Philadelphia Pensions Incredibly High, Causing Financial Issues for City

Due to a series of steep pension plans, Philadelphia is currently $5.9 billion short of what it needs for pensions this year. The shortage comes from a series of previous legislation that guarantee private sector workers up to 100% of their highest salary in pensions.

The Inquirer has more on the topic:

In fact, taxpayers continue to send each more than $100,0000 a year for their former service as mayor, district attorney, and police commissioner, respectively.

The trio of retirees are among 33 former city employees, including elected officials, who are paid more than $100,000 annually, despite no longer coming to work. Johnson tops the list with an annual pension of $152,439. Second is recently retired Mayor Michael Nutter at $141,906.

The pensions stand as a reminder of the roots of Philadelphia’s pension crisis – an arguably overly generous benefit formula combined with underfunding of the system along the way. Exacerbating the problem is the fact that there are now more retirees collecting pensions than active employees contributing to the fund. And those retirees are living longer than anticipated.

The end result is a pension funding crisis. The city is $5.9 billion short of its $11 billion pension liabilities.

[…]

Diane Oakley, of the National Institute on Retirement Security, said the public-pension levels are more understandable when the whole compensation package is taken into account. Public-sector employees generally receive lower salaries for similar jobs in the private sector, she said.

“They’ve made this deal that the benefits are more important to us than salary,” Oakley said. The pensions, then, are a draw to get people to work for the government.

The median private-pension benefit of individuals age 65 and older was $9,227 a year in 2014, according to the Pension Rights Center, a nonprofit advocacy group based in Washington. That same year, the median state- and local-government pension benefit was $14,158.

[…]

Take last year. Nearly 28,000 employees contributed $58.7 million to the pension fund, while the city paid in $577.2 million. The fund paid out $719.5 million to the 37,945 retirees and beneficiaries. The city’s expense included $1.7 million in the controversial DROP retirement benefit.

An additional cost to the fund last year was the $62 million in pension bonuses doled out as result of legislation that was sponsored by Mayor Kenney when he was a councilman.

Those payments, plus a bad investment year, contributed to millions lost in asset value, dropping the pension system’s funding status to 45 percent.

City officials are currently speaking with union representatives to see if a solution can be found.

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