The Hawaii State Employees’ Retirement System (ERS) has adopted “new option factor tables” that will apply to state and county workers who retired after December 31, 2013.
The ERS announcement can be found online, and anyone anywhere near retirement should take a look.
But exactly what it means isn’t clear.
Here’s the short explanation from the ERS:
Effective January 1, 2014, the new factor tables will be used in the calculation of a Member’s retirement options for all retirement plans. These new factors reflect changes in the investment returns and changes in the life expectancy of our members.
Generally, retirement options without a refund are decreased and options with a refund are increased. In addition, changes in the mortality assumption decrease your pension options at younger ages and increases your pension options at older ages. These new factor changes do not affect the Maximum Allowance.
Of course, investment returns are generally lower in the current economic environment, while people are generally living longer, and these are behind the changes ERS is making. So it seems that the changes must be designed to make up for the system’s lower income and longer payout periods.
But what do the “new option factor tables” mean? It’s very hard to tell. The announcement is full of ERS jargon and never really says exactly what the result of the changes are.
I was forwarded an email concerning the changes sent to faculty in the Shidler College of Business at UH Manoa by John Butler, Associate Dean for Academic Affairs.
Butler wrote:
Go to the below link and read the message carefully. As near as I can tell it means that if we retire after 12/31/2013 our monthly payout will be lowered.
So “as near as I can tell” is as educated a guess as the assistant dean of the UH business school is able to make. For us mere mortals, it’s clear as mud.
Perhaps ERS has to put some of this into plain language.
Is someone retiring on the first day of 2014 going to receive a lower retirement benefit than if they were to retire on December 31, 2013?
Figuring out how to deal with the economics of retirement is hard enough without this kind of opaque communication from the primary public pension system in the State of Hawaii.
Has anyone out who has digested the changes able to translate them into plain language? We await your comments.
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Retirement is a promise and it needs to be kept fairly intact.
What should be reined in is that ridiculous 21 sick days a year, and the ability to stack those and unused vacation for retirement with full pay.
I think a fairer comparison would look at the full package of income and benefits and compare them with the comparable private package.
Public employment in Hawaii has typically offered lower total compensation while employed but balance it with almost guaranteed long term employment and better retirement benefits.
For professionals, the difference between public service pay and benefits can be striking, making it very difficult to recruit and retain staff.
For example, pay for my position is 30% lower than what I made in the private sector and we pay half the cost of our health care while private sector employees typically pay only a very small share of the monthly premium.
Vacation days have to be used up or they expire after awhile. Allowing workers to count unused sick days as part of total time employed acts as an incentive for workers to put in more time working for their agency, reducing the need for overtime. Both are probably cheaper means of compensation than what private employers have to pay to get equally qualified workers.
Is it any surprise that Bob Jones, who labeled HGEA, UPW, and HSTA “the worst of the unions” thinks their benefits should be cut?
I just filed my retirement papers yesterday and was informed that the individual retirement benefit amount they had previously disclosed remains unchanged, but that the survivor benefit formulas had been changed, lowering benefits for people who retire at earlier ages (maybe 55-62) and raising them for people who retired at later ages. (I’ll be retiring at 64.5 years old, and my various survivor benefit amounts actually increased by a few dollars each.) So it looks like they adjusted actuarial tables.
What’s most alarming is that they haven’t provided any kind of information about what they plan on doing to state employee pensions. There is no information whatsoever on the ERS website, rather there is some bureaucratic jargon that has no meaning and patently seems designed to conceal their intentions. Nowhere is there any information on how to calculate how much one’s pension will fall by.