Just one of many stories about it:
Although Rhode Island paid the entirety of its recommended contribution in 2010 and had consistently paid its full contributions for several years, the state’s public pension system was still just 49 percent funded. Facing a funding gap of nearly $7 billion, Rhode Island was forced to make difficult changes to its pension system. According to Pew, in 2011 Rhode Island transformed its plans into a hybrid pension and 401(k)-like plan. The state also raised the retirement age from 62 to 67 and limited cost-of-living increases. The total savings from these reforms were estimated to reach $3 billion. Although union lawsuits to block the plan are still ongoing, the state’s Treasurer, Gina Raimondo, told the Associated Press that "Rhode Island is leading the way. I expect others to follow, frankly because they have to."
I agree the OP should do a great deal of research on his own.
As far as vesting goes, there are really only 2 options - 20% per year for 5 years or 100% after 3 years. No other possibilities are legal in the US for any employer public or private. And I know from personal experience that if you vest then leave an employer and take your money out, if you ever return to the employer you are still 100% vested. The vesting clock never resets.
I believe we are talking about 2 different things. One is the question if a State pension system can retroactively change the pension system. E.g. Molly has worked 20 years for the state and her pension has stated XX benefit, can the state change that benefit for the 20 years already served?
The question which the your article addresses is, can a state change their pension going forward? The answer is yes. Although, there will be wailing and gnashing of teeth. And lawsuits.
I am not aware of any case where a state has taken away pension benefits already earned. Benefits to be earned in the future, is a different story. In the case of Saipan, they tried claiming they were in way over their head and filing bankruptcy to discharge any pension liability, the judge dismissed the case arguing that CNMI is a "state" and therefore cannot discharge its obligtions. I have little fear of a state wiggling out of a pension payment.
DoingHomework wrote:As far as vesting goes, there are really only 2 options - 20% per year for 5 years or 100% after 3 years. No other possibilities are legal in the US for any employer public or private. And I know from personal experience that if you vest then leave an employer and take your money out, if you ever return to the employer you are still 100% vested. The vesting clock never resets.
Really? This is from the TRS3 handbook here in WA:
TRS WA wrote:Becoming vested
You are vested in the plan when you have:
•• Ten years of service credit;
•• Five service credit years and at least 12 of
those months were earned after the age of 44;
•• Five service credit years earned in TRS Plan 2
before July 1, 1996.
This is a significant milestone in your public service
Am I missing something here? I have never heard of a pension plan that gave full benefits at anything less than 20 years.
Current minimum vesting schedule as per ERISA for defined benefit plans is as follows:
1) 100% after 5 years of service
2) 20% for 3 yrs, 40% for 4 yrs, 60% for 5yrs, 80% for 6 yrs, 100% for 7 yrs
http://www.dol.gov/ebsa/publications/wy ... IhUHVF61No
In a defined benefit plan, an employer can require that employees have 5 years of service in order to become 100 percent vested in the employer funded benefits (called cliff vesting). Employers also can choose a graduated vesting schedule, which requires an employee to work 7 years in order to be 100 percent vested, but provides at least 20 percent vesting after 3 years, 40 percent after 4 years, 60 percent after 5 years, and 80 percent after 6 years of service. The permitted vesting schedules for current defined benefit plans are shown in Table 3 below. Plans may provide a different schedule as long as it is more generous than these vesting schedules. (Unlike most defined benefit plans, in a cash balance plan, employees vest in employer contributions after 3 years.)
Bichon Frise wrote:There are lots of reasons to do one thing or another. It is obvious to me, that the OP doesn't fully understand all the options. I encourage him to at least figure out some basic info. Somehow others, through a few paragraphs, have deciphered what is best. I have no clue, but all I am saying is for the OP to do his own digging and make at least a quasi-educated decision. For example, what if the OP's business takes the statistical turn of failing? Will he go back to teaching? Perhaps in another state? And what happens if withdraws the money? Does he start over? If he hasn't, can he get his time back? A lot of states will credit time for teaching in another state.
I would be interested in seeing some info on the state of Rhode Island skating out of their state pension obligations. I have only tracked the Northern Mariana Islands case, and the judge said no to them walking away.
TRS allows you to "buy back" previous years you have worked if you go back to work after withdrawing your funds. I'm not sure exactly what that means since a co-worker who is in the process of buying back some years told me. He can leave it there for the next five years in case he goes back (if the business fails or if he gets sick of it). After the five years, he will be forced to withdraw the funds because he won't qualify for pension (years of service + age = 80). Because the OP feels his fund is under performing, it seems like it would make more sense for the money to be withdrawn now than to wait five more years (unless buying back time is more "expensive" and he thinks he might go back to teaching in the next five years).
audii, while I appreciate your contribution, it isn't that helpful to link to a huge document such as the TRS handbook. What would be helpful, is a page number and/or a quote from the link which pertains to the question(s) at hand. Otherwise, it is like giving directions to your home and providing a map of the US with a large arrow pointing to Texas.