America’s Teachers: Heroes or Greedy Moochers at the Public Trough? by Dave Lindorff

“…Let’s just let that sink in for a moment. Those teachers, who are routinely being accused by our politicians of being drones and selfish, incompetent money grubbers worried more about their pensions than about teaching our children (though most, even after 10 years, earn less than $55,000 a year for doing a very difficult job that involves at least 12-14 hours a day of work and prep time counting meetings with parents), stood their ground when confronted with a psychotic assailant armed with semi-automatic pistols and an automatic rifle, and protected their kids. The principal too, a veteran teacher herself, stood her ground, reportedly suicidally charging at the assailant along with the school’s psychologist in a doomed effort to tackle him and stop the carnage.

“How many of us would have had to the courage to stand in front of a closet door to keep an armed madman from finding the kids hidden behind it, as one slain teacher died doing? How many of us would charge at an armed shooter, to almost certain death, in an effort to stop him from further killing? How many would bravely hide in a bathroom with a class of kids when we could have run away and saved ourselves?

“And this: How many of the politicians in Washington and in state capitals and how many conservative think-tank “researchers” who attack teachers as leeches and drones would have shown such heroism under fire?...”


For the complete article originally published at Nation of Change: http://www.nationofchange.org/america-s-teachers-heroes-or-greedy-moochers-public-trough-1355674260.


Let the Nurturers Nurture by Jake Matthews

There were some amazing stories of human courage and compassion that came out of the horrors in Newtown, Connecticut. Teacher Vicki Soto gave her precious young life to protect her tiny first graders. Shielding them from harm was her first instinct and her last act. In the face of terror unimaginable, her instinct to protect the defenseless students who depended on her for their safety and well-being did not fail.

If you think about it, she did this very thing each and every day. She went to that school and protected those children from the meanness of life as she spoke to them. I’m sure, in gentle teacher tones about being nice to one another, sharing how to treat others who were different than them. She made choices daily about what language and tone to use in front of children, what attitudes to take and what clothes to wear. I didn’t know this amazing teacher, but in reading about her and knowing the calling she followed with her life, I can say with confidence that she spent the five years of her all-too-short career protecting little ones from harm on a daily basis.

Vicki Soto was a workaday patriot, with no medals and no parades, a sacrificial foot soldier of nurturing who fought on America’s front lines of care and compassion, two traits that are terribly lacking in our nation right now. Even as her career changed and faraway deciders made it more and more about competition, she retained her hold on nurturing. Thank goodness, because American children need that more than anything.

In another room in that building, fellow first grade teacher Kaitlin Roig locked her little ones in a bathroom and pulled a bookshelf in front of the door. She told the children to be perfectly quiet. She told the children there were bad guys out there right then and that they needed to wait for the good guys.

“As their teacher, I’m their protector,” the teacher told Diane Sawyer. “I told the kids I love them,” she said, “and I was so happy they were my students…I said anyone who believed in the power of prayer, we need to pray.” And she didn’t leave out the children who didn’t believe in prayer. She told them to think happy thoughts. Even in a time of extreme stress, her thoughts were on the individual needs of those children.

She said she wanted “I love you” to be one of the last things they heard, because she was sure they were all going to die. As this teacher contemplated her own death, she didn’t think about what she needed. She thought about what those little ones needed.

When the good guys finally showed up, Ms. Roig had enough strength and wisdom not to merely throw open the door, but to insist that the police officer slide his badge under the door. Even then, she told him that if he were really a cop, he could get the door unlocked, and she refused to open it for him. The children told her, “I just want Christmas.” One student in that tiny bathroom told her that he knew karate and could lead the way out.

I can close my eyes and see this teacher taking those little students’ faces in her hands when they started to cry, and I can see her smiling at them even through the horrific fear settling in her own heart. These teachers are such wonderful people, such unheralded heroes. These are our nation’s last nurturers and look at how we treat them. We build systems to turn them into gladiators of merit. We call them union thugs to advance political agendas. Shame on us. Let the nurturers nurture.

Thank you, teachers across America, for your courage and your sacrifice. Thank you, teachers of Newtown, for caring for other people’s children when they needed you most. You all deserve the Congressional Medal of Honor. There is no greater love than this, that a teacher would give her life for her students. Keep nurturing.

from The Educator’s Room: http://theeducatorsroom.com/2012/12/let-the-nurturers-nurture/

The Deaths of Children

And what do we do now about the deaths of American children besides expressing our profound disbelief and sorrow? What do we do now about the deaths of children elsewhere in the world?

Do we mourn the deaths of children in Palestine and Israel, in Iraq and Afghanistan, in Sudan and Rwanda, in Nigeria and Somalia, in Sri Lanka and Sierra Leone, in Ethiopia and Eritrea, in Liberia and Colombia, in Chechnya, Syria, and Indonesia, and elsewhere in the world the way we grieve for our own children?

