Illinois turns retired state college employees into millionaires. How does your pension compare?

Total up what you expect to receive from your private pension and social security and see if it matches the astonishing rich pensions that the state of Illinois (i.e. taxpayers) gives to its public university employees.

There's a guy who, believe it, is expected to receive a $22.3 million lifetime state sponsored pension. He leads the pack. He is Leslie Heffez,, a Professor of Oral and Maxillofacial Surgery from the University of Illinois at Chicago, who retired at 55 and who collects a $564,298 annual pension. Okay, so maybe he deserves it because he's some kind of unique expert. So, what do the "ordinary" state university employees get?

As Taxpayer United of America has reporteddollar sign

  • The average 2016 annual SURS [State Universities Retirement System] pension is $35,751.
  • The average amount that employees paid into their own pension fund is $48,764, or 5 percent of their estimated lifetime pension payout.
  • The average estimated lifetime payout is $947,211.
  • The average age at retirement is 61.
  • The average years of employment are 18.

If you can take it, here is some more from  Taxpayers United of America:

  • Total number of 2016 SURS pension beneficiaries is approximately 62,792.
  • 3,955 collect pensions in excess of $100,000.
  • 15,628 collect pensions in excess of $50,000.
  • In fiscal year 2015, taxpayers were forced to pay $1,590,900,000 into the government pension fund.
  • In fiscal year 2015, SURS government employees paid $340,000,000 into their own pension fund.
  • At the end of fiscal year 2015, SURS had a 42.37% funded ratio with a $22.4 billion unfunded liability.

Sure, blame the politicians for robbing the state pension funds to pay for everyday state expenses (including state university subsidies), but there's this:  Since "2011, SURS has received the full annual statutory contribution from the state of Illinois."

Gee, so how is your pension and social security looking now?

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  • fb_avatar

    Come on, Dennis. How about telling more details, not just the cherry-picked ones that make public pension seem disproportionate? For instance, compare that average SURS pension to what Social Security can provide, then add that SURS people pay 8% into SURS with no earnings cap at which that stops. How about explaining how pensions are calculated, then show what is wrong with that? The numbers don't just magically appear. Perhaps most egregious in your biased piece is the implication that somehow a miracle should have happened because SURS got its full statutory payment since 2011. How is that supposed to offset decades in which the pension systems got anywhere from a fraction to zero from the state? How about the fact that of the SURS "full" payment, only about 1/3 goes for the annual normal cost, that is, to cover what employees earn in benefit that year. The remaining 2/3 goes toward the debt created by those decades of underfunding. Let some expert go back to the start of the systems and calculate the current funding ratio IF the state had always made its full contribution. I'll take bets on what the unfunded liability would be today.

  • fb_avatar
    In reply to Jim Lockard:

    Jim, you ask "For instance, compare that average SURS pension to what Social Security can provide" Ok I googled Social Security Benefits and I got this:
    https://www.ssa.gov/news/press/basicfact.html
    It includes this statement: $1,335 average monthly benefit (which works out to $16,020. So if ignore the 6.4% put into SSI by the employer (which lowers salary) for the 20% higher pension contribution, SURS members get over double the average annual benefit.

  • Boo hoo, Jim. Why didn't the leaders of the public employees union make an issue of the underfunding, instead of contributing mega-bucks to the campaigns of those very politicians who diverted the money to other purposes (including, by the way, public universities)? What did you do to protest the underfunding for all those years?

    I continue to be astonished by the ignorance of public employees who make a habit of whining about how tough they have it in retirement. No social security? My standard answer is that I'll trade you straight up what public employees get for all my retirement benefits after 40-plus years of working as a Chicago journalist and freelance writer AND my social security payments. Never mind that in the more than 20 years of freelance writing I had to contribute both the employer and employee share of social security withholding.

    And there's this: Why do public employees deserve special protection in the state constitution for their pensions? The rest of the world, including all of us in the private sector, have no such special protections. It was special interest lobbying that got it inserted into the constitution.

    Meanwhile, what is your solution to the state's funding crisis? Even if the pension funds got every cent they had been owed, we'd still have that problem having over us.

  • fb_avatar

    I am a Finance professor, so I understand a thing or two about compounding, investment returns over time, etc. Apparently Taxpayers United, where you are getting your information from, does not, because virtually all of the statistics they compute purporting to show that SURS pensions are overly generous really do nothing more than illustrate how these basic factors work. As an illustration, let's consider a hypothetical Walmart employee who worked there from 1980-2014, earned the average wage each year as reported by Social Security, contributed 6% of his salary to the company's 401k plan and received a 6% of salary company match (this is what Walmart actually does), and invested 70% of his 401k balance each year in the S&P 500 stock index and 30% in high-grade corporate bonds (an asset allocation that is roughly comparable to that of SURS). This gentleman would have had a starting salary of about $12,500 in 1980 and an ending salary of around $46,500 in 2014. His total employee 401k contributions over 35 years would be $60,041 and at the end of 2014, with employer contributions and investment returns, his 401k balance would have been $769,664!

    Now let us assume, beginning in 2015, he follows the standard advice of financial planners and withdraws 4% of his balance, and increases his withdrawal each year to reflect inflation. If inflation averages 2% per year, then he would withdraw $30,787 (4% x 769,664) in 2015, $31,402 (30,787 x 1.02) in 2016, etc. If he lives to age 82 (his life expectancy), then he withdraws a total of $840,442 in retirement. So looking at the ratio of lifetime contributions to withdrawals, this would be 60,041/840,442 = 7.14%. However, this is misleading, because unlike with SURS pensions the residual value in the 401k account would be available to his heirs. If he earns a measly 5% annual average return on his balance post-2014, he would still have $765,252 left in his 401k when he passes away at age 82. If you include that in the payout, then the ratio of total employee contributions to payouts drops to 3.73%.

    So the moral of the story is that the Walmart employee overall can do about as well as the SURS employee - slightly better using some metrics, slightly worse using others. The seemingly incendiary statistics you cite can be more-or-less fully explained as a natural artifact of actual historical investment returns and compounding over very long periods of time. They do not necessarily indicate that SURS pensions are too high.

  • fb_avatar
    In reply to Andrew Szakmary:

    You say "So the moral of the story is that the Walmart employee overall can do about as well as the SURS employee." However, the SURS employee puts 8% of his salary into his pension,while the WalMart employee has 6.4% of his salary taken by SSI, Walmart has to pay another 6.4% of his salary to SSI (lowering his salary) and he puts another 6% of his salary into the 401(k). So basically the Walmart Employee puts 12.4% of his money into retirement, and Walmart put in another 12.4%, while the SURS employee puts in 8%.
    And what if, instead of living to 82, the Walmart Employee lives to 95? If his 401(k) runs out, he is broke, but the SURS employee continues to receive benefits. And in your example, his starting withdrawal amount it about 66% of his final salary, while the SURS employee would get 75% of his salary as a starting retirement benefit, and might start collecting benefits before he turns 59 1/2.

  • Andrew, I haven't verified your math so I'll take your calculations at face value. But one thing that strikes me is that the Walmart employee has to bear all the risk of the market actually performing as you stated. There's no guarantee that he will earn those returns. The public employee pensions are guaranteed by the the taxpayers of Illinois. That's pretty amazing.

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