Eastern Iowa Government | National taxpayer group says Cedar Rapids’ and Iowa City’s top-paid employees will see more than $2 million in lifetime pension payouts

TUA’s pension project on Cedar Rapids, Iowa, is featured in this article from Eastern Iowa Government.

January 18, 2012, 2:17 pm

By Rick Smith/SourceMedia Group News

CEDAR RAPIDS — A national “taxpayers” group stopped here Wednesday to say it’s time for the state of Iowa and Iowa’s local governments and schools to move public employees from a public pension system to a less-costly, private-sector-like 401(k) retirement program.

To make its point, Taxpayers United of America, Chicago, Ill., estimated that the lifetime public pension payouts will reach near or exceed $2 million each for the top 50 highest-paid Cedar Rapids and Iowa City city employees.

Some of the payout is based on money paid into the system by the public employees.

Rae Ann McNeilly, outreach director for the group, said the group’s hope is that an average Iowan might respond, “I’m paying out $2 million in pension benefits on my $45,000 salary,” she said.

McNeilly said such “defined-benefit” public pension systems pay such extravagant benefits that the programs are “breaking the bank” or will. Many private-sector employers — if they offer any pension benefits at all — have moved to a “defined-contribution”system such as a 401 (k) where employers’ typically pay less and the system doesn’t guarantee an annual payout.

McNeilly pointed to the state of Rhode Island as one state that has worked to modify its state pension system, which Rhode Island has done by raising retirement ages and incorporating a 401(k)-like feature into the system.

McNeilly and Christina Tobin, the taxpayers group’s vice president, said elected officials and top government employees perpetuate public pension systems without question because they benefit from them. The key is to elect different people, the two said.

Tobin’s father, James Tobin, founded the taxpayers group 35 years ago. He ran for governor of Illinois in 1998 as a Libertarian Party candidate.

Iowa’s public employees pay into the state’s public retirement systems as do taxpayers in the jurisdictions where the employees work.

On July 1, most state and local employees in the Iowa Public Employees Retirement System or IPERS will be paying 5.78 percent of their income into IPERS and taxpayers will be paying an amount equal to 8.67 percent of the employees’ salaries into the system, according to IPERS.

On July 1, public safety employees in the Municipal Fire and Police Retirement System of Iowa will be paying 9.4 percent of their salaries into the system while taxpayers in the jurisdiction will be paying an amount equal to 26.12 percent of the employees’ salaries, according to the program.

Taxpayers United of America noted that lifetime pension payouts will exceed more than $3 million for top police and fire officials in Cedar Rapids and Iowa City because those officials can retire earlier and so are likely to draw payments over more years. The assumptions built into the group’s estimates are that most public employees will draw benefits for 24 years after age 62 while police and fire officials will draw them for 30 years after age 55.

The group estimates that Dale Helling, who recently retired as assistant city manager in Iowa City, will receive about $3 million via his pension payout.

It turns out that Cedar Rapids City Manager Jeff Pomeranz, unlike other Cedar Rapids city employees, is something of an example of what Taxpayers United of America wants to see. Pomeranz does not participate in the IPERS system and instead receives deferred compensation that he puts into a 401(k) account.

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