Is it our nationalistic fervor that condemns us to not care about the world’s children the way we care about our own...? Is it our wealth and privilege that insulates us from the deaths of children elsewhere in the world?

Think about the children elsewhere in the world and how many of them are dead because of our country’s and many other nations' political and economic interests and expediencies. Until we make everyone the object of our moral concern, we remain accomplices with hypocrisy and indifference. 

-Glen Brown

“Globally, just over 1 billion children under the age of 18 live in countries or territories affected by armed conflict—almost one sixth of the total world population. Of these, approximately 300 million are under the age of five” (Machel Study 10-Year Strategic Review: Children and Conflict in a Changing World p. 19).

TRS Executive Director Dick Ingram’s Version of Jonathan Swift's “A Modest Proposal”: Sacrifice Our Teachers Instead

A brief history or who do you work for, Dick Ingram?

December 2012

…When you asked, “Why wouldn’t we do that?” It’s the “We” that slams into dramatic irony. “We” means that only teachers bear the burden. It’s obvious that you, many members of the Illinois General Assembly, and members of the Civic Committee of the Commercial Club of Chicago do not know the meaning of the word, “sacrifice.” Sacrificing teachers (and other public employees) doesn’t address the revenue and pension debt problems in Illinois. “We” offer you and the Illinois General Assembly 10 legal and moral solutions instead of "pension reform" or breaking a constitutional contract… for more read: A Response to TRS Executive Director

October 2012

…For Ingram to suggest unconstitutional alternatives for solving the state’s budget problems is to focus not on the essential causes of the state’s budget deficits: its structural revenue and pension “debt” problems... for more read: “Once again we have a problem”with TRS Executive Director Dick Ingram

April 2012

…Yes, according to Ingram, let the suggestions and solutions for the TRS board be “new, bold and honest.” So here are two “new” suggestions for TRS: let’s put an end to scapegoating teachers and other public employees once and for all. Public employees are not responsible for the state’s deficits. Moreover, let’s put an end to distracting the general populace from the real problems that the State of Illinois confronts… for more read: Poisoning the Well: TRS Executive Director Dick Ingram’s Shift in Position

April 2012

…It is not one of the executive director’s duties to make self-contradictory statements that jeopardize the TRS members’ benefits and rights guaranteed by the Illinois Constitution. It is not “prescribed by the Illinois Pension Code” that the executive director’s role is to also validate a fallacious and illegal argument “where lawmakers [the Civic Committee and the Chicago Tribune also perpetuate] a [certain] solution…” for more read: The Blunder that Just Keeps on Giving

April 2012

…Ty Fahner of the Civic Committee was quick to remind everyone in the audience that “out of a sense of responsibility to his membership, Mr. Dick Ingram, head of the TRS, has admitted to the pension system’s insolvency”; that the “real numbers were hidden.” Rank-and-file members from the public unions in the room were silent, not out of surprise but because once again they were hearing Ingram’s words being used to make a case that “cuts” to the current teachers guaranteed benefits and, quite possibly retirees' guaranteed benefits, were necessary, despite the constitutional provision that protects such changes… for more read: Fixing Illinois’ PublicPensions (at the Better Government Association Symposium)

March 2012

“We cannot invest our way out of the funding circumstances that have been created over the last three, four, five decades… We can no longer rely on the old assumptions… We need to address the new funding realities… The constitutional protections that we focus on, very appropriately here, create a different kind of challenge for us” –Dick Ingram… for more read: TRS Executive Director Dick Ingram’s Address to Delegates at the IEA Representative Assembly

January 2012

“...The ‘unfunded’ portion of that liability creates tremendous pressure on state government because it essentially triples the annual cost of public pensions to taxpayers, money that could be spent on other services” (Ingram). Thus far, “shared sacrifice” has been meant only for the middle class, of whom public employees are members, and the poor that must abdicate their hard-earned money and pay more taxes because of an inefficient state government. Few people consider the fact that throughout the years state “services” were provided primarily because of the reallocation of public pension monies to those demands. Perhaps an important question to ask is whether the “party of the privilege” (the Civic Committee, for example) have anything to do with the state’s unreliable contributions to the public pension systems all these years? In other words, whether past legislative irresponsibility enabled certain self-serving legislators (who were funded quite generously through legalized and normalized bribery) to displace public pension money to those very “special interests” (or business groups) without raising taxes for corporations and special electorates… for more read: “Something Wicked This Way Comes” (or “What, Me Worry?”)

A Response to TRS Executive Director Dick Ingram’s call for more “sacrifice” from Illinois teachers

The following is Dick Ingram’s Letter to the Chicago Tribune on December 9, 2012 (reprinted in the Hartford Courant):

Last October, during one of the many public meetings I have spoken at on behalf of Teachers’ Retirement System throughout Illinois, I was confronted by an angry teacher. During the meeting, I had described in blunt terms the serious financial challenges facing TRS and the difficult time state officials were having in finding a solution that would secure the system’s future for all educators; those who are retired and those still teaching. This man was angry. He deserved to be. He felt cheated by a system that had promised him security when he retired. And quite frankly he has been cheated.

