You know that 7% pension pick-up that CPS wants to take away? Don’t believe their hype.

20140205-200522

-By John Dillon

The Illinois Policy Institute is angry once again with what their editorialist Diana Sroka Rickert considers another unnecessary handout to Chicago teachers:  the Pension Pickup.

In her December Tribune editorial last week, Rickert urged Chicago’s besieged Mayor Emanuel and CPS CEO Forrest Claypool to end the current practice of providing pension pickups for the Chicago Teachers Union.

“While (they) have busied themselves asking state taxpayers to send hundreds of millions of dollars Chicago’s way, they’re unwilling to use the $174 million that’s already available for them to use for teacher’s pensions.”

But they’re not the peculaters.  The real culprit?  Read on, please.

Chicago teachers are supposed to pay 9 percent of their salaries toward their own retirement savings.  But instead, teachers pay just 2 percent; the rest of the “teachers’ contribution” is picked up by taxpayers, thanks to a clause negotiated into their contract6s in the early 1980s.”

As a retired educator from a suburban district I suppose I could feel a little miffed with having paid 9.4% of my salary each paycheck, instead of 9% like those in the CTU.  Adding to that, if CTU paid only 2% of the 9%; well, why didn’t I get such a deal?

And that’s exactly what Rickert and the IPI want all of us to do.  Let’s not think it out or look into it.  Let’s just be blind angry.

The “deal” that Chicago teachers got in the early 1980s was actually a mandated law by the General Assembly in 1983.  And this statute (40  ILCS 5/17-130.1) provided the opportunity for retirement contributions to be considered part of the negotiating process in salary and benefit settlements during collective bargaining.  In fact, all districts in Illinois got the same deal.

“An Employer or the Board may make these contributions on behalf of its employees by a reduction in the cash salary of the employee or by an offset against a future salary increase or by a combination of a reduction in salary and offset against a future salary increase.”

Teacher’s Union:  We’d like to ask for a 2% increase in our wage benefits across the board this next contract.

Board of Education:  We’d like to find a way to do that.  How about a ½% increase across the board, and we’ll pick up 1.5% of your contribution costs per person?

If` you’re still not sure how this works, it means that my union never debated with the Board over my 9.4% payment.  But just down the highway at another district near the airport, they did and paid only 4% of their 9.4% requirement.

Read the rest of the article here.

14 thoughts on “You know that 7% pension pick-up that CPS wants to take away? Don’t believe their hype.

    • Nonsense. Every contract is different from other contracts. Some get better benefits. Some higher salaries. Some more vacation time. Others parental leave. Some employees get profit sharing. Bonuses. There’s not “one deal” public employees get. You don’t represent all public employees. Stop thinking you can speak on their collective behalf. Or take it somewhere else.

    • Dear Fred,

      Let me help some of our colleagues understand what really happened here. This is just another example of how no good deed goes unpunished. The benefit payment helped the school board, not the teachers.

      Whether compensation was paid in dollars to the teachers or dollars to the pension fund didn’t seem to matter at the time. (We know better now.) Total money in paid compensation didn’t change at all. Other public employees should be thankful they never accepted a similar arrangement that their employers could later turn against them.

      There was less than adequate money available to the school board from the state to fund schools. Instead of increasing funds to schools, the General Assembly changed a law so school boards could reduce tax withholding payments to the state and federal government by compensating employees with a non taxable benefit ( in this case a pension “pick up”) INSTEAD of higher pay. That money would then be available to spend on other things.

      Teachers agreed to this arrangement to help the board. Now the board wants to use that agreement to lower teacher compensation. How nice! They only want to count what they supposedly “gave” teachers, not what teachers gave up. They really didn’t give teachers anything. Where compensation was paid was changed. Compensation was NOT increased.

      Someone was running a scam when pension pickups began in the 1980’s. but it wasn’t teachers. It was the General Assembly and C.P.S. How total compensation is paid has a great effect upon how much tax withholding C.P.S. has to pay the state and federal government. The law you mentioned was passed to reduce that amount, allowing money to be spent elsewhere by school boards. It didn’t increase compensation given to teachers at all.

      Now C.P.S. says that teachers compensation should be reduced by that amount? Nothing like using the willingness of teachers to try to help against them. I’d strike too. Nothing like kicking teachers in the teeth because they agreed to try to help solve a cash flow problem.

