We have yet another grotesque pension story involving a city struggling with financial woes. This one is out of my home town of Chicago. Charles LoVerde III, a former trustee of the city laborers’ pension fund, will receive three pensions for the same time period totaling nearly $500,000 a year — that’s right, three pensions for the period. The triple crown of pensions was also won by union official, Liberato “Al” Naimoli, would will receive $438,000 a year. Since he is only 59 years old, he stands to rake in at least $9 million over his expected lifetime.
There are at least eight union officials in Chicago were eligible for these windfalls, which are allowed under what was described as “a charitable interpretation” of Illinois law by officials representing two city pension funds.
Once again, there is no indication that any lawyer or official will be punished for such an obscene interpretation. The city is closing police stations for lack of funds but giving three pensions to each of these officials. In the case of LoVerde, he took leave of absence in 1998 from a job with the city’s water management department. His salary in 1998 was $44,000 a year. He will now make half a million a year in pensions.
Naimoli retired in 2010 from the $15,000-a-year city job.
The city pension fund directors’ attorney, Fredrick Heiss, insists that it is perfectly legal and suggests that it is due to the legislature’s fault: “The Legislature never told us how to administer this thing. They could have said ‘no second pension at all,’ but they didn’t say that.”
Source: MSNBC
Dennis, It’s means testing and it’s means testing on a very narrow basis. You’re either for means testing or you’re not. In 1984 the Federal govt went from a defined benefit (CSRA) pension to a defined contribution (401K) system and SS. If you were hired under CSRS you did not pay SS, this is correct. That does not make a narrow carve out for a reduced payment appropriate for a second career that has SS as a primary retirement system IMO.
It is though a snapshot of what’s to come under means testing. BTW, I don’t and can’t participate in the SS system having 30 something quarters instead of 40 quarters, nor do I collect disability. I am not arguing from self- interest. Enlightened self-interest as a member of a class maybe and projecting into the future perhaps but not self-interest.
Lottakatz, you said: “The reason military pensions are not treated for SS payment the same as Federal workers pensions regarding this mis-named “windfall” is that the military has a better lobby and more fans than Federal workers. I was around as a Federal employee when the change was contemplated, proposed and passed. There was discussion at that time about treating all government pensions as a ‘double-dip’ regarding SS. The Congress backed off the military almost as quickly as the question was raised though.”
I respectfully disagree. Military employees began paying Social Security in 1957. Reservists began in 1988.
If you work 20 years in the Army and 20 years at Harry’s Hospital and Grill, you could get two pensions plus the combined SS.
New Federal employees began paying Social Security in 1984. Prior to that, their federal salary did not show up on SS records.
SSA pays 90% of the first so much of earnings – the figure changes each year. It pays less on higher earnings. This is to the advantage of poor people. In reality, most people who earn median wages actually get 40% from SSA after you combine 90% of this, 32% of that, and 15% of that. So if you worked all your life under Social Security and earned median wages (or self-employment) your Social Security benefit is about 40% of your average monthly earnings (indexed for inflation).
Federal employees whose total earnings would have justified 40%, had ONLY their part-time earnings seen by SSA. If their visible earnings were below the poverty level, they got 90% – a benefit meant for poor people.
Suppose I worked for the Bureau of Coming in Late and averaged $5000 per month. I also work at Harry’s Hospital and Grill for $700 per month.
Suppose you worked as my boss at Harry’s Hospitasl and Grill, making $6000 a month. When you retire, you get about 40% of your $6000.
But, with much less investment in SSA, I retire with 90% of my $700 – because SSA thinks I’ve only earned $700 a month. Thet think I’m poor, because they don’t see my non-covered earnings.
So that you and I get equal rates (not equal benefits), Congress said the 90% bend point should be paid only to really poor people. Federal employees should get the same 40% as everybody else.
Dennis, To clarify: “That reduction to 40% holds through the first 20 years of substantial employment.”
That reduction from 90% to 40% of the SS pension is applicable on the first 20 years of a second job or career at substantial wages. Check the chart. Even if someone leaves Federal employment and begins a new full-time career at substantial earnings they must work the first 20 years and receive only 40% of the max that they would have received if they were not a retired Federal employee. This artificially depresses, for ex-Federal employees, the retirement income under SS. The federal pension and the SS pension are being linked inappropriately and unlike military pensions.
