Skip to comments.Six-figure salary and a buyout create quite a pension [CT]
Posted on 01/13/2014 2:06:33 PM PST by Third Person
Highest state pensioner: 'It seemed fair at the time'
Of all the state pension checks cashed in 2012, none was bigger than John F. Veiga's.
The Coventry resident spent 37 years teaching business at the University of Connecticut. In 2009, he accepted an early retirement buyout offer from the state after contributing $222,128 to his pension during his UConn career.
Now, at age 70, that pension pays him $276,364 a year, the largest amount paid to a single state retiree in 2012, nearly nine times the $31,666 average state employee pension.
According to calculations by the data analysis firm VisiGov: Visible Government Online Inc. for The Day, Veiga could collect another $4 million in his lifetime.
"I don't know what to tell you," Veiga said. "Is it fair? It was what was offered. It seemed fair at the time."
Of the top 10 state pensions in 2012 - all six figures - all but two were paid to former employees of UConn or the UConn Health Center. Nine retired under the most generous retirement plan, called Tier I.
Veiga left Kaiser Aluminum in 1968, earned his doctorate in 1971 and became a professor at UConn after a brief stint teaching at Northeastern University in Boston. He said his former boss called him "crazy" to leave Kaiser, where he was earning $50,000 to $55,000 as a senior industrial engineer, for an assistant professor position at UConn with a starting salary of $16,000.
But over the nearly 40 years that Veiga worked for the state, that salary gap narrowed. Private companies cut back pension and retiree health benefits, according to a 2012 Employee Benefit Research Institute report. More and more, private companies came to rely on "defined contribution plans" - 401(k)-type plans that have no guaranteed annual benefit amount.
Veiga said the early retirement incentive package offered in 2009 during Gov. M. Jodi Rell's administration was too good to pass up. More than 4,700 state employees took advantage of the offer.
The buyout "made it very hard to say, 'Well, I am going to keep working,' when I can earn as much on a pension as I can working," Veiga said. It added three years to his to his term of service, and the state let him add three more years because he had worked as a residence hall director at Kent State University in Ohio, and another year because he had been an assistant professor of management at Northeastern University. That brought his credited years of service to 44.
His pension also comes with annual cost-of-living adjustments, Medicare insurance and prescription drug coverage, and supplemental health insurance and prescription coverage through the state. He pays a co-payment at the doctor's office occasionally, he said, but otherwise he does not pay for his health care.
State Comptroller Kevin Lembo said early retirement incentive programs put a lot of stress on pension systems. While they reduce payroll, they increase lifetime pensions because they add additional years of service. To Lembo, "They are short-term thinking at best."
The tier system
Veiga served as chairman of the management department at the School of Business for more than two decades and as the interim dean of the School of Business in 1991 to 1992. He was named the Northeast Utilities endowed chairman of business ethics in 2000, and a Board of Trustees Distinguished Professor in 2001. His final average salary for pension calculation purposes was $361,293 annually.
State retirees are classified according to a system of "tiers." Tier I, the most generous, was closed to new employees in 1984. As a Tier I retiree, Veiga's pension is determined by several factors, including his credited years of service and the average of his three highest salary years.
He also receives a cost-of-living adjustment ranging from 2.5 to 6 percent.
Pension benefits have been reduced as each new retirement tier was added. Under Tier II, retirees' benefits were based on a smaller percentage of their annual salary. Tier IIA, which began in 1997, required retirees to contribute to their retirements. With Tier III, which began in 2011, the retirement age was increased.
The Tier I average annual pension benefit in 2012 was $36,404; for Tier II, $23,106; and for Tier IIA, $11,556. Data for Tier III retirees is not yet available.
According to The Day's analysis, Veiga was one of 492 Tier I retires who, because of their high salaries, collected six-figure pensions in 2012. That number represents just 1.6 percent of the 30,472 Tier I retirees.
Although the Connecticut State Employees' Retirement System is funded at only 42 percent, Veiga said that will change when the economy rebounds in the next five to 10 years. People wouldn't even be discussing whether retirees' benefits were too rich if the economy hadn't gone downhill or if the state had managed its pensions better, he said.
"Every chance they get, where it is not obvious, they use the money right now and don't fund it all," Veiga said. "Can you imagine having money in a 401(k) somewhere and them saying, 'We will, for the next five years, not give you any interest or earnings, we are not going to do our part?' That is basically what they did."
From fiscal years 1996 through 2013, the state rarely contributed the annual amount recommended by actuaries. If it had done so, there would be $2 billion more in the State Employees' Retirement System fund, according to the State Comptroller's Office.