I found myself face to face with him after the meeting. By this time his anger had ebbed, and he was reflective. “This isn’t really about me, is it?” he said. “It’s about my daughter.” It turned out his daughter is in college and wants to follow in her father’s footsteps and teach in Illinois. But right now TRS cannot promise her a pension in 30 or 40 years when she finishes her career.

“Can we fix it?” he asked. Yes, I explained, we can. But any solution will be painful and involve sacrifice. He thought a moment more and posed a question I have not been able to get out of my head — a question we all have to answer. “Why wouldn’t we do that?”

Over the past 20 months, I have written to and spoken to thousands of Illinoisans about the problems TRS faces in keeping the pension promises made to our members. Describing the potential insolvency of TRS, and not being able to keep our members’ retirement promises, has generated many difficult — and even angry — conversations. The truth is often hard to accept. But everyone in Illinois deserves to hear the truth, however inconvenient. The challenges TRS faces are steep. But they are not beyond solution.

Say what you will about Gov. Pat Quinn’s latest effort to spark the proper attitude toward pension reform. Beyond his “Squeezy the Pension Python” video campaign, there is an important kernel of truth in the central message. All of these difficult conversations about pensions are far more about securing the future than balancing the present or understanding the past.

For the past eight months, TRS has emphasized that state leaders must act now to prevent insolvency in the future. TRS has the same fiduciary obligation to the 25-year-old teacher as to the 85-year-old retiree. Fixing the problem for the young teacher fixes it for everyone. Why wouldn’t we do that?

Those five words capture the attitude we need to solve the pension problem in Illinois. We are at our best when we think of the future instead of the present, especially when the present is challenging and difficult. When we sacrifice for the next generation, we do great things for today. Who among us would not strive, in lean times and good times, to make the future better for our children and grandchildren?

That is how we have to approach the pension challenge in Illinois. That is how we must think about the choices before us to put TRS and the other Illinois public pension systems on sound footing. It is not about us, it is about those who come after us. They might not even know or appreciate the sacrifice made for them, but what does that matter? Right now we have the opportunity to fix an old problem that has lingered in Illinois for decades — if we focus on the future. Why wouldn’t we do that?

Dick Ingram, executive director of Teachers' Retirement System of Illinois

Irony of the Week:

“TRS will not take a position on House Bill 6258. It is the legislature’s job to dictate the laws and rules that govern TRS and other public pension systems. The job of TRS is to administer those laws and work to secure the System’s finances so that the promises made to generations of teachers by the General Assembly can be kept” (Dick Ingram, December 6, 2012)

Dear Dick Ingram:

I didn’t know that your job description as the TRS executive director also includes occasional supplications. It is easy to construct victims with a dubious call for “sacrifice.” Of course, by “sacrifice,” you, Civic Committee members, and many Illinois legislators mean only public employees. Rose Ann DeMoro, the leader of National Nurses United, said the wealthy have “created an economy on to themselves without people.” Surely, you can see that to victimize teachers again and again because of the TRS unfunded liability is reprehensible. 

We are told that to fix the Teachers’ Retirement System teachers must pay for the system’s liabilities they did not create; that teachers need to compromise through “consideration” and make additional sacrifices. We know you are aware that the “sacrifice” you call for entails changing the public employees’ constitutionally-guaranteed pension by way of a bill that mitigates earned benefits and deprives legally-guaranteed rights. 

Nevertheless, you say, “It is not about us. It is about those who come after us. They might not even know or appreciate the sacrifice made for them, but what does that matter?” 



Mr. Ingram, is it a “Shared Sacrifice” when a governor rolls back the billionaire’s and millionaire’s taxes and then lacerates the state’s school budget while also attempting to diminish a public employee’s pension? Is it a “Shared Sacrifice” when, for most teachers, their pension plan is their only retirement subsidy because they cannot receive Social Security benefits? Is it a “Shared Sacrifice” when legislators and their lawyers want to change an existing contract, one that is not made compulsory on them, to one that forces teachers to accept an “impairment and diminishment” of their constitutionally-guaranteed pension and retirement rights?

You say, “What does it matter? …We are at our best when we think of the future instead of the present, especially when the present is challenging and difficult. When we sacrifice for the next generation, we do great things for today.” 

That’s quite a declaration by someone who hasn’t taught in public schools for 35 years. As a part of the past generation that has now arrived in this “challenging and difficult present” machinated by flagrant incompetence and fraudulence, I thought about the “future” a lot during my teaching career: the “future” of my students, my colleagues, my family, public education and its inequitable reforms. 

