Bankrupt city pays $204K annual in pension - for 8 months of service

Link: Police Chief

He lasted eight months and left the now-bankrupt city at age 52 with an annual pension that pays more than $204,000 -- the third of four chiefs who stayed in the position for less than three years and retired with an average of 92 percent of their final salaries.

I am a retired police officer with a nice pension (25 years credit in the system) but for the life of me I don't know how that works. That is a terrible, terrible abuse.

Pensions are going to be the downfall of many cities and companies. As a public school teacher, you start teaching at 22 and then can retire at 47. That's 30 years on average that a state government or union must pay you. You get paid for more years than what you actually worked. That's bad business.

mex, what happens is governments don't fund their end of the pension properly and/or they take from the pension fund when times are rough.

Additionally, in some big cities sweet benefits become a part of the political process because the public workers have some pull in the elections.

Any way you look at this it is the politicians that are the problem.

Originally Posted by mexitucky

Pensions are going to be the downfall of many cities and companies. As a public school teacher, you start teaching at 22 and then can retire at 47. That's 30 years on average that a state government or union must pay you. You get paid for more years than what you actually worked. That's bad business.

In KY you have to teach 27 years to draw full retirement, and you also must be at least age 55 when you retire.

In KY, you do not get 100% pension after 27 yrs. It is like 65%, but there is a nice % jump at 30 yrs. I once asked how many yrs. Til you get 100% and was told never...KTRS is also a matching finds situation...

In KY Law Enforcement you get 50% when you retire and then an additional 2.5% for each extra year of service. There are some tax benefits too.

New officers face a combination of years of service and age to qualify for retirement and I will let someone in the system explain that.

Finally, the law enforcement pension is "better" than the teacher pension because law enforcement is considered hazardous duty.

I don't know how this particular case works. But I do know that in some instances, the "last employer prior to retirement" can be on the hook for an employee's total pension. Regardless of how long said employee worked at that last place. Seems like a screwed-up way of doing business to me.

Originally Posted by Watusi

In KY you have to teach 27 years to draw full retirement, and you also must be at least age 55 when you retire.

Ok, so you teach for 34 years, retire at 57 and live 20 years more on average. You receive the average of your top 5 years, if I remember correctly. There is no way anyone contributed that much to their pension to be able to draw that for the next 20 years. I am not blaming teachers, I am using it as an example. What systems can support that in and of themselves? Then you have other pensions that pay out like the one in the article...politicians need to have to pass an economics exam and a common sense exam.

Originally Posted by mexitucky

Ok, so you teach for 34 years, retire at 57 and live 20 years more on average. You receive the average of your top 5 years, if I remember correctly. There is no way anyone contributed that much to their pension to be able to draw that for the next 20 years. I am not blaming teachers, I am using it as an example. What systems can support that in and of themselves? Then you have other pensions that pay out like the one in the article...politicians need to have to pass an economics exam and a common sense exam.

Actually they can when the state allocates the proper amount of resources to the pension system.

In the case of law enforcement, the state never does their part and they keep mandating to the cities they pay more and more into the system.

In my opinion it needs to move to a matching 401K system where the city/state matches a handsome portion of the overall salary.

Originally Posted by mexitucky

Ok, so you teach for 34 years, retire at 57 and live 20 years more on average. You receive the average of your top 5 years, if I remember correctly. There is no way anyone contributed that much to their pension to be able to draw that for the next 20 years. I am not blaming teachers, I am using it as an example. What systems can support that in and of themselves? Then you have other pensions that pay out like the one in the article...politicians need to have to pass an economics exam and a common sense exam.

Teachers contribute an unusually larger amount to their pensions because they do not contribute to social security (and they cannot draw social security upon retirement). So using teachers is probably not the example you want to use for your illustration.

Originally Posted by Watusi

Teachers contribute an unusually larger amount to their pensions because they do not contribute to social security (and they cannot draw social security upon retirement). So using teachers is probably not the example you want to use for your illustration.

Social Security? I won't be able to draw that either (theoretically, yes, but who knows if it will exist.) My point is, that unless a union or local government is being led properly and have astute financial people at the helm, pensions will continue to be underfunded. It is tough to run a retirement program where you guarantee what someone will make after they retire, and are contractually obligated to pay it. What you find is that at times when the economy is booming, unions or whoever can negotiate much better retirement plans. When the economy tanks, and those pensions begin being collected, you get this. Guru, in my opinion is correct. This needs to become privatized.

Originally Posted by mexitucky

Ok, so you teach for 34 years, retire at 57 and live 20 years more on average. You receive the average of your top 5 years, if I remember correctly. There is no way anyone contributed that much to their pension to be able to draw that for the next 20 years. I am not blaming teachers, I am using it as an example. What systems can support that in and of themselves? Then you have other pensions that pay out like the one in the article...politicians need to have to pass an economics exam and a common sense exam.

I assume that in most cases the employer matches well above and beyond what the emplyee contributes.

^ KERS has been notorious until very recently for underfunding the system. They would recommend employer match percentage each year, but the legislature was reluctant to sign off on the recommendation.