Hike in pension base would be costly
To the editor:
After reading Fred Sunderland Jr’s letter (”Town must support increase for retirees”, Nov. 4) I felt compelled to respond to some of the information Mr. Sunderland presented and to give some more insight on the matter. His assertion that Andover “must” raise the COLA base and that it is not that expensive is questionable at best when one digs a little deeper and looks at the consequences of initiating this change.
His point about the COLA adjustment on the first $12,000 is a simple truth and so is his claim that COLA adjustments to Social Security benefits is on the entire benefit. He happened to leave out though that the average Social Security benefit is only $1,269 per month, or $15,228 per year, not very far off from the $12,000 base. It should also be known the COLA limit of 3 percent per year is an arbitrary percentage and COLA awards are given simply because the awarding authority can award them, not because the COLA is based on any statistical inflation calculation. For example, most retirement systems have always approved the maximum 3 percent award year over year, irrespective of actual inflation, while since 2009 the COLA provided to Social Security benefits was: 0 percent, 0 percent, 3.6 percent, 1.7 percent, and 1.5 percent. So although the COLA base of $12,000 is less than the average Social Security benefit, the rubber stamping of COLAs above the actual inflation rate has benefitted retirees quite well.
His assertion that Massachusetts public employees cannot collect Social Security benefits is also a bit flawed. If a worker has completed 40 working quarters and paid FICA taxes on the wages, that employee is entitled to a benefit at retirement. However, the benefit can be reduced by the Windfall Elimination Provision enacted in 1983. Such a blanket statement that public employees “cannot” collect Social Security benefits is unjust.
It should also be noted; of the six surrounding communities Mr. Sunderland listed, only one, Methuen, enacted the change independently. The other five are part of two different regional or country retirement systems (Middlesex Country Retirement Board and Essex Regional Retirement System) that in total make decisions for a combined, 117 towns, cities, and government entities. The Lawrence City Council voted down a COLA base increase at their Oct. 1 meeting due to the increased long-term costs of the base change.
The Pioneer Institute recently released a report on the effects of COLA base increases on Massachusetts retirement systems. Their calculations estimated an increased benefit cost of approximately $875,000 to the Andover retirement system if the COLA base is raised to $13,000; a system that is only 49.7 percent funded and scheduled to be fully funded by 2040, ranking dead last, 104th out of all funding schedules. Further investigation will show although Andover employees do indeed contribute to their pension fund, the cost of benefits over the next 5 years outpaces total contributions by the employee’s and the town, not including a supposed 7.75 percent return on investments, by almost $19 million further straining the fund balance while most likely increasing actuarial liability.
In conclusion, I do believe Mr. Sunderland’s intentions are in the right place by advocating for retiree benefits to have commensurate buying power in the future. However, many of citizens and taxpayers may not understand the financial ramifications of making COLA base increases since the overall pension system has multiple flaws that require action from our cohorts on Beacon Hill to fix.
Christopher R. Cook
Spending is driving us to ruin
To the editor:
“It is difficult to get a man to understand something, when his salary depends upon his not understanding it,” wrote Upton Sinclair.
In this case, the people responsible do in fact understand what they are doing. The greatest larceny in the history of mankind continues, only now do we have an insider who was complicit in its execution apologize for its purpose in The Wall Street Journal’s Op-Ed piece by former Federal Reserve official Andrew Huszar: “the greatest backdoor Wall Street bailout of all time.”
Mr. Huszar of course is referring to the Fed’s Quantitative Easing (QE) program. Along with the taxpayer backed bailouts of bankrupt entities, now called “too big to fail” financial institutions, the Fed wanted to further backstop these entities by taking their bad debts off their books. What this program really should be called is theft. What QE and the bailout does is transfer your money to these financial institutions with a government gun in your face, while at the same time telling you how good it is for the American people.
Remember, these institutions were broke, thanks to a variety of reasons, one of which was the destruction of Glass-Steagall, which would have limited the amount of leverage banks could use. With Glass-Steagall no longer a barrier from engaging in risky behavior, there was no reason to stop their ridiculous behavior. To make matters worse post-bailout, an ex-Congress member from Pennsylvania by the name of Paul Kanjorski decided it would be a good idea to change the accounting rules, by changing “mark-to-market” via Financial Accounting Standards 157. Now institutions and corporations could have massive write-downs by marking their assets under Level 3 “Unobservable Assets” to whatever they choose. Which is exactly what they all did, and of course Congressman Kanjorski was handsomely rewarded through campaign donations from the securities and insurance sectors, like many other members of Congress friendly to Wall Street currently enjoy.
The larceny eventually comes out of Americans’ purchasing power. Even while the government deficit continues to decline, the Fed continues at their $1.2 trillion a year QE pace. Credit of this magnitude can never of course replace real economic output, but of course our government is pretending it can with disastrous current and future effects.
It is now clear the Fed “intervention” isn’t serving the needs of the people, but is enabled through a crony Congress establishment, serving the needs of their true masters on Wall Street. By supporting any Congress member that has enabled or supported this larceny upon us, you are in fact enabling your own financial hanging, maybe not today or tomorrow, but when all that credit runs its course and it’s time to pay up, only then will the people realize what they have done to themselves in support of these criminals.