You asked, “Why wouldn’t we do that?” There’s an irony in repeating “Why wouldn’t we do that?” ad nauseam. Your repeated question (for poor effect?) makes a false presumption that demands a simple answer to a complex problem. Perhaps your tautology is your adaptation of Governor’s Quinn’s puerile “Squeezy the pension python,” and your attempt at diverting everyone’s focus from real solutions for the state’s revenue and debt problems is just another ploy modeled after the Civic Committee’s skewed Illinois Is Broke operation. 

When you asked, “Why wouldn’t we do that?” It’s the “We” that slams into dramatic irony. “We” means that only teachers bear the burden. It’s obvious that you, many members of the Illinois General Assembly, and members of the Civic Committee of the Commercial Club of Chicago do not know the meaning of the word, “sacrifice.”

Sacrificing teachers (and other public employees) doesn’t address the revenue and pension debt problems in Illinois. “We” offer you and the Illinois General Assembly 10 legal and moral solutions instead of "pension reform" or breaking a contract:

·         The current “Pension Ramp” does not work for the five public pension systems. The “Ramp” entails larger payments today as a result of the 1995 funding law – Public Act 88-0593 – to pay the pensions systems what the state owes. The pension debt needs to be amortized for a longer frame of time (a flat payment) “just like a home loan that is amortized.” Though the initial payment will be greater in the beginning, over the long term it will become  a reduced cost and a smaller percentage of the overall Illinois budget as it is paid off throughout the years;

·         Raise revenue to pay the state’s debts. With a constitutional amendment, “given an appropriately designed graduated-rate structure, Illinois could cut the overall state income tax burden for 94 percent of all taxpayers—on average providing a tax cut to every taxpayer with less than $150,000 in base income annually, raise at least $2.4 billion more in revenue, and keep the effective individual income tax rate for millionaires well below five percent…  Illinois taxpayers with the bottom 94 percent of base income collectively would receive an annual tax cut of $1.06 billion… [T]he combined effect of this policy would be a stimulus to the economy from tax cuts and additional state spending (assuming that the additional revenue is used to fund current public services that would otherwise not be funded) that would create at least 36,000 private sector jobs in communities across Illinois…” (Executive Director Ralph Martire, Center for Tax and Budget Accountability, CTBA);

·          “The State shall provide for an efficient system of high quality public educational institutions and services… The State has the primary responsibility for financing the system of public education (Article X, Section 1 Constitution of the State of Illinois). There needs to be a required annual payment from the state to the pension systems;

·         Tax services. Broaden the sales tax base to include selected consumer services. Illinois is one of five states with sales taxes on fewer than 20 services (The Center on Budget and Policy Priorities);

·         Eliminate the tax loophole for “Tax Increment Financing Districts”;

·         Eliminate “Edge Tax Credits” and other tax loopholes for large corporations in Illinois;

·         Increase taxation on the wealthy: Illinois is in the top 10 of regressive state tax systems where the wealthiest taxpayers do not pay as much of their incomes in taxes as the poorest and middle-income wage earners (The Institute on Taxation and Economic Policy);

·         Implement a more timely system of payments (cash management practices are greatly affected by budgetary practices in relation to deferred liabilities which place additional pressures particularly in the first and second quarters of the year to pay those expenses; timing of tax payments also affects the state's cash flow and should be adjusted accordingly);

·         Shifting the state’s“normal costs” for the public pension systems to school districts will have negative consequences. “Property tax bases would not be sufficient to absorb any shift in the employer normal cost for teacher pensions… School districts are demographically and financially varied, and it would be difficult to impose a uniform normal cost shift on them… Illinois ranks last in terms of state spending on K-12 education, and school districts are already relying heavily on local property taxes… While shifting the state’s normal cost obligations onto school districts may provide some relief to the state’s budget, it will not mitigate these financial obligations and will instead push them onto school districts that, on average, already derive the majority of their revenue from local sources” (CTBA). The state should continue to pay the normal costs for the five "public pensions."

·         Examine and improve the efficiency of the state’s government. This includes establishing term limits for Illinois legislators.

Sincerely,
glen brown

Defending and Protecting Public Employees’ Pensions against the Legislative Siege

Eric M. Madiar (2012), Chief Legal Counsel to Illinois Senate President John J. Cullerton and Parliamentarian of the Illinois Senate, states: “Pension benefits are under siege for two reasons: opportunity and political motives (p. 179)… [Legislators] frame [the] larger discussion of whether the law provides states with a means to achieve a particular objective: the unilateral reduction of public pension benefits to avoid painful tax increases, service cuts, or both (p. 180)…

“In Illinois, New York and Arizona… by joining a pension system, public employees obtain absolute ‘vested’ rights in the pension plan, including later benefit increases added during their service. These rights cannot be unilaterally changed by the legislature under any circumstances, but the rights may be modified via legitimate contract principles (an offer, new consideration, and voluntary employee acceptance) (p. 182)…

“The application of the Contract Clause and unmistakability doctrine [or ‘the means to determine the reasonableness of employee reliance interests or the reasonableness of legislative changes’ (p. 184)] to the lawsuits in Colorado, Minnesota, and New Hampshire best illustrate how different state legal protections either facilitate or defeat reform efforts. [These] cases also raise the question whether cutting benefits is a reasonable and necessary means to protect the pension system when, for decades, the state failed properly to fund the system [as in the case of Illinois]…

“[Nonetheless, there are those among us who want to abandon] “the fundamental principle that the rules of the game for contracting parties are not to be changed midstream… This is especially hard to comprehend when public employees have diligently and faithfully paid their contributions while their government employers have failed to pay their required share. Indeed, for decades, states have treated pension systems as a credit card to pay for government services and avoid tax increases or service cuts (p. 194)...

