ARTICLE

Group wants public workers off pension system

National group says top-paid city employees' pension payouts will exceed $2 million; 401(k) plan would be cheaper

CEDAR RAPIDS — Representatives of a national group stopped here Wednesday to say it’s time for public employees in Iowa to be moved from a pension system to a less costly 401(k) retirement program like those used in the private sector.

To make its point, the Chicago-based Taxpayers United of America estimated that the lifetime public pension payouts will near or exceed $2 million each for the top 50 highest-paid city employees in Cedar Rapids and Iowa City.

Some of the payout is based on money paid into the system by the public employees.

As Cedar Rapids Mayor Ron Corbett pointed out, local governments can’t do much about employee pension arrangements because it’s a state system. And at the Statehouse in Des Moines, pension reform has not been mentioned as a priority this session, nor did Gov. Terry Branstad focus on the topic in his Condition of the State speech.

Still, Taxpayers United outreach director Rae Ann McNeilly said said defined-benefit public pension systems pay such extravagant benefits that the programs are “breaking the bank,” or will in the future. Many private-sector employers — if they offer any pension benefits at all — have moved to a defined-contribution system such as a 401(k), which typically costs employers less and doesn’t guarantee an annual payout.

McNeilly pointed to Rhode Island as one state that has worked to modify its state pension system, by raising retirement ages and incorporating a 401(k)-like feature.

She and Christina Tobin, the taxpayers group’s vice president, said elected officials and top government employees perpetuate public pension systems without question because they benefit from them. The key is to elect different people, the two said.

Tobin’s father, James Tobin, founded the taxpayers group 35 years ago. He ran for governor of Illinois in 1998 as a Libertarian Party candidate.

Iowa’s public employees pay into the state’s public retirement systems, as do taxpayers in the jurisdictions where the employees work.

On July 1, most state and local employees in the Iowa Public Employees Retirement System will be paying 5.78 percent of their income into the system, while taxpayers will be paying in an amount equal to 8.67 percent of those salaries, according to IPERS.

Meanwhile, public safety employees in the Municipal Fire and Police Retirement System of Iowa will be paying 9.4 percent of their salaries into that system, and taxpayers in their jurisdictions will be paying an amount equal to 26.12 percent of the employees’ salaries, according to the program.

Taxpayers United of America said lifetime pension payouts will exceed more than $3 million for top police and fire officials in Cedar Rapids and Iowa City because they can retire earlier and so are likely to draw payments over more years.The group’s calculations are based on certain assumptions, such as that most public employees will draw benefits for 24 years after age 62, while police and fire officials will draw them for 30 years after age 55. Also, the group estimates that the typical IPERS employee with 35 years of service would receive an annual pension payout of 65 percent of the average of their highest three years of pay.

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