In just about every police department, around the country, there is a spectrum of officers, of all ranks, who are somewhere from fresh out of the academy to old, slow, and grey haired (like me) who seem to have been the police forever.  One thing they probably all have in common is a portion of each and every paycheck goes into their pension fund.

Once there, the pension fund managers combine that money with a specific required payment from the municipality or state and then invest this money.  After a set amount of years an officer is eligible to retire and collect this pension.  Of course what the officer collects usually depends on how old they are and how long they have worked.

This pension is actually a part of the salary package that the officer earns for his or her many years of service.  This is a debt owed to the officer just like his salary is owed to him on payday.  This debt owed to the officer is paid monthly after he retires.  It is a lawful contract between the officer and the municipality or state.  Don’t forget that under current social security regulations, most officers receive little if any social security benefits even if they have paid a fortune into FICA for years.

Many of us have worked a long time looking forward to this light at the end of the tunnel.  We have worked nights, weekends, missed holidays, and family events.  We have worked in the worst weather and under the worst conditions.  Of course we didn’t just do this because of the pension at the end of the tunnel.  We did it because it was the right thing to due.

While the economy was booming, all of these pension funds were doing very well with their investments.  While we continued to pay into these funds, on each payday, many of the states and municipalities saw this as an opportunity to postpone payments and shift this money to other projects.  Then the market crashed.  Fund managers started to get worried.  They needed the money that was owed to the funds from the states and municipalities.  This was a lot of money.

States and municipalities saw pension funding become their largest budgetary item.  The correct and honorable thing to do would be pay your debt.  Instead these municipalities for the most part are choosing to try to find a way out of paying now that the bill has come due.

Imagine this; your house needs to be painted so you hire a guy to paint it.  You give him some of the agreed upon money so that he can start.  When the house is finished you tell him that the money you owe him is just too much money.

You tell him he is just being greedy to expect all that money.  Shame on the painter for expecting all that money, he is just being unreasonable.  In the meantime you decide to plant some lovely tulips in the flowerbeds around your house and put up a new fence.  You tell the painter times are tough and he is just going to have to get used to it.

This is what a lot of municipalities are trying to due and are being supported by groups like the Civic Committee of the Commercial Club of Chicago and the Illinois is Broke group as well as others all over the country.  I use Illinois as an example because I live there and I am most familiar with it, but this problem is nationwide.

The real problem these groups are having is they have realized that to make changes to the existing fund benefits is in many cases unconstitutional.  In these cases they are proposing a rather shortsighted plan.  New legislation has been proposed in many states changing pension funds to a two-tier plan.

Newly hired police officers will be given the option to join a 401(k) plan.  The municipality will not contribute anything.  There are variations from state to state with some offering no change to currently contributing officers up to allowing the officers to switch to a 401(k) or choose to increase their contribution and work longer before they are eligible for retirement. These plans don’t sound all that bad until you look at a couple recent studies that have come out from some very well respected sources.

The National Institute on Retirement Security (NIRS) released a study showing just how pension funding actually improved economic conditions for the community and country. The NIRS analysis shows that for each dollar paid out in pension benefits, $2.37 in total economic output was supported. For every dollar contributed by taxpayers to state and local pension funds, $8.72 in total output was supported nationally.

This was further supported by a report from the Government Accounting Office, GAO that 401(k) plans just do not have the same impact as traditional pension plans so why the rush to push them. Simple, rather than let people see that municipalities have mismanaged the money entrusted to them by the voters they would rather take the short-term option and avoid paying the bill.

As a young officer or a senior officer you probably ask what can you do about this problem?  Well, actually, you can do a lot just by being informed about what is happening in your municipality and state.  There are many facebook and web pages that provide you with information on pensions in your area.  Illinois has the Illinois Public Pension Fund Association and We Are One Illinois with both Facebook pages and websites.  California has Lets Talk Pensions on Facebook and nation wide there is the National Public Pension Coalition on Facebook as well.

Additionally most police unions constantly have links and articles on their websites on these issues.  In Chicago the two unions representing the CPD Sergeants and Lieutenants have joined forces and maintain First Responder Pension Facts on the Internet and Facebook.  These sites keep you current on all pending pension legislation in Illinois.  Please remember, I am most familiar with Chicago, so you need to do a little research yourself for your area.

Here in Illinois, these groups have been very successful blocking some legislation that would have been very harmful to both state and municipal pension plans.  These groups are only successful because they have united law enforcement officers and firefighters statewide.   Without that sort of strength our pension funds would have been ruined.  When detrimental legislation comes up these groups have been able to garner such huge support that the state legislators have had no choice but to stop and listen.

During one such legislative push an Illinois State Representative was quoted, as saying all the representatives were receiving so many calls about the legislation that no one could make any outgoing calls from their office lines.

If you are a young officer, do not make the mistake of thinking it will be fine just because retirement looks so far away to you.  Ask anyone ready to retire and they will tell you that it was surprising just how quickly it snuck up on them.  Do your homework now so that there will be a light for you at the end of the tunnel.

Learn more about this article here:

http://civiccommittee.org/initiatives/StateFinance/Public-Awareness-new.html

http://www.illinoisisbroke.com/

http://pensiondialog.wordpress.com/2012/03/09/facts-and-data-that-tell-the-pension-story/

www.firstresponderpensionfacts.com