worked at a corporation, 97 percent of the retirees now receiving a city pension wouldn’t lose a dime from their pension payments, based on March 2012 figures. Instead, the federal Pension Benefit Guaranty Corp. would step in to pick up payments up to a $57,500 cap for retirees 65 and older. That would cover the full pension for all but 661 Detroit pensioners.
“The PBGC is analogous to the FDIC, but instead of bank accounts it insures people’s pensions benefits,” says Jonathan Rose, who is a partner in the Washington, D.C., office of Alston & Bird and co-chairman of the American Bar Association’s joint committee on employee benefits.
The PBGC takes over bankrupt pension funds and is financed by premiums charged to more than 26,000 corporate plans, not taxes, although many pension experts fear the corporation eventually may need a government bailout, as pension funds shrink and payouts climb for retired baby boomers.
The cap on pensions can often mean a big hit for higher-earning workers, such as airline pilots and, in Metro Detroit, for many salaried retirees of Delphi when it went through its years-long bankruptcy. While hourly union workers saw their pensions saved in the government’s auto industry bailout, pensions were cut by as much as 70 percent for approximately 15,000 salaried Delphi retirees. A group of Delphi retirees is suing the government over the reduction. Delphi retirees also lost all of their company paid health care benefits, which aren’t insured by the PBGC.
Just because a company goes bankrupt doesn’t mean the PBGC automatically picks up the pension. Instead, the board negotiates with creditors and the company if it is reorganizing, and tries to salvage the pension plan. Of 38 bankruptcies involving pension plans last year, the PBGC worked out deals to keep nearly 200,000 people on their old pension plans, according to the board.
Falling under control of the pension board is the last resort for private plans. Instead, a 1974 law aims to keep pensions fully funded so that workers can get the benefits they’ve earned. The law — the Employee Retirement Income Security Act — covers both pension plans, which pay specific benefits, and plans such as 401(k) accounts, which invest specific contributions but don’t set a guaranteed payout.
ERISA, as it’s known, has a Detroit connection. The law was prompted by the Studebaker Corp., which was acquired in the 1950s by Detroit-based Packard Motor Car Co. When Studebaker-Packard closed its South Bend, Ind., factory in 1963, it paid pensions to only those workers older than 60, gave 4,000 workers just 15 percent of the value of their benefits, and completely stiffed 2,900 others. At the end, Studebaker’s under-funded pension plan fell $15 million short.
“The ones who weren’t vested were screwed,” says Rose. “It was the after-shock of long-time workers receiving little or nothing that prompted the secretary of labor and the White House to draft the preparations for ERISA.”
The law sets out specific regulations for pensions, including detailed rules that require companies to set aside adequate money to finance their pension plans.
But when ERISA finally became law more than a decade a later, two groups of employees were exempt — churches and federal, state and local government workers. Governments and religious groups didn’t want the federal government ordering them to bolster their under-funded plans, Rose says, and would have opposed the measure. “It was a political compromise,” Rose says. “Otherwise, to my understanding, ERISA would have never passed.”
Besides allowing governments to skip pension fund payments for years without penalty, being exempt from ERISA also means government pension boards can use less-strict accounting rules that allow for overly optimistic financial projections, leading them to be even more under-funded than private-sector plans, notes Robert Novy-Marx, a professor of finance with the Simon Graduate School of Business at the University of Rochester.
“If the federal government gets involved in insuring and regulating state and city pensions, then it wants to have a say and that’s a problem for a lot of people,” Novy-Marx says. “There’s also a huge moral hazard. If these plans were insured, you would image that Detroit would have much earlier tried to put this liability on the federal government.”
Instead, the only protection public pensions have is the same one the city’s bond investors relied on: If the city fell short to pay its obligations, it would raise taxes, borrow more or get bailed out by the state. Instead, all Detroit pensioners can rely on is a disputed provision of the state constitution that says government workers’ pensions can’t be reduced.
The rarely used Chapter 9 municipal bankruptcy code doesn’t spell out whether the state rule trumps federal bankruptcy law, and ongoing municipal bankruptcy cases in smaller California cities have been wrangling over a similar state pension law for more than a year.
Until Judge Steven Rhodes rules in Detroit’s bankruptcy case, William Schultheis and other city retirees will have to watch and wait.
Meanwhile, all Janet Ley watches is the portfolio of investments she bought with her pension payout from Ford. “It seems like it’s growing every day,” Ley says. “I feel a lot more comfortable, and I can sleep at night.
boconnor@detroitnews.com
(313) 222-2145
Twitter: @BrianOCTweet
From The Detroit News: http://www.detroitnews.com/article/20130812/METRO01/308120021#ixzz2br23Xx5g |
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Tue Aug 13, 2013 8:23 am |
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Raymond Sist
F L I N T O I D
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1. Studebaker was mentioned in the article. How many people know that Studebaker built the majority of the covered wagons the pioneers used when they moved weat?