  1. Someone should tell them that when you go to compare salary schedules across districts you have to add back the pension pick up to the salary schedule or the districts with the pension pickups look like the teachers are poorly paid.

  2. One day somebody is not going to have enough teachers to fill a small elementary school because somebody paid attention to an editorial writer and took away another incentive. Who’s going to teacher the 4th grade classes then? Editorial writers?

  3. I haven’t checked the legislation, but I would be very surprised if I were wrong on this point. When an employee has 9% deducted from his or her paycheck, then later on he or she can cash out, taking a lump sum, instead of the pension. Employees cashing out is good for the State or local goverment employer: They get to recoup the employer match, which is at least double what the employee contributed.

    CPS wasn’t doing the teachers a favor when they offered a pension pick-up in lieu of a pay raise. They were doing themselves a favor. As often as not, they got to keep the money.

    • Walter,
      This is not a 401K. It is not a match. It is earned compensation for work performed. It ALWAYS belonged to the employee, not the employer. No one pays for your pension but you.

      That is part of why it is so insulting when people claim “I pay your pension!” ( YOU pay it. Your earned compensation belongs to you for the work you do.) or “The state doesn’t have money for other things because of your pension!” (Money CLAIMED to be paid for pensions from G.R.F. is either paying earned compensation (20%) or debt service (80%). No pension check is being paid from G.R.F. T.R.S. pays it.)

      People who leave are receiving back their own earnings.

      You are correct about the arrangement being favorable to CPS, though. See my comment to Fred.

      • Hugh,

        A part of the employee’s check is deducted to fund the pension plan. An additional matching amount is sent directly to the pension fund by the employer. If you draw down the text of the pension law you can read the details. (Go to http://www.ilga.gov/legislation/ilcs/ilcs3.asp?ActID=638&ChapterID=9) It’s a challenging read, that’s why I haven’t done it in a while. If you don’t believe me, you should go to the original text and at least read enough to satisfy yourself that I know what I’m talking about.

        Both the employee deduction and the match are part of the employee’s earnings, except for one crucial difference. If the employee cashes out he or she gets the entire accumulated deduction in one lump sum. Some people, even teachers, cannot resist the temptation. They cash out, spend all the money, and wind up indigent. The State or the city is fine with this. They get to keep the employee’s match, which is a much larger amount.

        If you pay attention, you will see them. You run across former teachers, State employees, etc.,who cashed out, spent all the money, and now are dependent on handouts and food stamps. You can tell. They’re the ones who don’t seem to have anything to say when the rest of us are talking about pension issues. They’re broke, most of the time, only ordering coffee when the rest of the crowd orders lunch.

        Remember, most of us get no Social Security, so the people who cashed out really put themselves behind the eight ball.

        Walter

      • Walter,
        Some people, even very good teachers, are unjustly SB7nd, given phony bad evaluations, and then terminated after decades of teaching, but with many, many years to go before they are eligible to retire. Often they have to cash out to pay for housing, food, medical insurance, etc. while they try to find employment. Occasionally, but only very rarely is cashing out done frivolously by long term employees.
        The end result, as you pointed out, is they are impoverished for the rest of their lives.

  4. Dear Walter,
    I believe you.
    Your comments make it quite clear to me that you have examined the statutes. I think we are in disagreement over semantics. To me, the choice of wording used in the statute was intentionally deceptive and chosen for a reason. To use the word “match” conveys a meaning that isn’t really accurate or true.

    Sometimes those who wish to pull the wool over employee’s eyes (when codifying matters relating to employment) first try to control the choice of words used in employment benefit discussions. Words are the tools they use to deceive those employees. The argument later is advanced that they never said what you thought they did, and they don’t owe you what you thought they promised you.

    Everything given to you in return for the work you do is compensation. Call it a match, salary, benefit, or whatever. It is never given (which is part of what the the term “match” is intended to convey). It is earned by your work.

    The choice of the word in the pension law may well have been intentional. By doing so, employers frame pension earnings as a gratuity of the employer when the benefit is actually earned. If you think that the employer pension contribution is a gratuity, you and I disagree. Somehow though, I don’t think you view it as a gift from a benevolent employer.

    You and I agree about the choice of early withdrawl of pension contributions. It is a very bad idea. My point was that the so called “match” was their money in the first place. It was an earning in a paid in a different way, not a gratuity from the employer.

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