Why? “For lawmakers, it is simply politically more palatable to unilaterally cut pension benefits for public employees and retirees than to raise taxes, cut services, or both… The adoption of the contractual approach by Colorado and New Hampshire, however, make it more likely that pension reform efforts will be found unconstitutional” (p. 194).


(Eric M. Madiar (2012). Public Pension Benefits Under Siege: Does State Law Facilitate or Block Recent Efforts to Cut the Pension Benefits of Public Servants? ABA Journal of Labor & Employment Law, V. 27, no. 2, 179-194. Retrieved December 7, 2012 from http://www.americanbar.org/content/dam/aba/publishing/aba_journal_labor_employment_law/jlel_v27n2.authcheckdam.pdf


Douglas L. Greenfield and Susan G. Lahne (2012) found that “the vast majority of state courts, relying on either state law or the Contract Clause of the U.S. Constitution, treat pensions provided to public employees as enforceable contracts protected from later unilateral reduction, even if imposed through legislative enactments (p. 2) (See E. Madiar, Public Pension Benefits Under Siege: Does State Law Facilitate or Block Recent Efforts to Cut the Pension Benefits of Public Servants?, ABA Journal of Labor & Employment Law, V. 27, no. 2 179, 181-185 (2012) (summarizing and categorizing state courts’ varying treatments of public pensions).

“In jurisdictions that find that a public employee’s pension contract rights arise… either when the employee first was hired or joined the pension plan, or at some point during the employee’s public service, courts have generally held that, once these rights come into effect, the employee is protected with respect to both past service and future service. 

“In these jurisdictions, thus, public employees are considered to have a contractual right to continuance, throughout their employment, of substantially the same pension terms as in effect when their protected pension rights came into effect, and this protection covers both the pension credited to them when the rights first arose and the additional pension that may be credited to them for future service throughout their public service career (p. 4)…

“Most states, therefore, cannot readily reduce their existing pension obligations to their employees in an effort to solve a fiscal crisis, and until recently few even tried (p. 6)…

“It is reasonable to conclude that government employers desire and intend to treat their complex, articulated pension programs in toto [in entirety] as an important aspect of their contractual obligations to each of their employees covered under the program (p. 11-12) (See Madiar, ABA Journal of Labor & Employment Law at 194, n. 111 (citing Lauderdale v. Eugene Water & Elec. Bd., 177 P.3d 13, 19-21 (Or. Ct. App. 2008)).

“Pension plans, unlike other forms of compensation, are designed as complex systems intended to be funded consistently over time and to produce life-long replacement income to be provided over time to employees after retirement. Stability is an important facet of all pension plans, and this is particularly true of government pension programs, which tend to be larger, more long-term, and more complex in terms and scope than private-sector plans (p. 12)…

(A footnote referring to the aforementioned states,] “In this regard, the reduction of the governments’ promises, as part of these employment agreements, to maintain these long-term, complex funding and payment programs, to promises of “deferred compensation,” (see Monahan, 97 Iowa L. Rev. at 1043), understates the actual nature of the states’ substantial undertaking. The state courts have obviously understood that more than merely future compensation payments are involved in the commitment that governments took on as enforceable contractual pension obligations” (p. 12).

“…[I]t is virtually unheard of for a government to declare to new hires that the current government pension program is only a temporary feature, available to the new employees only until the government employer exercises its unilateral and unfettered right to reduce or eliminate the pension benefits at any time in the future (p. 13).

“If the courts had initially mistaken the legislative intent underlying these pension programs, and governments had not intended that they create binding contractual rights, governmental entities surely would instead have taken concrete steps, all these many decades, to correct the courts’ errors and to establish that they intended to have the freedom to revise such arrangements at will, as well as to ensure that newly-hired employees understood the precariousness of the current pension arrangements (p. 13)…

“[A]n implied contract in fact was formed between a government employer and its employees regarding the promised pension benefits and that the implied contract extended to continuing, for the duration of the employee’s employment, the terms of the pension system in effect when the contract was formed (p. 13)…

“[Though] each state has its own standards for determining whether, and to what extent, unilateral legislative modifications of existing contract rights may be made, and this is particularly true with respect to government pension promises to public employees, (p. 14)… (In this regard, it is worth noting the inequity inherent in cutting pensions promised to state and local public servants based on alleged underfunding that was substantially caused, in many cases, by funding “holidays” that government employers awarded themselves) (p. 14).

