Can teacher pension increases keep up with the cost of living?

Graph: NY Times.

As a retiree I have had to listen to anti-taxers complain about our alleged generous pension for years.

Some focus on our yearly COLA increase.

Each February we get a 3% compounded increase over the pension we received the year before.

Prior to 1989 the increase was 3% simple.

Meaning 3% of our starting pension amount.

The legislature changed the benefit to 3% compounded because inflation was way more than that and they felt sorry for us.

In 1990 the official government CPI was double that.

So, the change from simple to compounded wasn’t generous.

It was re-election insurance.

Since then the 3% compounded has kept retirees aligned with increases in the costs of things. None of us have gotten rich.

But things may be about to change.

There is growing concern with inflation.

Writes the NY Times:

Consumer prices jumped at the fastest pace in more than a decade in April, surprising economists and intensifying a debate on Wall Street and in Washington over whether inflation might reach levels that would squeeze households and ultimately undermine the recovery.

Suddenly that 3% compounded doesn’t look so generous anymore.

And I don’t hear anybody suggesting a raise to keep us up with the cost of living.

Remember that when and if the cost of stuff goes down.

11 thoughts on “Can teacher pension increases keep up with the cost of living?

  1. Maybe if you had been paying your “fair share” toward your pension the people of Illinois would feel sorry for you. You didn’t and we don’t/

    1. Bob,
      Members of the state’s pension systems are the only ones who have paid what we were supposed to pay. Call me to feel sorry when the promises made to you are broken, when the contracts you agreed to are ignored, when the needs you have or will have as an elder mean nothing.

  2. Are you saying that your district did not have a pick-up plan where the district paid the employee contribution? If there was a pick-up plan, please explain how YOU paid the employee contribution.

      1. So … you made pre-tax contributions and as a result part of your pension is not taxed?

      2. My point involved federal tax. In general, contributions by employees to defined benefit plans are “after tax” contributions. The result is that a portion of the eventual pension is recovered tax-free (federal tax) due to the fact that the employee has a “basis.” One of the purposes of a pick-up plan is to avoid the employee having to make mandatory contributions from after-tax earnings.

        If you find this fascinating you can study-up. I’d suggest starting with https://www.irs.gov/government-entities/federal-state-local-governments/employer-pick-up-contributions-to-benefit-plans.

      3. Whether employees make the contribution or the school district picks it up is contractual.

  3. Why wouldn’t you say that the rest of the world’s pensions should be brought to the current level that retired teachers receive BEFORE you get additional COLA? It’s already unlikely that Illinois teachers will ever receive what they’ve been promised under an unsustainable system. Older retirees are more likely to get that because the funds will last for a few more years. But rationing of insufficient resources is already underway worldwide. Nobody can get elected or re-elected speaking this truth. I’m not sure I can even get “published” here with this speculation. But (for now) I can continue reading and annoying the moderator.

  4. True pick-ups are contractual. If one has pick-ups it’s pre-tax. Can pick-ups be negotiated out in the next contract or are they “contract rights” that can never be changed? When you say “Our teachers paid the full employee contribution. 9.4% for most years” are you counting all years since plan inception? Pick-up plans started in 2006. My guess is that few Illinois teachers have paid out-of-pocket since then. Thus I think your original answer is misleading. But it’s a great advocacy point!

    1. All TRS contributions are pre-tax. It is a permissible issue of bargaining each contract negotiation. The last time I looked about half the teacher contracts had teachers paying the full amount, with the other half having the board picking up some or all of the teacher contribution. Where there was board pick up it was usually instead of a raise in salary. One year the CPS board and the CTU bargained a 7% pension pickup by the board instead of a raise in the base salary leaving members of the Chicago Teachers Pension Fund paying the remaining 2%. That arrangement ended with a recent contract. Now teachers make the full contribution. I’m not sure where you got the idea that “pick-up plans started in 2006.” Each of the 600 school boards and union locals bargain this on their own. We would often put in on the table for bargaining, offering to take a reduced salary increase in exchange for a partial pension pick-up. The board never agreed to this. In any case, it is a small matter and doesn’t amount to much either way. I wonder why you are obsessed by it?

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