Paying for Retirement – Teachers and Other Folk

There is a gentleman named Mike Laird who often comments on teacher pension issues. He got me thinking about compensation.

His basic argument is that when the majority of teachers in Illinois pay nothing or under 2% of the 9.4% required contribution to the Teachers Retirement System, that should just be considered a different form of compensation.

Last night it came to me how different it is.

My wife is in Social Security. She had to pay 6.2% until this year, when Congressional Republicans and Democrats cut that to 4.2%. Of course, with the state income tax having been increased by two percentage points, the same amount disappears to a government black hole.

My wife has something called a pension, but it is not a defined benefit plan. Her employer just puts some small percentage of her salary in a very low-paying interest bearing account.

She did, however, have a 401(k) plan in which the employer provided a match to some single digit percentage of her salary. All of that will get taxed when withdrawn by the Federal government, although, if current law continues, it will not be subject to Illinois income tax.  It was not taxed on the way in.

Taken from the Teachers Retirement System web site.

When her employer offered the opportunity for her to contribute to a Roth IRA-type of retirement plan, instead of a 401(k), I convinced her to switch.

For the Roth she has to pay Federal and state taxes on the way into the account.

The reward is that she won’t have to pay Federal taxes on the way out.  And, of course, the state won’t levy an income tax either.

 

Teachers do not pay into or get Social Security for their school jobs.

9.4% of their salaries go to the Teachers Retirement System.

For the minority who pay all that 9.4% themselves, the money going in is taxable.

For the majority of teachers who pay nothing themselves or very little toward that 9.4%, both the Federal and state income taxes are avoided on the way in.

Teacher pensions are subject to Federal taxes when withdrawn, but, as with all other retirement income, not subject to the Illinois state income tax.

So, is it fair for teachers not to have pay taxes on money that pays for their pension contribution?

That’s what the comment section is for.


Comments

Paying for Retirement – Teachers and Other Folk — 22 Comments

  1. The statement on the taxability of contributions is not accurate. Payment by the employer does not change the employee’s Federal or Illinois income taxation in any way.

    When the 9.4% is handled as a payroll deduction, the amount is pretax for Federal and Illinois income taxes, but not payroll taxes. In this regard at least, TRS and IMRF contributions are taxed the same way as traditional 401k salary deferrals.

    When benefits are paid, all benefits are fully taxable for Federal income taxes like a traditional 401k, but not Illinois taxes currently like a traditional 401k.

    Before YMTK attacks me for comparing the two, I was not the one who brought them up. Please actually read the entire article and what I wrote before attacking me or my comment.

  2. Yah, taxes are interesting, but, more interesting is the 9.4%.

    I keep hearing educators and union folks and elected officials and reporters/writers crowing that the teachers pay the 9.4% toward their pension. It’s a nice attempt at pacifying the public.

    They omit the fact that they negotiate for the district/board to pay that amount. Freebies are Fun rides again at the Taxpayers Expense.

    They get their regular raises and benefits and then extra bucks are tossed into the package to cover the TRS and voila – the teachers aren’t truly paying the 9.4%. Nice gig if you can get it.

    Why do the boards and districts give in? …..either because they want to (some boards are loaded with Education Industry biased folks) or because if they don’t bend over and give the union/teachers what they want – a strike is called.

    Word dances in a contract or a press release don’t change the facts.

    Therefore, in school, our children learn how to wiggle around the truth from the very people who preach about not wiggling.

    Why are we surprised that our kids frequently lie about where they are going, who they are going with, etc. – or oops, omit some involved truth? “Don’t do what I do, do what I tell you to do.” isn’t exactly something to be proud of.

  3. FDA/Aileen, I find your previous comment insulting, given the actions of you and your political cohorts. Your group are the kings and queens of omitting some involved truth.

  4. FDA – Your misleading “extra bucks” comment is a recurring theme. You want to pretend that in a district where the pension is contracted as fully paid that a CPI raise of say 2% actually makes for a raise of 11.4%. It doesn’t. 2% is actually 2%. Imagine that. All those math lessons we had were right. When a number is increased by 2.0%, it is 2.0% higher. Absolutely mind blowing isn’t it?

    Why do you continue to make intentionally misleading statements?

    Unless the proportion of employer paid pension changes, an X% increase (if any) is just that, not X% + 9.4%. Should the employer paid portion change the X% should be stated as a change in total cost as has been done in D158.

    You and YMTK want to claim that I along with others are smearing the truth or spinning or what have you. Yet when I have asked you to point out any inaccuracy in my math, you have been silent. However, you continue to repeat the same false and misleading information almost verbatim. I would copy and paste my response if the search function picked up comments. Maybe I should just save a copy of my canned response to paste everytime you make this misleading statement.

  5. “Therefore, in school, our children learn how to wiggle around the truth from the very people who preach about not wiggling.

    Why are we surprised that our kids frequently lie about where they are going, who they are going with, etc. – or oops, omit some involved truth? “Don’t do what I do, do what I tell you to do.” isn’t exactly something to be proud of.”

