My readers react to pension buyout proposals.

pension-hearing-2-29

Rep. Mark Batinick, R-Plainfield, explains his lump-sum pension bill during a hearing before Representative Elaine Nekritz’ House Personnel and Pensions Committee yesterday.

Fred,

Pension buy-out? Not that I want to prejudge… But… Consider the source! Does Nekritz have nothing better to do than think of hair-brained idiocies? How did Einstein define “insanity?” She needs to be placed long-term on some kind of farm that specializes in psychological rehabilitation. I realize that we’ve mentioned “revenue” millions of times or more in written and spoken word among us, but apparently it hasn’t yet dawned on our one-track minded Elaine that her time might be spent more productively on… let’s say, “R-E-V-E-N-U-E?” Then again…

I thought that Fortner, among Republicans at least, had some horse sense. At a legislative breakfast two years ago, he agreed with Ralph Martire’s idea that the “pension ramp” needed to go and the “unfunded liability” had to be refinanced over a longer term. It seems that his “horse sense” had a brief shelf life. Unlike Nekritz, Fortner does have a major excuse: He’s a Republican.

I have a strong feeling that we’re all suffering from “Nekritz fatigue.” She’s a human (?) whack-a-mole. It’s as if she were put on this Earth just to torment us. To paraphrase Henry II (Plantagenet / 1133 – 1189 A.D.) in reference to Thomas A Becket, Archbishop of Canterbury, at the height of their long church-state dispute: “Will no one rid us of this meddlesome Democrat?”

Elaine, enough already!!! Your greatest contribution to the people of Illinois would be a long stay on that farm for psychological rehabilitation.

– Karl-Heinz Gabbey

Fred,

So Elaine Nekritz is updating our pension with some brilliant expertise. Now the pension, which was originally designated solely for the retiree, must be shared with a “vendor” and some “additional experts”.

-JR

Fred,

I’ve followed your articles for three years now.  This “scheme”is as dumb as Nekritz looks.  I negotiated three contracts for district 230 and as an Accounting teacher with 38 years of experience before I retired, in 2004, I can’t believe that these people think teachers are so unaware of financial matters that they would even consider this.  Dementia would be a qualification.

-Tony Gies

Fred,

I have read elsewhere that the lump-sum payout in the Batinick bill would be 80% of the present value of benefits to be received, based on average life expectancy as estimated by the pension fund actuaries and based on assumed pension fund investment returns. A person would be eligible to choose a full or partial lump sum only one-time when they retire.

The problem I see is that this is likely to cost the state money (the opposite of what is intended). Workers have a lot of choice in picking their retirement date. So basically, if someone gets a terminal cancer diagnosis anytime between age 55 and when they retire, In most cases they will be able to retire immediately, take the lump sum, and they and their families get more than otherwise over the worker’s (unfortunately short) remaining lifetime. In insurance this is called adverse selection, and it is the main reason private health insurance premiums were so high before the ACA (sick people were more likely to apply for policies), and why insurance companies are losing money on ACA enrollees (because this is still the case and the ACA bars medical underwriting). Now I understand that not everyone behaves rationally, and that some healthy retirees will choose the lump sum even though it may not be in their best interest. However, the average state employee is well-educated, and I would not gamble on the collective irrationality of the state workforce. If the proportion of state employees who behave rationally exceeds 50%, the state is likely to lose money under this scheme.

-Andrew Szakmary

8 thoughts on “My readers react to pension buyout proposals.

  1. I agree with Andrews assesment. While this is nothing we still need to find primary opponents for her to return the favor of her torment of us.

  2. Dear Fred, How many do you see buy up lottery tickets for a chance to “hit it big”?  There will be some fools among those who teach who will choose to “live for the moment” and take the lump sum no matter how foolish it actually may be. We live in an era of instant gratification.Mary Richie

  3. I spoke to Rep. Batinick last night at a fundraiser. I suggested to him that his plan would go haywire if people made a wrong determination and the market went south again. He said that, I believe, his mother-in-law is a retired teacher and he would suggest to her that she withdraw her money so she could buy a duplex in Florida and live off of the rental income from the other half of the duplex for the rest of her life. This is wrong on so many levels. I wonder if he is willing to have “mom” move in with he and his wife when this plan fails? And did anyone think about checking with the Federal Government to find out what is actually allowed these days in regards to withdrawals to pension systems?

    Linda L Brookhart
    Executive Director
    State Universities Annuitants Association
    217 E Monroe Street, Suite 100
    Springfield, Illinois 62701
    217.523.4040 Voice
    217.553.1091 Cell
    217.523.4044 Fax
    linda@suaa.org
    http://www.suaa.org

  4. Linda this plan does rely on stupid but an we stop people from being stupid? It sounds like he wants to get Moms money ……Now I would have her borrow to buy the duplex and pay off with the renter and her income and keep that walled up pension. Pensions and retirements are walled off from bankruptcy.
    I support a real social safety system like Medicare for all but on something like this…well I have known so many people that have foolishly cashed out the tiny amount you can get now from SURS that I guess we might as well let them get a larger amount…but encourage them to blow it in Illinois not Forida! BTW I even had an accountant who teaches at a real university suggest a cash out….to which I laughed heartily.

  5. I think I read something in the plan about “vendors” providing the money for the lump sums in return for a portion of the sum. Is that even legal?

  6. From what I see, lump sum looks daffy. Calculations? Just what are the particulars? And would this be for retirees like me or those still in the classroom?

    Thanks,
    Rob

  7. Has anyone thought about the tax liabilities? Pensions were/are deducted before taxes, hence you are to pay taxes when you get it. What kind of bill would you get for a lump sum?

    And I agree with Linda, the Feds have rules on pension pay outs.

    No one has said anything about how this looks so much like privatizing the pensions. I wonder what vendor thought of this.

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