“… [T]he government sector has not heretofore and need not now mirror the private sector model. Most government functions require large stable workforces that will provide continuity for the foreseeable future. The employees of governments are also taxpayers to the same governments and consumers of the government services that they themselves provide. A government contractually-based pension program, designed to be a permanent feature of the employment relationship and intended to provide definitely determinable replacement income to the government’s long-term workforce in retirement, is both sustainable and desirable on both economic and policy grounds (p. 14-15)...

“[It is true any] attempt to denigrate the validity of decades of judicial precedents about the binding nature of legislation establishing pension commitments to government employees and to motivate state courts to overturn long-settled premises about these commitments would impose its own, unjustifiable costs. The states and their instrumentalities have promised pension benefits to their employees; those employees have relied on those long-standing promises; and as a result the citizens of the states have benefited from the services provided by those employees.

“[In short,] there is no sound public policy reason to conclude that these promises – based on the reasonable expectations of the contracting parties – should not be fully protected by the laws prohibiting or limiting the impairment of contracts” (p. 15-16).


Greenfield, Douglas L., Lahne, Susan G. (2012). How Much Can States Change Existing Retirement Policy? In Defense of State Judicial Decisions Protecting Public Employees’ Pensions. National Council of State Legislatures Legislative Summit, 1-16. Retrieved December 9, 2012 from http://www.ncsl.org/documents/fiscal/DGreenfield_Presentation.pdf

Illinois Pension Reform Is without Legal and Moral Justification:

http://teacherpoetmusicianglenbrown.blogspot.com/2012/05/sb-1673-is-without-legal-and-moral.html

“Double, double toil and trouble, [Cash Balance Plans can bring] cauldron bubble”

“The cash-balance plan… was a pension plan ‘masquerading as a defined contribution’ savings plan… ‘It’s [a] way to disguise the cutbacks in [public employees’] benefits’” (Ellen E. Schultz Retirement Heist, How Companies Plunder and Profit from the Nest Eggs of American Workers).

RESOLUTION 2006-04 - Supplemental Plans for State and Local Government Employees

from the National Association of State Retirement Administrators

WHEREAS, there is continued emphasis on increasing retirement savings nationwide, and state and local governments have been responsible partners in achieving this goal by covering the vast majority of state and local workers in public employee retirement systems that provide sound, secure benefits in retirement; and,

WHEREAS, many governmental entities sponsor a supplemental defined contribution plan in addition to the general retirement plan to allow participants to defer some portion of their salary in anticipation of retirement needs, and some states provide limited matching contributions to encourage supplemental plan participation; and,

WHEREAS, tax favored savings arrangements available to employees of state and local government are valuable in both increasing the attractiveness of public service as a career and encouraging public employees to play a proactive role in providing for their own future financial security; and,

WHEREAS, federal legislation has been enacted over the last decade to simplify participation in, and the administration of, these supplemental arrangements, much of which recognized that arrangements sponsored by governmental entities are unique from those sponsored by other entities; and

WHEREAS, efforts to simplify rules while keeping these unique characteristics under consideration are encouraged, such as: i) providing for similar tax treatment of employer contributions to governmental 401(k), 401(a), 403(b), and 457 plans by excluding such employer contributions from the Social Security and Medicare covered wage definition and the maximum amount that may be deferred under the plan for the taxable year for all such plans; and ii) allowing "Roth" features to be incorporated in all such salary reduction arrangements.

NOW, THEREFORE, BE IT RESOLVED that the National Association of State Retirement Administrators encourages federal policy makers and regulators to continue to recognize the distinctive characteristics of state and local governments and their supplemental retirement arrangements and keep these in mind when promulgating regulations or further legislative changes to these plans; and

BE IT FURTHER RESOLVED that the National Association of State Retirement Administrators supports legislation that encourages state and local governments to create and maintain supplemental retirement plans; and

BE IT FURTHER RESOLVED that the National Association of State Retirement Administrators does not support a one-size-fits-all approach to legislation that mandates the replacement of existing plans that may best meet the needs of individual governmental entities and their employees, nor legislation intended to supplant rather than supplement current retirement arrangements and could result in additional cost and complexity for State and local governments as well as plan participants.


For further reading:

The Effects of a Defined-ContributionPlan on the Teachers’ Defined-Benefit Pension Plan

The Hybrid Pension Plan as an Alternative to HB 5754 and Four Important Issues

“To [Cash Balance] or Not to [Cash Balance]” (from the United States Department of Labor)

     What is a cash balance plan?

There are two general types of pension plans — defined-benefit plans and defined-contribution plans. In general, defined-benefit plans provide a specific benefit at retirement for each eligible employee, while defined-contribution plans specify the amount of contributions to be made by the employer toward an employee's retirement account. In a defined contribution plan, the actual amount of retirement benefits provided to an employee depends on the amount of the contributions as well as the gains or losses of the account.

