NVPERS: unfair for taxpayers and retirees
Liberals are supposedly all about “fairness.”
Whether it be leveling the playing field through affirmative action, taxing the working class to provide for those who do not, or forcing men to buy health insurance that includes maternity care, liberals want everyone to have the same end.
So, it’s particularly confusing that those same liberals champion a retirement system that, by design, leaves its members with seriously inequitable outcomes.
According to a new analysis made possible by the court-ordered release of Nevada’s Public Employee Retirement System payment records, some retired public employees in the Silver State are collecting golden pensions — so generous that their retirement compensation is higher than the base pay they received during their final year of employment.
Recent retirees with at least 30-years worth of service credit are retiring, on average with 100.59 percent of their final year pay. Those of the Las Vegas Metropolitan Police Department fared best, receiving an average of 112.39 percent of their highest year’s salary in retirement. Full-career Clark County retirees received, on average, a 2 percent pay raise, now getting 102.04 percent of their base pay. Their counterparts in Washoe County and the cities of Las Vegas, Henderson, Reno and North Las Vegas received pensions that were 87.5 to 98.7 percent of their final year’s salary.
Retirement benefits for other government employees — though still far more lucrative than most private-sector retirees could ever expect — are quite different.
According to the just-released 2014 PERS actuarial data report, the System’s 48,729 retirees had, on average, 20 years of service and pensions worth $35,598.
Yes, for 20 years of work, that’s a wonderful deal, especially considering that it well exceeds the maximum Social Security benefit, which itself only becomes available at age 67 after 35 years of work.
But it’s still a far cry from getting a pay raise on retirement, and far less than what those who spend only 10 years longer in the System receive. For the 10,357 PERS retirees who have at least 30 years worth of service credit, the average pension is $64,913.
That means those who were employed by Nevada government for 30 years receive pensions that are 82 percent greater than those of people who have spent 20 years in the System.
And, for those local government employees who leave government employment before hitting the five-year-mark, there are no benefits at all. These employees can’t even roll over their “share” of retirement contributions.
For Nevada’s current and up-and-coming work force, that last bit of information should flash warning lights. Millennials — according to Forbes — only remain in a job for 4.4 years and expect to remain there for only three. Since NVPERS penalizes the new norm of job-hopping, the system’s appeal can only dwindle.
For taxpayers, everything about PERS should be concerning. Nevada PERS’ unfunded liability has grown to a massive $40 billion, based on a risk-free rate of return. As a consequence, taxpayers have been forced to dramatically increase the amount they pay on pensions. Contributions to police and fire employees’ pensions have risen from 28.5 percent of salary in 2001 to 40.5 percent of salary in 2014 — a 42 percent hike. For other employees, contribution rates in that time period rose from 18.75 percent to 25.75 percent, or 37 percent.
All this at a time when taxpayers in the private and nonprofit sectors are most likely being asked to put more of their own earnings toward their 401(k) plans as their employers contribute less.
The State of Utah was forced to make reforms after its public pension system’s assets crashed during the Great Recession. As of 2011, new government employees in Utah are given a choice when it comes to their retirement: Take the 10 to 12 percent of their salary the government contributes toward their retirement and invest it in a personal retirement account, or, enroll in a hybrid with the understanding that taxpayer contributions are capped at 10-12 percent.
The change, which was well-received by voters, benefitted both taxpayers and employees. Taxpayers no longer bear the risk of employee retirement investment, while retirees can rest easy knowing politicians can’t raid their retirement fund to pay off government expenses. Additionally, allowing employees to invest in a personal plan enables them to take their retirement with them if they switch jobs — as Millennials are prone to do — and eventually even pass it on to their heirs.
If members of the left truly care about fairness, they will come to the table in Carson City and work with reform-minded lawmakers to address the unsustainable nature and inequity of outcomes and opportunity within PERS.
It’s time Nevada looks to states like Utah that have made the difficult but necessary choices to curb ballooning debt, protect current workers’ retirements and replace outdated retirement systems with 21st Century models that are fair for taxpayers and retirees.
Chantal Lovell is Communications Director at the Nevada Policy Research Institute, a non-partisan, free market think tank.