The Pension Pick-up Picture for Pepper Pike

I wasn't around when Pepper Pike agreed to a 2% pension pick-up arrangement with its employees rather than a 2% wage increase, but it's an item in the Finance Review Committee Report (which you can read here, see pg. 7) and was cited by a candidate for Council in a Chagrin Valley Times article last week as something that the City could have eliminated already as a benefit (the FRC report says that instead, "...the amount should be used for base wages").

At least twice in public session (4/20/11, 6/9/11), I've advocated for moving forward on this FRC recommendation regarding the penion pick-up, but I also specifically emphasized the necessity of examining the switch's financial impact on base wages, if any, as Council considered what to do and how to do it.

Now, this article from last week's Chillocothe Gazette does an excellent job exploring the good, the bad and the ugly of the pension pick-up idea. I recommend reading the entire article.

What do you think?

UPDATE: Please note, an early version of the state budget actually had the 2% pension pick up for state employees being eliminated and shifted to the state public employees.  Both the Ohio House and the Ohio Senate stripped that elimination from the bill.  Why, you may ask? Well - I don't know, but I will tell you that the electeds who voted on the state's budget? They are state employees who would have been affected by that shift. 

So, one might ask, if one were an asking kind of person, if it's good enough for the local governments to eliminate the pick up, why isn't it good enough for the state?


Paul said...

School districts do the same - ours has 100% pick up for both the teachers' union and the support staff union.

It's a matter of perspective: Is the pickup just a way to give the employees a way to make their retirement contributions with pre-tax dollars; or is it hidden extra pay? I've always looked at it as the former.

In school districts, it's pretty common for the top administrators to also have 'pickup on the pickup.' This is an approach where there a no deductions - pretax or otherwise - from the employees gross, and the both the employer and employer shares are paid by the employer. Furthermore, the employer contribution is recognized as 'salary' by the retirement system, inflating the eventual benefit.

I get frequent calls from a community member, complaining about some other thing he's read in the Superintendent's contract. I tell him to quit worrying about the individual components of the compensation package, and just look at the total cost to the taxpayer.

Judge that number to be too low, too high or about right, and forget whether it comes in base pay, accumulated sick days, car allowance or retirement pick ups.

Jill said...

Thanks for that perspective, Paul. I agree with you for the most part. There's no question that public education of how this all works is a huge and needed task - there are so many myths perpetuated on all sides. That's part of why I posted this article.