Dennis, the same mechanism applies though, any money earned while in Federal (or state) employment is fair game for having a portion of it paid into a pension plan. Any money earned elsewhere, as a part time job or as a second career that pays into SS should get whatever the rules call for without offset. The only reason a special rule was made for Federal employees is because it was politically convenient.
How can you argue that it is OK for someone to collect both a military pension and then SS for a second career and yet make an arbitrary determination that some other class of employees should not be able to do the same thing? That reduction to 40% holds through the first 20 years of substantial employment. See the second table:
http://ssa.gov/pubs/10045.html
You could also make the same argument for anyone that worked a part or full time job at low wages for a host of other reasons that also collects any other pension or disability payment from the government. It doesn’t pass the smell test. It is a very specific, narrowly focused means test imposed on only a particular type of worker and it involves dependants of deceased spouses that elected a SS survivor benefit as well.
There is also a Social Security Offset for widows and widowers whereby if, as a widow or widower you receive a Federal pension and your spouse elected a SS survivor benefit, it is reduced by 2/3.
http://ssa.gov/pubs/10007.pdf
The government treats Federal pensions as if they were somehow linked to SS when they are not. They were, under the CSRS paid primarily by the employees, and more expensive by 1 to 1/5% than SS. The money taken in including a smaller matching payment, was to be invested in TBills, loaned directly to the government.
This though is actually where means testing regarding SS is going to go if that ever gets implemented. The government will tax you with SS and then determine that as a retired person if you make or have x amount of money yearly you will receive reduced SS benefit’s.
The reason military pensions are not treated for SS payment the same as Federal workers pensions regarding this mis-named “windfall” is that the military has a better lobby and more fans than Federal workers. I was around as a Federal employee when the change was contemplated, proposed and passed. There was discussion at that time about treating all government pensions as a ‘double-dip’ regarding SS. The Congress backed off the military almost as quickly as the question was raised though.
Now, with the overwhelming emphasis on defined contribution systems (Including the government) instead of defined benefit systems all retirees are at the whim of Wall Street and all working class pensioners are screwed IMO. And Wall Street wants that last great poll of worker money, Social Security, to be a defined contribution plan.
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“Federal employees that also work in private industry and pay into SS don’t get all of their SS, only a small portion of it even though they paid the max in both their pension plan and the SS system – what’s fair about that?”
Wrong unless you drop the word “max.”
What you describe is called Windfall Elimination Provision. Federal and state employees who worked part-time were getting a false-high on their SS benefits.
I’m quoting from http://www.socialsecurity.gov/OACT/COLA/piaformula.html .
“For an individual who first becomes eligible for old-age insurance benefits or disability insurance benefits in 2011, or who dies in 2011 before becoming eligible for benefits, his/her PIA will be the sum of:
(a) 90 percent of the first $749 of his/her average indexed monthly earnings, plus
(b) 32 percent of his/her average indexed monthly earnings over $749 and through $4,517, plus
(c) 15 percent of his/her average indexed monthly earnings over $4,517.”
People whose average indexed earnings are less than $749 per month get an SSA benefit of 90% of their previous earnings.
The next tier yields only 32%, and the last tier only causes a 15% increase. Somebody who earned twice what you did will not get twice as much SS.
The average earner – after adding 15% to his 32% and his 90% – gets Social Security of about 40% his previous earnings.
Government employees could earn thousands of dollars per month not covered by SS. Then they could work part-time for under $749 per month. A poor person who earned under $749 per month would get 90%. A government employee would look “artificially poor,” because SSA would only see his part-time job. So poor people and government employees got 90%, while full-time private employees got 40%.
To close this loophole, Congress determined that non-covered government employees would only get 40% Social Security. The exception allows full benefits to government employees who have 30 years “substantial earnings.”
See http://www.socialsecurity.gov/pubs/10045.html for more WEP information.
“Career military who leave the service after the allotted time and then go to work for the government get double pensions all the time I know 2 guys who get a military, federal (gov, worker) and state pension (local elected official).”
Also wrong!
They get 2 pensions – not double pensions. The federal government credits military time toward a civil service (OPM) pension – only if there is no military pension.
I could work 4 years in the Army, work 26 years for the Railroad Retirement Board, and get a 30 year pension – if I paid the Civil Service Retirement contribution (7%) on the Army salary.
I could spend 19 years in the Navy and work 11 years for the Railroad Retirement Board, and get a 30 year pension – if I paid the Civil Service Retirement contribution (7%) on the Navy salary.
However, if I had 20 years in the Navy, I could only apply it toward a Civil Service Pension if I waived the Navy Pension.