2. The politicians said "trust me" and the government workers believed them. Sad. |
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Tue Aug 13, 2013 11:51 am |
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untanglingwebs
El Supremo
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Gov. Rick Snyder claims Flint retiree benefit cuts can keep police on streets of city his court brief calls 'Murdertown'
Gary Ridley | gridley@mlive.com By Gary Ridley | gridley@mlive.com
on October 09, 2013 at 5:38 PM, updated October 10, 2013 at 2:33 AM
FLINT, MI -- Gov. Rick Snyder claims that cutting Flint retiree benefits would allow the city to keep public safety personnel employed and combat a violent crime problem that has left the city with the nickname "Murdertown."
Snyder made the claim in a brief filed Sept. 25 with the U.S. Sixth Circuit Court of Appeals in Cincinnati. It's in response to a lawsuit filed by city of Flint retirees over a decision by outgoing emergency manager Michael Brown that would force retirees to pay more out of pocket for health coverage.
The brief was written and submitted by Attorney General Bill Schuette's office on behalf of Snyder. Spokespeople for both the governor and attorney general could not be reached for comment.
City officials claimed that Brown's changes to the benefit would save the city roughly $4 million -- which could be used to maintain police staffing levels.
"Given the city's ignominious appellation as 'Murdertown,' and the indisputable fact that the city is a violent place, the Emergency Manager's policy decision to forgo additional cuts to police and fire cannot reasonably be challenged," Snyder's brief reads.
The governor also challenged a U.S. District Court's opinion that asserted Brown should have looked to other options -- such as additional millages or increased water and sewer fees -- before deciding to make changes to contracts.
"... (T)he budget already called for an increase in sewer and water fees, and a millage increase could not be counted on since it would require voter approval in an already depressed city," Snyder's brief argues.
In 2012, Brown called for increased garbage fees, a $100 yearly street light assessment and a 25 percent hike in the water and sewer rates.
Snyder also downplayed the impact the cuts would have on retirees.
"Moreover, the modification to Plaintiff's benefits can hardly be considered a drastic impairment or abrogation of any purported contract," Snyder's brief reads. "Plaintiffs will continue to receive health benefits at a comparable level to current employees."
But Mary Bland, president of the Flint-based United Retired Government Employees association, said some in her group are already struggling financially because of the changes.
"There are people who are going bankrupt," Bland said. "They can't get tests done. They can't afford it anymore."
Attorney Alec Gibbs, who represents the retirees, told The Flint Journal previously that the changes have forced retirees to decide between paying for necessities and medical treatment.
"They came in and they shifted off a great bulk of the costs of health care onto retirees," said Gibbs.
The changes would force non-Medicare-eligible retirees to pay at least $500-$2,000 out-of-pocket before any coverage begins. Medicare-eligible retirees would pay an additional $100 per person per month, have their deductibles increased to $1,000 have an increased co-pay -- from $1,000 to $2,500.
"As a retiree, I feel definitely under attack," Bland said. "Everyone is looking at us as the easiest source of money to pay their bills."
Snyder is asking the Court of Appeals to reverse an injunction put in place by a lower court and remand the lawsuit for dismissal. Gibbs said he plans to file a response to Snyder's brief.
Oral arguments in the case were made Oct. 1. The court has not released its decision. |
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Thu Oct 10, 2013 7:43 am |
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untanglingwebs
El Supremo
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search for Schuette protecting pensions.
IT DIN'T TAKE SCHUETTE LONG TO SWITCH SIDES. WITH THE NERD RUNNING AGAIN, HE LOST HIS CHANCE TO RUN FOR GOWERNOR!
Schuette right to defend Detroit pensions | The Detroit News
www.detroitnews.com › Opinion › Editorials
Consistency and the state constitution demand that Attorney General Bill Schuette fight to protect the pensions of Detroit retirees from being downsized in bankruptcy ...
Michigan AG to defend public pensions, state constitution in ...
www.freep.com/.../307270059/...pensions-in-Detroit-s-bankruptcy-filing
Jul 27, 2013 · Bill Schuette said he will intervene in U.S. Bankruptcy Court in Detroit 'on behalf of southeast Michigan pensioners who may be at risk of losing their ...
UPI - Michigan A.G. Bill Schuette plans to intervene in Detroit ...
www.upi.com/Top_News/US/2013/07/27/Michigan-attorney-general-says...
Jul 27, 2013 · Michigan Attorney General Bill Schuette said Saturday he will intervene in the Detroit bankruptcy case to protect people collecting city pensions.
Michigan Attorney General Bill Schuette files on behalf of ...
www.freep.com/article/20130729/NEWS01/307290079/Schuette-Detroit...
Jul 29, 2013 · Michigan Attorney General Bill Schuette filed on behalf of thousands of retirees in U.S. Bankruptcy Court to protect what he calls 'hard earned pensions ... |
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Thu Oct 10, 2013 7:50 am |
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