In the 2013 fiscal year, the state did meet its annual required contribution amount - $1 billion - for the Connecticut State Employees' Retirement System. The Malloy administration said it also met the annual required contribution amount in the 2012 fiscal year. The comptroller's office reported that the state contributed $118 million less that year than actuaries had recommended.
Your tax dollars just beginning to pay for bought votes from decades past. And it’s only going to get worse.
Would you object if he had saved money in a tax-free retirement account, and bought an annuity paying the same amount? Government employees are required to “invest” in the government pension plans — why should anyone object if these plans eventually pay out (as promised)?
If he had saved money in a tax-free retirement account, he would be retiring on HIS MONEY. Now he is retiring on money to be paid by the taxpayers.
paid in $222K and gets $276K a year??
He won the lottery?
Who should pay for the underfunding for all of the public employee retirement plans?
We “object”, because in order to keep the promises to which you refer, someone has to come up with the money now. Who should pay? Is there a limit to what any one taxpayer/worker should pay? How are the school systems, states, and municipalities going to cover the obligations of these plans?
They all no doubt donate part of the stolen loot back to Democrats and vote for them too
he paid in $222k and gets $267K a year, do you really think this is an investment paying out? No, this is robbing the taxpayers.
Pretty impressive number.
California is similar, only the ranks are much larger of course.
The man paid 222K into the system over 37 years. Even taking the absurd position that he contributed evenly across the 37 years (as opposed to less early on and more later in his career) with an 11% return is 2.8 million. His pension is projected to pay out 4 million. This is the government rewarding its hacks at the private sector’s expense.
The pension plans are untenable... I object to the public sector union/ elected official unholy alliance that created this mess in the first place.
He left a good job to teach..and he ended up in a great financial position.
I DO think the States, and Fed's are whacked to give these type retirements though...But hey...they think money is an endless stream!! What do you expect?
Interesting to compare to SocSec where I paid in 240k and get 28k/yr LOL.
And when the pensions system goes broke, they will come back to the citizens for more money as if they were a bottomless resource.
You know, there was (was) a time when public employees got into a “devil’s bargain” - you wouldn’t make as much as you could in the private sector, but if you kept your nose clean you would always have a job, move up to a level somewhat suitable to your ability, and retire worry-free.
“Interesting to compare to SocSec where I paid in 240k”
...are you counting what your employer paid, they they might have otherwise paid you?
Yes, 120k from me, matched by employer.
Most teachers I know have contributed over 200 gran of their own bucks into their pension plan by the time they retire; they usually retire around $4000/month. When the bottom falls out how much of any of it will matter?
Government employees who retire with pensions are benefiting from a change in their pension plans back in the 90s that greatly increased the value of these plans because the stock market at the time had made lots of money, out pacing most pension plans that paid around 50% of final pay.
Once these plans started paying out larger amounts, unions started asking for small increases to these amounts for every give in their employment contracts. Because the payout was over time, and government negotiators were often negotiating their own pensions, it was an easy give.
There used to be a book called “the millionaire next door.”
Now that millionaire is probably a public school teacher.
There was recently a big stink in Vegas over municipal pension bumping, but I can't remember if it was police or fire.
If you compare 200K with a 4K/mth payout with SocSec. You need to consider that that SS now requires you are 66 years old to get the full benefit. And that it pays some number in the 30k range for someone who has paid in 6% for their whole life. If that’s 40 years and the final salary is $100k you likely paid $130k and you get $2500 a month, starting at 66.
“His final average salary for pension calculation purposes was $361,293 annually.”
I don’t begrudge people their success, unless they are hypocrites. The media do not go after the salaries of academics, because they are a sacred cow. They have no problem, however, characterizing physicians as greedy and overpaid. That said, that salary is much more than the average physician’s salary (yes, I know some make significantly more, but the average is significantly less). I just find it hypocritical.
One teacher I know gets $4400/month, taught 36 years, but 8 years was as Marine Captain that he bought in.
People are scared to retire nowadays, work till they die I guess; ain't so bad though.
The problem comes when the government relies on future income to fully fund pensions instead of paygo.
I am in Illinois. Its much different here. Your wife would neither get nor pay into SS. That works well for Illinois teachers because their pensions pay so much higher than SS. Average Illinois teacher makes $100K at retirement. That’s 100K. They can retire at 55 and make 75% of last three years pay plus medical. That income is state tax free as well. They also get a 401b, sometimes with a match. Each year of retirement they get a 3% raise. Its crushing Illinois. Their are more retirees than teachers now. And the retirees make far far more than the teachers do.
In my school district a teacher can tell the district that she is retiring in three years. They give her a 25% raise that year. And then she gets no other raise. But that puts here at an affective 100% retirement. Stealing? I think so.
Buy the way our school district gets hundreds of resumes per job opening. Most go to friends of the school’s staff.