Following are a series of reforms which we believe balances out the need to preserve benefits for current employees while avoiding bankrupting our public entities. We believe that these reforms should be applicable beginning in January of the year following passage of this legislation.
1. Eliminate Pension Spiking
A. Mandating that all pensions be based on the average wages earned over 10 years
B. Mandating that wages for purpose of the pension can only be based on the base wages, bonuses, severance payments, vacation pay, overtime etc, are not included as wages for pension calculations.
2. Set a retirement age of 62 for firemen and policemen and 67 for all other employees. Allow all employees to retire at 62 but use the same formula as social security uses to reduce benefits for early retirees.
3. Cap Pension Benefits and mandate participation by employees in funding costs.
A. Cap pensions at 75% of wages. We do not believe that it is necessary to fund over 75% of any employees pre-retirement income (See What's a Reasonable Retirement Tab).
B. Mandate employees match in their contribution whatever contribution is required of the employer. This makes the employees take some ownership of pension costs, if they feel the costs are too high they can negotiate a lower accrual rate.
4. Cap accrual rates at 1.5% for employees subject to Social Security and 2.5% for those not participating in Social Security. Past accruals that employees have earned at higher accrual rates would still be contractually honored. Current employees will however see their accrual rates decrease beginning in January of the year following passage of this legislation.
5. Have retiree's Participate in Restoring Underfunded Plans
There are no good answers when plans are underfunded and in danger of collapse. Most of us feel that once someone has retired that they should not lose something that has been promised to them. At the same time is it fair to ask taxpayers to come up with the money to pay benefits to correct underfunding? I would suggest younger retirees might take a haircut on benefits while older retirees benefits should not be touched if possible. Younger retirees often have the option of going back to work.