What Is A Fair Pension?
By: Ron York, President POLICEPAY.NET, Inc.
I am just going to give you the answer right up front. A fair employer paid pension benefit is ZERO. That’s right. What do you bums think? Look, us hard working taxpayers are tired of being Santa Claus for you ungrateful ingrates. If you want a pension, fund it yourself. Don’t ask me to pay you to not work. Suck it up and get a grip. Boy, that felt good.
What is that you say? Your employer does not provide you with a pension. That’s a whopper. I personally know that you have one of those obscene 3% @ 50 plans that provides you a 90% pension. The city even pays your 9% contribution. I can do the math. You fat cats and your union thugs are draining the city’s coffers and then trying to sell me on the big lie.
What do you think so far? Give me another chance. Employers do not GIVE anyone a pension. They just deduct money from your paycheck and put it into your pension plan. There is only one pay number that matters – total compensation per hour worked. Base pay, pensions, health insurance, etc. are just components of total compensation. What the pieces cost does not matter. What if you went shopping for an automobile and found that every dealer was asking a price of $25,000? Would you be concerned about the cost of the individual components in the vehicle?
What if you were violently opposed to cigarettes and detested paying for the lighter in the car, just to find out it is not an option, but standard equipment? Would you be concerned about the cost of the lighter? What if the dealer tells you that the lighter costs $20,000 and the rest of the car costs $5,000, would you immediately leave and go to another dealer? Would you prefer instead to buy the same $25,000 vehicle from a dealer who had the cigarette lighter priced at $500 and the rest of the car at $24,500? Why not? That’s a big difference - $20,000 versus $500. The answer is obvious – you are buying a car, not individual parts that it is made from.
Compensation is the same. The employer is concerned with the total cost and the employee is concerned with the total compensation package. Let us look at an employee who is getting a paycheck of $48,000 per year. In addition, the employer is putting 25% of pay into a 3% @ 50 pension plan and $1,000 per month toward the employee’s health insurance. The employer’s total cost per year is $72,000. (If you are lost, stop and do the math).
This department works a 40 hour week (5 days @ 8 hours), or 2,080 hours per year. This employee gets three weeks vacation, ten holidays, and ten sick leave days for a total of 280 hours of paid time off. Therefore, he works 1,800 hours per year. What is his total compensation per hour worked? The answer is $40 per hour. You are the mayor, what number are you concerned with when preparing the budget? If you answered anything other than the total hourly rate, go back to the top and start rereading the article.
Forget about the components and focus on total compensation per hour worked. Get your compensation package in a form that will draw the least attention and scrutiny. If you do not, you will be under constant attack from people who only focus on individual components. We would pay you a 500% pension if you would work 30 years at minimum wage. We would write you a paycheck of $72,000, rather than $48,000, if you would fund your own pension and health insurance.
Employers pay none of their money into your pension plan. They put your money into the retirement system. What is a fair pension? It depends on how much of a reduction you are willing to take in your paycheck.
