Local View: The real facts on pension plan

2012-08-04T23:57:00Z 2015-02-03T09:55:49Z Local View: The real facts on pension planBy JON CAMP JournalStar.com
August 04, 2012 11:57 pm  • 

“A half-truth is the most cowardly of lies.”

-- MarkTwain

In his Local View column (LJS, Aug. 2), David Engler, president of the Lincoln Firefighters’ Union, criticized 401(k) retirement plans (a type of defined “contribution” plan) and concerns I have voiced about the Police and Firefighters defined “benefit” Pension Plan.

Engler’s column quotes the biased National Institute on Retirement Security (NIRS) and contains half-truths.

NIRS' Andrew G. Biggs, formerly the principal deputy commissioner of the Social Security Administration, has noted the NIRS “membership consists principally of public employee unions, the pension plans in which they participate, and the actuarial and investment firms that serve them."

Engler’s editorial incorporated NIRS bias.

Facts or half-truths? Engler wrote, “By every independent measure the (Pension) fund is fiscally healthy.”

Fact: The Aug. 31, 2011, Actuarial Valuation Report stated: “If asset returns are not significantly higher than 7.50 percent (the assumed annual investment return) over the next few years ... the employer contribution rate can be expected to increase significantly.” In 1999, the city’s contribution was $908,234; it is now $6.7 million and increasing.

Engler: “As recently as 2008, the Lincoln Police and Fire Pension was 100 percent funded. ... Today it is 81 percent funded, and the reduction is due to the devastating recession. As the market recovers, so will the pension fund.”

Fact: The “market” value of the Pension fell from $181 million in 2007 to $135 million in 2010.

Engler’s “81 percent funded” figure uses “actuarial language”. There are three values of importance (8-31-2011 figures): (1) the Actuarial Accrued Value ($205 million), (2) Funding Value ($165 million) and (3) Market Value of assets ($148 million). Engler’s “81 percent” refers to the Funding Value ($40 million deficit), not the Market Value ($57 million deficit). Funding Value is an “actuarial” creation -- not the same as the “market value” of the assets. The Pension Plan was 72 percent funded using “Market Value.”

Without Mayor Chris Beutler’s 2009 modifications of two key Pension Plan “actuarial assumptions,” the “81 percent of Funding Value” would be closer to “72 percent of Market Value.”

Since 1999, I have suggested the 7.5 percent earnings assumption is too high --during those 13 years, the investment return exceeded 7.5 percent only three times. Current U.S. Treasury Bond rates for 30 years are 2.6 percent. If Engler is so sure the “market will recover,” will he and his fellow pension participants guarantee the investment return instead of Lincoln taxpayers?

Engler: The amount of taxpayer dollars that go into the firefighter and police fund is limited, with nearly 80 percent ... coming from our own paychecks and investment earnings.

Fact: The plan participants contribute an average of 6.69 percent of their compensation. The remaining costs of the Pension Plan are paid from Lincoln taxpayers’ real estate taxes, less investment earnings. The city’s contribution for 2011 was 18.02 percent of compensation, nearly three times as much as plan participants, and a one-year increase from 15.62 percent in 2010. Engler’s 80 percent figure has no relevance to employee contributions.

Engler: “(F)irefighters and police officers don’t receive Social Security, and our pensions are our only source of retirement income."

Fact: Lincoln’s firefighters and police officers do not contribute the 6.2 percent to Social Security that other workers do. But the 6.69 percent they contribute to the Pension Plan provides, in Engler’s words, a “modest” 64 percent of regular pay at retirement.

How many Lincolnites would gladly decline contributing 6.2 percent to Social Security and instead contribute 6.69 percent to the Police/Firefighters Pension Plan and receive “64 percent of their highest year’s pay” for life? At a retirement age as young as 48-50?

Engler is disingenuous saying the Pension Plan is their “only source of retirement income.” How many firefighters have second or third jobs because they work Kelly days providing considerable free time -- and draw Social Security or retirement from those other jobs? How many firefighters have second careers after retirement that provide additional retirement benefits and Social Security?

The City of Lincoln has three alternatives to improve the police and firefighters retirement benefits: (1) require more contributions by the Pension participants, (2) reduce Pension benefit levels, and/or (3) convert to a defined contribution plan.

Council Member Jon A. Camp formerly owned an actuarial consulting firm.

Copyright 2015 JournalStar.com. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


Letter, 11/29: Refugees a military opportunity

There is little that the average American can really do to defeat ISIS with one big exception: welcoming the refugees fleeing the hell in Syria and Iraq with open arms. There is a moral reason for accepting these refugees and there is even a strong religious reason for accepting them. As the…

Letter, 11/29: Lessons of roundabout

With regards to the 14th & Superior Street multi-lane roundabout ("Lesson learned from Superior Street roundabout: Don't build too big," Nov. 18), let me see if I have this right:

Letter, 11/29: On faith and persecution

Some members of all major religions, with their loving and merciful gods, are known to have carried out inquisitions, crusades, colonization, enslavement, holocausts, witch-hunting, subjugation and terrorism at one time or another, leading to persecution and execution of innocent people, as …

Letter, 11/29: Open hearts, homes to refugees

I was repulsed when I saw the front page of last Tuesday’s paper ("Ricketts joins governors calling to halt Syrian refugees," Nov. 16). I then read that Gov. Ricketts has joined a host of other governors asking the administration not to permit Syrian refugees into the United States ("Rickett…

Letter, 11/29: Support more rigorous vetting

I have to wonder how many people have written a letter of support for Governor Ricketts and the other governors who signed a letter asking that the process for vetting refugees be looked at, and possibly revised, in light of the recent Paris terrorist attacks ("Support Ricketts on refugees,"…