Wednesday, November 28, 2007

The Tax Hike Cometh…

Oops, goofed, the tax hike has already cometh… However, if you think the County’s tax increase this year is something, wait until the County Commission votes to implement defined benefits for county employees!

The County seems hell bent on doing what every other large business has been forced to dump if they planned to stay in business. Companies across the nation have found it impossible to fund the kind of retirement program the County wants to put in place. They’ve gone into bankruptcy; they’ve run to the government to help, they’ve closed their doors.

And it’s not just private companies (like IBM, General Motors, Delta Air Lines, etc.) who’ve had huge problems with trying to pay the bill for defined benefit type retirement. Counties and cities are having to go back to taxpayers to fund bloated defined benefit programs.

At a time when so many are crashing and burning in large part due to defined benefits, the County is looking to grab onto the golden tether and ride the horse straight into our pockets. Yep, that’s where all this is going to end up, with taxpayers having to pony up the funds to cover benefits for employees who’ve long since moved on to other jobs, states, countries...

Right now, it looks like the county is getting ready to commit to a defined benefit system that is raising taxes across the state and beyond.

Who’s giving them advice on this plan? From everything I’ve seen at the meetings and heard from others in the know, the company that will ultimately get the business is providing all the studies, data and info. Oh, and a committee of employees who are getting close to retirement and one outside attorney who has absolutely no knowledge of retirement systems and said so during his first briefing to the Commission.

I’ve talked to umpteen insurance types, financial wizards and the like about defined benefits. Every single one, no exception, basically said “RUN” in the other direction if someone starts talking defined benefits. I’ve been on the Internet searching for someone who says something good about a defined benefit program. The only folks saying they like it either work for or are affiliated with someone who’s also selling benefit programs. Find a think tank who says it’s a good idea… find an independent financial wizard who says it’s a good business decisions… If it’s a bad business decision doesn’t it stand to reason that it’s a bad decision for the government to expect us to fund this type retirement?

Here’s my prediction based on the information that abounds on this issue: We’ll be fine for a few years. All will be rosy and everyone will sing merry songs and give glowing reports. Then the County will have a wave of retirements. They’ll scramble a bit to cover the unfunded liability. It’ll grow. And grow. By the time the next change of command on the Board of Commissioners the county will be in a deep hole with no way to dig itself out. There will be some major scrambling to try and figure out how in the world to pay benefits for those who only worked for the county for five, six and seven years. They’ll do without some recreation, they’ll do without some needed road improvements, they’ll cut back here, cut back there… and raise our taxes ‘cause there ultimately won’t be any other way to cover the tab that will grow exponentially as more and more hit retirement age.

I worked for the government for 14 years. I had both a defined benefit retirement and a 401K plan. I didn’t appreciate it while I was there, but boy I love it now. I understand why everyone would want a defined benefit retirement plan. It’s there for a lifetime if you don’t cash it out. However, my 401K would do the same thing. In fact, I rather like it better. When I die, my husband or my kids will get whatever I didn’t use. The defined benefit? It doesn’t belong to me. It belongs to the government. They’ll give the money I paid into it to someone else.

One of the reasons for moving to a defined benefit system that is touted is that it makes the county government competitive. Well gee, I guess it’ll make ‘em even more attractive now that every other company in the world is ditching their defined benefit. I would argue that for most of us it’s things like salary, health, location, and the job itself that attract us. Until most hit their 40s or 50s they’re not thinking much about retirement. If they are the type that does, many would be happier (or as happy) with a 401K or the system the County currently has. Who wouldn’t like to own their own future? Who doesn’t like the idea of the company matching their contributions? Managed correctly a 457 or 401 can out-perform many retirement systems and it doesn’t go away the day you die.

We need to make sure county employees aren’t stuck out in the cold when they retire. We can’t expect them to live on Social Security alone. A good percentage of county employees are socking money away for their future under the current program. Some aren’t. Some of those are young and aren’t yet thinking of that day in the future when they’ll retire. Some have spouses who are making sufficient money that they’ve opted to take every penny of their salary. Some who aren’t contributing to the current retirement program won’t want to pay their portion of the defined benefit program either if it means a decrease in their take-home pay.

[[[[Just in case you're wondering what the difference is between a defined benefit retirement plan and a defined contribution plan like the County currently offers here's easy to remember definitions: defined benefit: controlled by others and they tell you what you'll get; defined contribution : you own it, and put your own funds into it. Usually companies do a match with a defined contribution plan]]]]]

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