February 4, 2013
(Harrisburg, PA) – Tom Corbett marched into the Governor’s Mansion on a reform platform that remains truncated. Mr. Corbett has pledge to reform pensions. He has postured and tucked away pay raises for future consideration, but has never pledged not to take the pension jack.
Mr. Corbett pledged not to take to a Cost of Living Adjustment (“COLA”) as Governor, and he has publicly stated his salary remains frozen at $174,914. He remains the sixth highest paid governor in the nation. According to Mr. Corbett, he deducts the COLA and returns the amount to the Department of Treasury. Mr. Corbett is required to make member contributions of 6.25% to his pension.
However, Mr. Corbett may enjoy a pension bump with each annual adjustment if his COLA is included in his W-2 income since that would increase his compensation for pension purposes. Including the COLA would result in his “pension salary” for 2010 being $177,401, $183,224 for 2012 and $187,921 in 2013.
Mr. Corbett is 64 and pension eligible. If he left office this year, assuming 12 years of service, (1) his highest three years average with the COLA would be $182,848 x 2.5% x 12 years or an annual pension annuity or $54,854.60. If the COLA is not factored, his highest three years average would be $174,914 x 2.5% x 12 years or $52,474.20.
Either formula – based on Tom Corbett’s career as Attorney General and Governor – would produce an annual pension pay out greater than the combined annual pensions of the last three governors. Rock the Capital filed Right to Know Requests for former Governors Ridge, Schweiker and Rendell with the State Employees’ Retirement System. SERS provided responses on January 9, 2013.
Tom Ridge, 1995-2001
• Please provide former Gov. Tom Ridge’s (R-Erie) monthly retirement payment): $996.77 per month = $11,961.24 annually.
• Please provide former Gov. Tom Ridge’s (R-Erie) lump sum payment. $45,023.65. (Full )
Mark Schweiker, 2001-2003
• Please provide former Lt. Gov. Mark S. Schweiker’s (R-Bucks) monthly retirement payment. “Has applied for benefit; not yet in pay status.”
• Please provide former Lt. Gov. Mark S. Schweiker’s (R-Bucks) lump sum payment. “Has applied for benefit; not yet in pay status.”
Ed Rendell, 2003-2011
• Please provide former Gov. Ed Rendell’s (D-Philadelphia) monthly retirement payment: $1,863.21 per month or $22,358.33 annually.
• Please provide former Gov. Ed Rendell’s (D-Philadelphia) lump sum payment: $96,420.84. (Full)
Calculating SERS Retirement Benefits
1. SERS is a defined benefit plan, meaning it is based on employee earnings and not contributions made to the plan (defined contribution).
2. Retirement contributions are taken from the employee and employer on earnings that are subject to Medicaid earning thresholds. The employee contribution rate is 6.25 percent. Not sure what the employer contribution percentage is but there are two depending on when the employee joined.
3. Retirement annuities are based on years of service and age. To qualify for full- retirement an employee must have either 35 years of credited service or 5 years of credited service at age 60.
4. Retirement monies are based on the average of the employee’s three highest earning years. For example, an employee’s three highest years are, $58K, $60K and $62k. The employee’s salary base is $60K.
5. An employee earns 2.50 percent per year of service. When an employee retires, the percentage received is the number of years times creditable service times salary base. If an employee retires after 35 years (full retirement) with a $60K salary base a typical formula for gross retirement would be 35(2.25)(60)=$47.3K.
6. The kicker on early retirement (see 3 above) is the age factor. Assume an employee retires w/34 years of service and is not 60. There is a penalty of approximately 4 percent for each year under age 60, but the penalty may vary by class. The formula would be 34(2.25)(60)=$45.9K. If the employee is 58, the annual pension would be “docked” $3,672 or 8 percent of the full benefit due at age 60.
Calculating Legislators’ SERS Retirement Benefits Basically the same as above but as they are in a different class of service (D- 4) there are some differences:
√ The age for full retirement benefits is 50 (The 35 years of service threshold is moot because they would have to be elected at age 15, which, at least for now, is not permitted).
√ Act 120, passed during a lame duck session in 2010, impacted new entrants in the pension system by mandating minimal vesting periods of ten years, bumped up the retirement age and forbade lump sump payments.
√ The multiplier (percentage points/per year) is 2.50.
√ The formula is the same: multiplier X years of service X final average salary Example: 3 X 20 X 80=48k/year.
√ Legislators contribute 7.5 percent (tax deferred). It’s unclear what the state (taxpayers’) share is as it was paid in a lump sum and is still being drawn down. When they need more scratch an actuary will determine the rate.
1 On October 3, 1995, Thomas Corbett was appointed by Governor Tom Ridge to fill out Ernie Preate’s term. Mr. Corbett was confirmed by the Senate on October 3, 1995 and served until 1997. Corbett retuned for a second tour of duty on January 18, 2005, won reelection in 2008 and served through 2011. As Attorney General, Tom Corbett made $148,003 in 2010.
Photo by wallyg
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