My brother retired from the Navy and works for a federal agency. He’ll have to work there 20 years to get a pension from that agency. How is that different from 20 years on the railroad and 20 years at Bank of America – with two pensions?
“work for a few years under SS then go to the armed forces….stay the full 20….retire….work for a private employers….get the graduated SS (making more money) and join the reserve….Trifecta kicks in after you retire….SS, Military Retirement and State-National Guard….All legal under the system.”
Wrong!
You cannot join the Army Reserve or the National Guard after 20 years active duty. It’s all the same pension. No reserve component will enlist anybody who qualifies already for a military pension. One could be in the Army for 7 years and join the Air Force Reserve for 13 years. Most Reserve components won’t enlist somebody from a different service with more than 13 years’ prior service, because they don’t want to buy the pension obligation. I was one of the recruiters who had to tell people that.
A person who works 20 years in the military and then for a private employer isn’t cheating by get military retirement and SS benefits, anymore than somebody who worked for Bank of America and gets a pension and SS benefits.
I retired from the military, retired from another job (20 years), and retired from a part-time job (15 years) that I worked the last 15 years of the 20 year job. While I was on active duty, I worked part-time jobs on clam boats, at drug stores, at grocery stores, and for a security company. I get 3 pensions and Social Security. My last 15 years before retirement, I worked a 40-hour week at one place and a 32-hour week at the other place.
I’m not triple dipping if it’s three separate pots.
I’m with TomDarch, If you qualify for the various pensions and funds that are available to you why should you not have the right to collect them? Should a person give up their SS credits because the are working for a company that provides a 5% buy in to a 401K (annuity) for that person? Should a person that works for 2 or 3 companies during their career and pays into all of their pension plans as well as SS be forced to choose one or prohibited from paying into more than one fund during their career? Federal employees that also work in private industry and pay into SS don’t get all of their SS, only a small portion of it even though they paid the max in both their pension plan and the SS system – what’s fair about that?
This kind of controversy is ginned up to demonize working class people. Gee, this guy will get 9 mil over the rest of his life, an example so narrow and egregious as to be laughable will be used to paint unions and workers as greedy free loaders. Never mind that various Wall Street executives will get 9 million dollar bonus’ this year as the have every year including while and immediately after they destroyed the American economy. Focus on the real problem, not the shiny distraction.
Career military who leave the service after the allotted time and then go to work for the government get double pensions all the time I know 2 guys who get a military, federal (gov, worker) and state pension (local elected official).
OK – I’ve been following the local TV news coverage of this. Eventually there will be some more in depth written journalism to dig into. For now:
The “interpretation” was described as the idea that the state law disallowed both a municipal pension AND a pension from a “local” union, so the interpretation was that if the union local was located outside of the City of Chicago, you could get both a Chicago pension and a non-Chicago located union pension.
When the guy refers to “no second pension at all” that’s what he’s talking about – the law appears to ban only overlapping “local” municipal vs. union pensions.
But here’s what I don’t understand – If you work for the City for long enough to qualify for a city pension, AND you work for a union long enough to qualify for the union pension, why shouldn’t you get both? In situations where people may have committed fraud in claiming to be qualified for one of these pensions, that’s obviously a problem. If you went from one private employer to another and qualified for both employer’s pension plans, you’d get both, right? Why should there be a state law to interpret at all regarding multiple pensions, as long as each individual plan’s rules were followed?
Tom,
From what I understand…is that there are numerous folks that have learned how to graft onto this system….work for a few years under SS then go to the armed forces….stay the full 20….retire….work for a private employers….get the graduated SS (making more money) and join the reserve….Trifecta kicks in after you retire….SS, Military Retirement and State-National Guard….All legal under the system…..as it stands…
“The Legislature never told us how to administer this thing. They could have said ‘no second pension at all,’ but they didn’t say that.”
Did they really need to say that? Whatever happened to common sense, integrity, intelligence? Oh right, politicians were involved.
A while back I wrote:
Many of these pensions have survivorship rights so these huge payments will continue to go to the spouse after the retiree dies. These payments could stretch across decades with plenty of cost of living increases along the way. I think $9M is a low estimate.
This is so “Chicago”-God knows how many similar stories there are out there…
The next best thing after getting a Presidential Pension….is a Union Official Pension…..
When accountability is considered a plague (“lean forward”) corruption spreads throughout the land.
Hopeless … It will only get worse…