A cash balance plan is a defined-benefit plan that defines the benefit in terms that are more characteristic of a defined-contribution plan. In other words, a cash balance plan defines the promised benefit in terms of a stated account balance.

How do cash balance plans work?

In a typical cash balance plan, a participant's account is credited each year with a "pay credit" (such as 5 percent of compensation from his or her employer) and an "interest credit" (either a fixed rate or a variable rate that is linked to an index such as the one-year Treasury bill rate). Increases and decreases in the value of the plan's investments do not directly affect the benefit amounts promised to participants. Thus, the investment risks are borne solely by the employer.

When a participant becomes entitled to receive benefits under a cash balance plan, the benefits that are received are defined in terms of an account balance. For example, assume that a participant has an account balance of $100,000 when he or she reaches age 65. If the participant decides to retire at that time, he or she would have the right to an annuity based on that account balance. Such an annuity might be approximately $8500 per year for life. In many cash balance plans, however, the participant could instead choose (with consent from his or her spouse) to take a lump sum benefit equal to the $100,000 account balance.

If a participant receives a lump-sum distribution, that distribution generally can be rolled over into an IRA or to another employer's plan if that plan accepts rollovers.

The benefits in most cash balance plans, as in most traditional defined benefit plans, are protected, within certain limitations, by federal insurance provided through the Pension Benefit Guaranty Corporation.

How do cash balance plans differ from traditional pension plans?

While both traditional defined-benefit plans and cash balance plans are required to offer payment of an employee's benefit in the form of a series of payments for life, traditional defined-benefit plans define an employee's benefit as a series of monthly payments for life to begin at retirement, but cash balance plans define the benefit in terms of a stated account balance. These accounts are often referred to as "hypothetical accounts" because they do not reflect actual contributions to an account or actual gains and losses allocable to the account.

How do cash balance plans differ from 401(k) plans?

Cash balance plans are defined-benefit plans. In contrast, 401(k) plans are a type of defined-contribution plan. There are four major differences between typical cash balance plans and 401(k) plans:

a.      Participation - Participation in typical cash balance plans generally does not depend on the workers contributing part of their compensation to the plan; however, participation in a 401(k) plan does depend, in whole or in part, on an employee choosing to make a contribution to the plan.

b.      Investment Risks - The investments of cash balance plans are managed by the employer or an investment manager appointed by the employer. The employer bears the risks of the investments. Increases and decreases in the value of the plan's investments do not directly affect the benefit amounts promised to participants. By contrast, 401(k) plans often permit participants to direct their own investments within certain categories. Under 401(k) plans, participants bear the risks and rewards of investment choices.

c.       Life Annuities - Unlike 401(k) plans, cash balance plans are required to offer employees the ability to receive their benefits in the form of lifetime annuities.

d.      Federal Guarantee - Since they are defined-benefit plans, the benefits promised by cash balance plans are usually insured by a federal agency, the Pension Benefit Guaranty Corporation (PBGC). If a defined-benefit plan is terminated with insufficient funds to pay all promised benefits, the PBGC has authority to assume trusteeship of the plan and to begin to pay pension benefits up to the limits set by law. Defined-contribution plans, including 401(k) plans, are not insured by the PBGC.

Is there a federal pension law that governs cash balance plans?

Federal law, including the Employee Retirement Income Security Act (ERISA), the Age Discrimination in Employment Act (ADEA), and the Internal Revenue Code (IRC), provides certain protections for the employee benefits of participants in private sector pension plans.

If your employer offers a pension plan, the law sets standards for fiduciary responsibility, participation, vesting (the minimum time a participant must generally be employed by the employer to earn a legal right to benefits), benefit accrual and funding. The law also requires plans to give basic information to workers and retirees. The IRC establishes additional tax qualification requirements, including rules aimed at ensuring that proportionate benefits are provided to a sufficiently broad-based employee population.

The Department of Labor, the Equal Employment Opportunity Commission (EEOC), and the IRS/Department of the Treasury have responsibilities in overseeing and enforcing the provisions of the law. Generally, the Department of Labor focuses on the fiduciary responsibilities, employee rights, and reporting and disclosure requirements under the law, while the EEOC concentrates on the portions of the law relating to age discriminatory employment practices. The IRS/Department of the Treasury generally focuses on the standards set by the law for plans to qualify for tax preferences.

Are there requirements that apply if my employer converts my current plan to a cash balance plan?

Yes, however, employers are not required to establish pension plans for their employees because the private pension system is voluntary. In addition, employers are allowed substantial flexibility in deciding whether to terminate or amend their existing plans. Therefore, employers generally may change by plan amendment their traditional pension plans and the benefit formulas they use.

