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December 20, 2014

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Examination of public employee pensions raises eyebrows, questions about accuracy

While the state retirement system appeals a court order to release individual pension data, a privately funded nonprofit group has taken it upon itself to estimate pensions for hundreds of public employees throughout local and state government.

And though many of the group's results are fairly astronomical, they are not completely accurate — a fact that even Taxpayers United of America, the report's author, concedes.

The data, released Monday by Taxpayers United, assumes employees reach their fully vested retirement potential (which earns them an annual pension equal to 75 percent of their three highest salary years) retire at 55, then live another 30 years and get an average of 3 percent in annual cost-of-living boosts.

State retirement actuarial tables say life expectancy is 82 years, most public employees quit or retire after about 20 years, and around age 64. After 20 years of employment, they are eligible for a pension equal to about 50 percent of their three highest salary years.

Here’s one example of how those small changes can account for huge differences in estimated retirement pay:

Former Rebels basketball coach Lon Kruger is at the top of Taxpayers United’s list of pension payouts to UNLV employees. Kruger earned $606,000 in gross annual wages during his tenure at UNLV. By the Taxpayers United spreadsheet, his estimated annual retirement payment would be $466,000, earning him $17 million over the life of his retirement.

But if you put Kruger’s numbers into the “benefit calculator” on the state Public Employees Retirement System website, you get a different number. It estimates his annual payment around $113,000, if he retires at 65. Then if he lives to 95 and gets a 3 percent bump each year, his total earnings would be about $5.5 million. If he lives to 82, the amount is $2.7 million.

Kruger, who turns 60 in August, now is head coach of the Oklahoma Sooners.

Dana Bilyeu, executive officer of the Nevada Public Employees’ Retirement System, noted that the average annual payment to public employees in the system is $29,000. That compares to about $22,000 for those who receive Social Security retirement benefits. Public employees do not contribute to or earn Social Security.

“This is extreme in every single scenario,” Bilyeu said of the Taxpayers United estimates. She added that the PERS actuarial tables — which take into account life expectancy, retirement age and other factors — would have been readily available to the group.

Rae Ann McNeilly, outreach director for Taxpayers United of America, said the point of making the estimates was to show “how the system allows for outrageous pensions that the taxpayers just can’t sustain.”

“And the reason for them is to keep the union bosses and elected officials in power,” she added. “That’s the game that they play. They make it sound like it’s for the employees and the children. It’s not.”

She would like to see Nevada enact a law to put new hires in 401(k) retirement plans.

McNeilly has some support. A push for more austerity by Clark County commissioners in recent years has bolstered county staff to take tougher stands in union contract negotiations. A new contract with county firefighters, for instance, has for the first time language that obligates firefighters to pick up their portion of state-mandated increases in retirement contributions.

County Commissioner Steve Sisolak said McNeilly’s point was one being recognized in other states and cities.

“With life expectancy increases and earlier retirements, there’s not enough money to sustain those benefits over time,” he said. “That’s what these jurisdictions are running into.”

He recalled years when Lake Mead was so full, spillways were opened to release the water into the Colorado River below the dam. “Now look at the downturn,” he said. “You have to look ahead.”

He thinks the system should be “tweaked.” One area would be to base retirement payouts on all of an employee’s public work history, not just the three highest salary years.

McNeilly said the state retirement board could do more to make policy decisions like that easier. They could drop their appeal and release personal retirement information.

“That’s the big story here is, give us the information,” she said.

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  1. Attention Gov. Sandoval: From the new Pew study, Nevada consistently failed to pay its full annual pension contribution from 2005 to 2010. The system was 70
    percent funded in fiscal year 2010and faced a $10 billion funding gap.Nevada's management of its long-term liabilities for pensions was causefor serious concern and the state needed to improve how it managed its bill for retiree health care.

  2. In addition, if those with PERS contributions have contributed to social security, their SS benefits are reduced by as much as 75% due to their PERS collection. So, I paid into social security with enough credits to get a decent amount each month. however, due to my 20+ years with PERS (so far) I will receive only 25% of what I paid out of my salary into social security.

    Plus, if Ms. McNeilly, or the authors of the article did their research on PERS they would have found the following...

    NVPERS' cost structure is exceedingly efficient for delivery of retirement benefits. On an individual basis, fully 80% of the benefits paid to our members are paid from the investments of the System.
    The System's fees are more than 70% below the industry average. Nevada's all inclusive investment costs are 0.12% while the average large public fund pays 0.39% (for comparison, the average individual investor typically pays between
    0.50% to 2.0% for investment management).
    The result is NVPERS saves over $68 million per year in fees compared to the average large pension fund. This savings, compounded over a ten year period, results in over $990 million in added value to NVPERS' members.

