It took nine months for recent UFT retirees to get back pay for in service work; it might take a much longer time to get correct monthly pension payments. This problem may impact future retirees too.
When the UFT leadership was selling their municipal pattern setting contract of 10% raises over 7 years last year (now extended to 7 years, 1 month), one of their selling points was that when people retired they would have their pension payments calculated as if they had already been receiving an additional two 4% retroactive raises from the 2009-2011 round of bargaining that other city unions obtained long ago. Active UFT members are deferring that money now.
According to what we were told by the UFT, those who retired after November 1, 2009 should be entitled to a recalculation of their monthly benefit based on higher numbers. For those who retire between June 30, 2014 and May 1, 2018, pension payments should reflect a higher salary than what we will actually paid too because the 8% that was the last city pattern is going to be added to active member pay at a rate of 2% a year every May from 2015-18.
Even though we will be receiving the salary increases piecemeal, we were assured by leadership that if we were eligible to retire, our pensions would be based upon higher numbers.
This is important since for Tier IV members (most people retiring now are in Tier IV), the pension is normally based on the salary for the final three years of service (final average salary). It makes a substantial difference in payments if the lower salary numbers we actually make are the ones used to calculate the monthly pension.
For a simple example, if someone is earning around $100,000, $101,000, $102,000 for the final three years, the final average salary is $101,000. Now if the retroactive money is included, then the last three years increases to approximately $108,000, $109,000 and $110,000. The final average salary goes up to $109,000.
If that person is 55, in 25-55, and has worked for 25 years, he/she is entitled to half of the final average salary. Half of $109,000 is $54,500 That is a little better than half of $101,000 which comes to $50,500. To be specific it is $4000 more per year. (This is an incomplete example as there is the ASF but it explains the basics.)
According to a source inside the UFT, pension calculations are being made based on the lower numbers. This was confirmed when I asked two recent retirees. We were informed that the Teachers Retirement System will correct this at some point in the future.
This is more of our money we are letting the city hold for us.
Is it really that difficult to come up with a salary schedule on what we would have made had we received the retroactive salaries from 2009-2011 right up front and then basing pensions on those numbers?
Will arbitrator Martin Sheinman be brought in again to bail the city out because there will be a large sum of money owed to UFT retirees that the city says they can't afford?
*I certainly am no pension expert and would appreciate clarification if there is updated information and/or I am missing something here.