Federal law does place restrictions on plan changes generally. For example, advance notification to plan participants is required if, as a result of the amendment, the rate that plan participants may earn benefits in the future is significantly reduced. Additionally, there are other legal requirements that have to be satisfied, including prohibitions against age discrimination. In addition, while employers may amend their plans to cease future benefits or reduce the rate at which future benefits are earned, they generally are prohibited from reducing the benefits that participants have already earned. In other words, an employee generally may not receive less than his or her accrued benefit under the plan formula at the effective date of the amendment. For example, assume that a plan's benefit formula provides a monthly pension at age 65 equal to 1.5 percent for each year of service multiplied by the monthly average of a participant's highest three years of compensation, and that the plan is amended to change the benefit formula. If a participant has completed 10 years of service at the time of the amendment, the participant will have the right to receive a monthly pension at age 65 equal to 15 percent of the monthly average of the participant's highest three years of compensation when the plan amendment is effective. This pre-amendment benefit (including related early retirement benefits) is protected by law and cannot be reduced.

In addition, there are additional restrictions that apply specifically in the case of an amendment that converts a plan formula to a cash balance plan formula. Specifically, participants must receive the sum of the pre-amendment benefit plus benefits under the new cash balance formula (as a result, there cannot be a "wear away" period during which the participant does not accrue additional benefits, as could occur if participants were merely entitled to the greater benefit). Furthermore, all benefits under a cash balance plan (including benefits accrued prior to a conversion) must be fully vested after 3 years of service.

What happens to the assets in a plan when an employer converts its traditional defined-benefit plan formula to a Cash Balance Plan formula?

When an employer amends its plan to convert the plan's traditional defined-benefit plan formula to a cash balance plan formula, the plan's assets remain intact and continue to back all of the pension benefits under the plan. Employers cannot remove funds from the plan, unless the plan has been terminated and has assets remaining after payment of all of the benefits under the plan.

How am I affected if I leave my job at a company that just changed its pension plan from a traditional defined-benefit formula to a Cash Balance Plan formula?

If you have worked long enough to be vested under the plan, you should receive the sum of (1) the accrued benefit under the formula in effect before the amendment, and (2) the additional benefits (see response to question above) you earned under the plan formula in effect after the amendment. However, you may have to wait until a retirement age under the plan to receive your benefit.

Is my employer required to give me a choice of remaining under the old formula rather than automatically switching me to the new cash balance plan formula?

Neither ERISA nor the IRC requires employers to give employees the choice of remaining in the old formula. Employers have several options, including:

a.      Providing no choice, replacing the old formula and applying the new formula to all participants;

b.      Allowing employees to remain under the old formula, while restricting new hires to the new formula;

c.       Stipulating that certain employees who have reached a specific length of service or who have reached a certain age may choose to stay with the old formula;

d.      The law permits employers to have such flexibility, but whatever option applies has to satisfy legal requirements.

Under each of these options, benefits already earned by the participants, as of the effective date of the amendment that converts the old formula to a cash balance formula, may not be reduced.

What information is my employer required to give me to explain the new cash balance plan formula, and when should I receive this information?

Many employers voluntarily provide helpful information about these conversions in advance of the change becoming effective. Make sure you have all the information that the employer has provided. If you are still not sure if you have enough information to understand the plan change, you have a right to contact your plan administrator and ask for more information or help in understanding the change and any choices you have in conjunction with the change.

Plan administrators are generally required to give at least 45 days advance notice of plan amendments that significantly reduce the rate at which plan participants earn benefits in the future.

After the plan is amended, the plan administrator is required to provide all plan participants with a Summary of Material Modifications to the plan or a revised Summary Plan Description. This document will summarize the changes to your plan.

In addition, under the Age Discrimination in Employment Act (ADEA), an employer requiring an employee to sign a waiver of rights and claims when choosing between plans is required to provide enough information to enable the employee to make a knowing and voluntary decision to waive ADEA rights. In most cases, an employee must be given at least 21 days to sign the waiver and at least 7 days to revoke the agreement.

Will the conversion of my pension plan formula have an effect on my retiree health benefits?

Often, pension plans and health plans are operated independently and are administered separately. However, sometimes eligibility for retiree health benefits depends upon eligibility for pension benefits. If you have questions about your health benefits you should contact your health plan administrator. Be aware that, like pension plans, health plans generally can be amended or terminated.

What should I do if I believe my benefits under the old formula have been inappropriately reduced or that my rights have been violated?

You should immediately contact the plan administrator and discuss your concerns. Be sure to review your individual benefit statement or the information used to calculate your benefit to determine if it is correct — such as employment date, length of service, and salary.

If your concerns are not adequately addressed, or you still have questions about your situation, you should contact one of our offices.

In addition, employees who believe that they have been subject to discriminatory treatment because of their age, race, color, religion, sex, national origin, or disability may file a charge of discrimination with the Equal Employment Opportunity Commission (EEOC).

Source: United States Department of Labor
John Dillon’s Commentary on CashBalance Plans

Ken Previti's You Say You Want to Negotiate with Thieves