NYC Teachers are juicing their pensions, and it cost taxpayers $1B

teaching

Via NY Post: A little-known pension perk available only to New York City teachers cost taxpayers an astonishing $1.2 billion last year, a watchdog group reported Wednesday.

The sweet deal guarantees that teachers who sock away money for retirement in a special Tax Deferred Annuity (TDA) receive a 7 percent annual return. In stark contrast, banks currently pay depositors just 1 percent or less on most savings accounts.

And city taxpayers are the de facto guarantors for the high rate of return — on the hook to make up the difference if the annuity falls short of the guarantee.

Knowing a good thing when they see it, increasing numbers of teachers are stashing their cash in the no-lose annuity, the Citizens Budget Commission found.

It said that there are now 137,000 participants in the plan, including 51,000 retirees. But only 3,000 are drawing on their funds. The rest, according to the commission, are watching their nest eggs grow at a fixed rate available to no other city employee.

And that’s over and above the teachers’ regular pensions.

“You don’t get a guaranteed rate of return with your 401(k). But teachers do” in that special annuity, said CBC research director Charles Brecher.

“It’s a good, positive math lesson for teachers. It’s a bad, negative math lesson for taxpayers. The teachers get this huge taxpayer subsidy. The city should treat the teachers like everyone else.”

Former city labor director James Hanley said the guaranteed 7 percent — which he negotiated down from 8.25 percent in 2009 — is indefensible. “Nobody else has such a system. This is a little ridiculous. It’s tough to sustain in the long term,” Hanley warned.

The annuity is a voluntary program to supplement traditional government pensions. Other city employees have them — without the guaranteed 7 percent return.

The sweet deal kicked in when the state Legislature in 1988 allowed teachers to designate all or part of their pension contributions to the fixed-return fund, which at that time was paying 8.25 percent, then close to the return of federal government bonds.

After the 2008 stock-market crash, the fixed-rate option grew in popularity. In 2007, the annuity fund stood at $7.4 billion. Last year, it held $18.7 billion. Taxpayer subsidies have also grown, from $238 million in 2007 to $1.2 billion last year.

The CBC urged the city to end the 7 percent guarantee, particularly for new hires. The CBC pointed out that while government pensions are protected by the state constitution, the annuity isn’t.

Any changes would require taking on the powerful teachers union.

Union boss Mike Mulgrew

Union boss Mike Mulgrew

Mike Mulgrew, president of the United Federation of Teachers, argued that taxpayers have actually come out ahead. “The CBC report neglects to mention that over the last 25 years, the city has actually made a profit from this fund, since its investment returns over that period have exceeded the guaranteed rate of return promised by the TDA,” he said.

Mayor Bill de Blasio’s office had no immediate comment.

DCG

Advertisements

8 responses to “NYC Teachers are juicing their pensions, and it cost taxpayers $1B

  1. The problem with this is that it is thoroughly legal, and the TDA was established over 40 years ago. It is the same with those civil servants, e.g., police officers and firemen, who legally game the overtime. Let’s play the ball where it lay on this one:
    These civil servants are not breaking the law; Therefore, a change in the law is needed. This would require going to the State Legislature in Albany. So blame the lawmakers for these flaws and not the civil servants themselves.
    Another little tidbit in this game is the overtime, whereby a police officer or other civil servant (but not teachers in this case), can inflate his pension by working all the available overtime in the last five years leading up to his retirement.
    All this is totally legal. Every now and then, the New York Daily News plays this envy game by publishing the names and photos of a select few who legally take advantage of what is available. But why castigate them? It doesn’t solve the problem, the cure to which lays with the State Legislature in Albany.

    This story is analogously identical to Hillary complaining about Donald Trump “taking advantage” of the “tax laws.” Mr. Trump would be a bad businessman and a fool for not doing so—especially since Mrs. Clinton has, undoubtedly done the same! Ditto teachers and other civil servants!
    Here in New York, on WOR 710 AM, there used to be a morning talk show host, John Gambling, who always shared what a great weekend he had at or near his home on the North Shore of Long Island. But any time a cab driver would find a dollar on the street, for example, he would HOWL IN EXECRATION! It’s ENVY, plain and simple: Complain about the ENABLERS and not the beneficiaries, in this case.

    Liked by 3 people

  2. The more serious hosing of taxpayers is the flagrant ruse by which government workers effectively pay no taxes at all. Government workers are paid at least 40% more than their private sector counterparts who have as good or better salary determinants. When any government worker files a return, any taxes paid to the government are strictly a gimmick that leaves the government worker’s wages effectively free of tax and then some.

    Most of them are a further burden inasmuch as private sector wages are reduced by some 40% solely because of unneeded regulations these government parasites enforce that inhibit the industry and productivity of working men and women. It’s also worth noting that compassionate care for the poor, disabled, and displaced among us could be vastly improved, support the dignity of the disadvantaged, and be done at less than half the cost if done locally. In some programs up to 90% of the money spent goes to engorge America’s real parasites, the bloated bureaucracies and their crony contractors sucking the blood out of civil society.

    Liked by 1 person

  3. VOTE TRUMP

    Liked by 1 person

  4. Gee why not generalise I made way more in the PRIVATE SECTOR.

    Like

  5. Pingback: NYC Teachers are juicing their pensions, and it cost taxpayers $1B – The Grey Enigma

  6. This is a problem with union corruption. They hose their members and pay off the ‘law makers’. I hate unions. I used to belong to one. They suck.

    Liked by 1 person

  7. Teachers goonions are one of the largest threats to freedom in America.

    They should all be dissolved.

    Liked by 1 person

  8. New York State Teachers Retirement System:

    Goldman Sachs ……….. 1,044,570 shares
    Bank of America ………. 25,717,779 shares
    JP Morgan Chase ……. 9,249,084 shares
    Wells Fargo …………….. 11,719,040 shares
    Apple …………………….. 2,238,839 shares
    Berkshire Hathaway …. 4,233,252 shares
    Chevron ………………… 4,696,129 shares
    Exxon …………………… 10,690,460 shares
    Halliburton Co. ……….. 2,185,861 shares
    Microsoft ………………. 18,041,893 shares
    IBM ………………………. 2,487,558 shares
    General Electric ………. 24,942,816 shares

    Johnson & Johnson ……. 6,531,214 shares
    Coca Cola …………………. 9,084,361 shares
    Lockheed Martin ………… 634,287 shares
    Merck & Co ………………. 7,210,775 shares
    Morgan Stanley …………. 3,390,884 shares
    Monsanto Co. …………… 1,242,171 shares
    Occidental Petroleum ….. 2,286,394 shares
    Pfizer Inc …………………. 17,341,607 shares

    Like

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s