by James Eterno, Chapter Leader Jamaica High School
(The opinions expressed here are solely those of the author and do not represent pension advice. We recommend that for pension advice members should call a qualified pension consultant. )
There has been a great deal of discussion on the blogs and in schools about the pension deal and the merit pay plan. Before we begin please note that currently Tier IV members need to have 30 years of service and be at least 55 to retire without penalty or they have to be 62 years old and meet other criteria.
It is also important to note that the proposed 55/25 will provide a pension without a penalty. If someone retires at 55 with 25 years of service, the final pension you receive will be 10% less than if you retired with 30 years. Obviously, the more years you work, the greater the pension.
Listed below is the actual 2005 Contractual language for pension legislation along with much of a letter from city Labor Commissioner James Hanley to Randi Weingarten. Hopefully, after reading this piece UFT members will have some factual information for when the parade of Unity representatives come to the schools to try to sell yet another questionable deal, even though we won't even get to vote on this one because we already approved most of this in the 2005 Contract.
Article 4C from the 2005 Contract called Pension Legislation:
1. A Labor-Management Pension Committee will be established to investigate legislation allowing all current and future members of the TRS Tier II, III and IV to retire without a reduction of benefits due to early retirement upon age 55 with at least 25 years of service, as well as other relevant pension issues.
2. The Committee will analyze the actual costs and additional contribution rates required to provide this benefit (including any additional health insurance benefit costs) without any cost to the City.
3. Upon mutual acceptance of the Committee's recommendations, including plan design and costs, the parties agree to jointly support the legislation necessary to implement the benefit changes.
The Four main provisions of the pension agreement that were written in a letter from city labor commissioner to UFT President Randi Weingarten last week that goes now to Albany for approval.
(1) An "opt-in period" of six months in which any incumbent employee who wishes to participate in this optional program must affirmatively submit a written election to participate.
(2) Additional Member Contributions (AMC) - in addition to all currently required statutory contributions, an Additional Member Contribution (AMC) of 1.85% shall be paid by those employees electing to participate in this optional program as well as by all newly-hired employees participating in the TRS and newly-hired UFT-represented above listed members participating in BERS retirement systems. These additional member contributions shall become effective on the first business day after the enactment of the enabling legislation.
(3) Current incumbent employees including those on leave who elect to participate in this optional program and who pay the requisite AMC shall be eligible to retire at age 55 with 25 years of credited service with immediate payability of pension benefits without any reduction. Assuming the legislation is effectuated in 2007-08 school year, those who elect this pension will be eligible to retire 6/30/08 or later.
(4) Employees hired after enactment of this enabling legislation shall be eligible to retire at age 55 with 27 years of service and receive immediate payability of pension benefits without any reduction. This will not be construed to change the eligibility for retiree health insurance benefits (i.e., ten years of credited service and pension payability) as determined by the City and the Municipal Labor Committee and in accordance with the Administrative Code.
So Who Wins and Loses?
The Pension Agreement
1. Generally, UFT members who started in the system (or another system but got city TRS pension credit for it) between the ages of 26 and 36 should consider opting in on 55/25 even though they will have to pay 1.85% of their salary for the rest of their career into their pension. They will be able to retire when they complete at least 25 years of service as long as they are at least 55 years old without the substantial percentage reduction in pension income that exists now. (If someone opts in and changes their mind and decides to stay the full 30 years or until age 62, I doubt they will get a refund of those additional contributions so if you opt in, you will probably need to retire as soon as you can to stay a winner.)
2. Anyone who started in the retirement system younger than age 26 but took substantial time off on un-credited, unpaid leave (child care, restoration of health without pay) which means they won't have the required 30 years of service that is needed to retire at age 55 without opting in to 55/25 . Anyone in this category also should consider opting in if they want to retire at age 55 with at least 25 years of service without a reduction. Remember, however, you will have to pay 1.85% of salary into the retirement system for the rest of your career if you opt in.
3. People who cover classes gain as coverages will be counted as income when figuring out the Final Average Salary that pension payments are based upon.
4. The City of New York- The NY Times reported last Thursday that Bloomberg expects the city will gain tens of millions of dollars over the long term from this agreement. For more on how the city gains, read on.
The No Gainers
1. Anyone who started before age 26 (and will work straight through until retirement) cannot retire a day earlier because of this agreement as far as we can tell. They will still need to work at least 30 years to collect a full pension upon retirement.
2. Anyone who started at age 37 or later cannot retire a day earlier because of this agreement as far as we can tell because they won't have the years of service that are necessary to take advantage of the new program. At age 62, their retirement won't be subject to a reduction in benefits.
3. Tier I members
Note that all of the no gainers could gain from coverages being pensionable.
The Big Losers
Teachers not yet hired-
Right now UFT members have to pay 3% of their salary into the pension for the first ten years of service and then nothing for the rest of their career. Under the new system they will have to pay 4.85% for the first ten years and 1.85% thereafter but they will not be permitted to retire at 55 with 25 years of service as was agreed to in Article 4C1 of the Contract. Instead, the new agreement says they have to complete 27 years and be at least 55. In addition, a teacher hired right out of college at age 22 will have to work 33 years to be able to retire and unlike those teaching now, they will have to make pension contributions for their entire career, not just the first ten years of service. That is why we are calling this provision a de-facto Tier V and this is how the city wins.
We would like everyone who reads this blog who would like to question a Unity representative to ask why Randi gave up so many of our rights in the 2005 Contract but she couldn't get what the city agreed to in the Contract: "legislation allowing all current and future members of the TRS Tier II, III and IV to retire without a reduction of benefits due to early retirement upon age 55 with at least 25 years of service?" Emphasis on future members added by us. 55/27 for yet to be hired teachers is not 55/25 and pension contributions for new teachers for their entire careers is a step backwards.
The little ugly merit pay provision was snuck into the last Contract in an Article 8L which you won't find much about in those glossy "fact sheets" and special NY Teacher editions selling the punitive giveback laden Contract that among other indignities forced us back to hall patrols and gave us work in August. The school-wide bonuses for improved student performance are there also. Article 8L says:
Labor/Management Committee On Long Term Reforms
With regard to the long term recommendations the 2005 Fact Finders made subject to adequate CFE funding, the parties shall establish a Labor Management Committee to discuss the following issues: a)bonuses, including housing bonuses, for shortage license areas; b) a pilot project for school-wide based performance bonuses for sustained growth in student achievement c) salary differentials at the MA-5 through MA-7 levels; and d) a program for the reduction of class sizes in all grades and divisions. If the parties agree on the terms of any or all of these issues, they may be implemented by the Board using whatever funds may be identified.
You see ladies and gentlemen we voted for merit pay when we voted for the 2005 Contract.
Is anyone holding their breath waiting for the class size reduction program in Article 8L to be implemented?
The Grand Losers
New York City educators, parents, students and anyone nationally who attempts to follow NYC and implement such a dumb merit pay plan. We will see millions of dollars that could go to worthy projects such as lowering class sizes, adding more guidance counselors, social workers or paras, or starting up more after school programs that instead will be raised for a completely useless merit pay plan whose underlying assumption is that if the city dangles a possible $3,000 in front of a school staff, then teachers will work harder than they are working now and veteran teachers will run to transfer to difficult schools for that potential 3 grand. This merit pay plan is a combination boondoggle-slap in our faces.