    (nvpers.org)

    Plus, PERS invests in local companies as part of its investment plan.

    AND as of Dec. 2011, PERS had 24.4 BILLION in assets. PERS NV is listed as one of the most stable and reliable retirement systems in the nation. It was ranked in the top 32% for returns (a good ranking for NV), and in the bottom 23% for risk (another good ranking for NV) when compared to state pension programs. AND NV PERS ranks in the top 13% for risk/returns efficiency- yet another good ranking for NV.

    If it ain't broke, don't fix it.

    And maybe, just maybe... if Ms. McNeilly understood exactly how PERS worked, was funded, and contributed to the state of NV, she wouldn't have such a hard time getting retirement info from people. (although I do stand with Dkallas, my salary is already posted online, MYOB about my retirement- especially since you have no idea how much I have self contributed to the fund - thus skewing the results anyway)

  3. This story doesn't even mention the biggest howler in this embarrassingly misguided "study": faculty and professional staff of the Nevada System of Higher Education (including Lon Kruger) don't participate in PERS and have precisely the sort of 401-k style defined contribution retirement plan that this group advocates.

    Part of their report is a list of 200 faculty and staff from UNR and UNLV who supposedly will receive hundreds of millions of dollars from PER. Only none of them will receive a dime from PERS. Ooops. Nevada News Bureau got this story right a year and a half ago when it wrote about the NSHE retirement plan as a "model"

    http://www.nevadanewsbureau.com/2011/03/...

  4. Apparently the GOP and associated groups don't mind class warfare if it's between public and private sector middle class workers. They figure if they can keep us busy fighting amongst ourselves we won't notice anything else.

  5. This is an attempt to get your money off the sidelines and into the wallstreet game so they can have a chance at your money with all of their dirivatives. Bottom line they want action in the worlds biggest casino.

  6. IF PERS retirees average $29K while SS retirees average $22K, that's terrible. When we average in firefighters, teachers, and cops that would mean other workers are getting LESS THAN SS???? And, hey JOE SCHOENMANN what about the reduction in benefits when the retiree is under age 60?

  7. So forget 401(k) and participate in Social Security. That would mean local government employees have to PARTICIPATE in paying for their retirements instead of the City (County, SD, US) paying for all of it. Would also encourage career changes from, to, within private to public sector--so better candidates would be available for those government jobs instead of constant preference for "experienced" public servants.

  8. One thing that we have to note here is that there is not necessarily a direct relationship between the average PERS retirement payment and the average SS retirement payment. The story said that most employees quit or retire after 20 years and around age 64. I guess if you were saying the same thing about SS, which I have been paying into for nearly four decades, and am still about a decade and a half from being able to get full benefits, it might be different. By the time I could get full benefits from SS, I will have been paying into it for over 50 years. If the average SS recipient paid in for 40 years versus 20 for PERS, that is a significant fact. (I am not sure what the actual numbers are there, but they likely differ substantially.)

  9. KY: State employees pay in, (some) local gov. employees pay in all of 1% or so. FLOOZY: There are also a bunch collecting both SS and PERS--you can vest in PERS with just 5 years and leave it there until you're 60, then collect.

  10. DKallas: Unfortunately, the extremes are edging out other considerations. When a person can work for 20 years in a somewhat cushy "job" and receive six-figure retirement AND health care forever and ever after, it's difficult for many people to not assume that all of PERS is out of whack. We must move quickly to fair and reasonable compensation and retirement. If we could immediately do that we still "owe" the current employees endless benefits unless we have a means of changing ACCRUING BENEFITS.

  11. Roslenda:

    If one could work for 20 years at a cushy job and then retire at 6 figures with free health care, it would be out of whack. But none of that happens. First, to get full retirement you have to work for 30 years, second, you get 75% of your average pay, you get subsidized (not free) health coverage in a plan that sucks (currently there is a $2000 annual deducitible). Add to all of that, your contribution to your retirement has gone up over 15% in the past 3 years, and is now almost double what others pay in Social Security tax, any social security you might have earned in other employment gets whacked by the "Windfall Elimination", your earnings have been going down since 2008, 25% of your co-workers have been laid off, (or left to get a job that pays better) so your work load is higher, and the public doesn't appreciate how hard you work for what litte you get and want to take even more of it away. And even though the sales tax rate has gone up, that increase is more than offset by the dramatically lower property taxes on their house.

    You were partially right, something is definitely out of whack.

  12. Hank: Think City and County employees. Firefighters. LEOs. And if you would read what I wrote, that all the other government employees are hit with blame for those who have it so financially wonderful....