    Yep, all the teachers fault. Don’t blame parents for teaching their children and definitely don’t look at the facts that children have been lying and doing the things you point out for as long as children have been born. In my opinion, which doesn’t mean much to many people on here, it’s unfair to bring up that kids lie as if it’s only because of the teachers. It’s probably a more fair assessment to say that people lie, stretch the truth, have different perceptions of the truth. Your truth and my truth are not always the same as a matter of fact “For Dee and Alan”.

  6. Let’s take a snapshot in time.

    Let’s look at the point in time when a particular Board agreed to pay all or part of the employees pension contribution.

    That would happen during collective bargaining between the union and the School Board/Administration.

    From the moment that change goes into effect, the employee’s take-home pay increases without increasing base salary.

    Because the employee is no longer paying all or part of their so-called employee contribution.

    This is simply another negotiating tactic for the IEA union to increase employee compensation.

    Once again, that board paid pension contribution would be listed in the collective bargaining agreement. Look at the district and union press releases and the newspaper articles at the time this perk was negotiated. Was it clearly spelled out to the public that this was a board concession to the union? Was it clear to the average taxpayer that the board paying a portion of the employees pension contribution, actually increases the employees take home pay without increasing their base salary?

    Also, IEA commercials advertise the employee does not pay into social security and has contributed all these years to their pension.

    That’s misleading. In some districts the employee is not paying the employee contribution to their pension. Rather, the Board/District/taxpayer is paying the employee contribution. The board is paying the employee contribution. The employee is not paying the employee contribution.

  7. The current radio ad being run by the teachers union has one of the teachers saying they took less all along so that they could retire with a small pension.

    If I could work 9 1/2 months a year, have all the funky federal holidays off, two weeks at Christams, and a week for spring break every year, and get paid what some of the teachers listed below do, I’d say sign me up. That’s even without the huge pensions they get for life based on these inflated salaries.

    Let’s do what most of the fortune 500 companies did. Take an age plus years of service, and let those with a certain number keep their inflated pension. Others get a one time lump sum contribution to a 401K, and some help with insurance if they work to age 55.

    With the types of salaries listed below, these folks should be saving for their own retirement! They’re getting enough of my money!

    2010 Teacher Details

    Name: Speaker, Kathleen
    Salary: $149,203
    Position: High School Teacher
    Full/Part Time: Fulltime
    Percent Time Employed: 100%
    Assignment: Information Processing/Admin Assistant/Secretary
    Years Teaching: 28
    Degree: Master’s
    School Name: Crystal Lake Central High School
    District Name: CHSD 155

    Name: Ahsmann, Charles
    Salary: $147,785
    Position: High School Teacher
    Full/Part Time: Fulltime
    Percent Time Employed: 100%
    Assignment: Physics (Grades 9-12 Only)
    Years Teaching: 26
    Degree: Master’s
    School Name: Crystal Lake South High School
    District Name: CHSD 155

    Name: Kay, Bruce
    Salary: $161,030
    Position: High School Teacher
    Full/Part Time: Fulltime
    Percent Time Employed: 100%
    Assignment: Physical Education
    Years Teaching: 32
    Degree: Master’s
    School Name: Cary-Grove Community High School
    District Name: CHSD 155

  8. I do not care what degree the teachers have… they are making darn good money for the amount of time they actually work compared to the normal working taxpayer. The salaries for the three teachers shown above are ridiculous.

    What makes me madder is that I, like many other seniors, pay the outrageous school district taxes and do not even have kids in schools or MCC.

    It’s no wonder people chose to be teachers. I hope that at some time in the near future this gravy train is going to derail!

  9. Okay – so let’s see if this makes things clearer for those who do not like the simple way I word things. The following info ties to the Illinois State Board of Education, the ieanea.org/region/47, whatever applicable districts’ sites are involved, and even a quote I received from someone in Springfield who, given his position there, should know. He’s well known. If he can understand it, certainly those who don’t like the way I say it would get the point he is making.

    QUOTE: “If teachers are not paying 9.4% it’s because they bargained for that with their local school boards. I believe that varies from district to district.”

    That sounds pretty clear to me! And if the teachers aren’t paying it, guess who is? Us, the taxpayers.

    ————————————

    http://www.isbe.net/research/pdfs/teacher_salary_10-11.pdf

    ILLINOIS TEACHER SALARY STUDY 2010-2011
    ILLINOIS STATE BOARD OF EDUCATION
    Data Analysis and Progress Reporting Division
    April 2011
    Jesse H. Ruiz, Chair Christopher A. Koch, Ed.D.

    Page 125 or 126 – see wording on form Appendix D, 2010-2011 Illinois Teacher Salary Study Data Collection Form

    PART D – TEACHER SALARIES AND BOARD-PAID OR TAX-SHELTERED RETIREMENT CONTRIBUTION

    ——————————————–

    Page 122 of 126 APPENDIX C Details on Column Headings

    Selected column headings for tables in Section II are described below.

    5. TRS %. This column provides the percentage of the salary that is considered board paid into the Teachers’ Retirement System.

    ————————————————-

    Page 10 of 126

    Table 10. Mean Percentage of Teacher Retirement that is Board Paid, by District Type and Size, and by Percentage os Districts that Consider
    Teacher Retirement to be Board Paid (NOTE: if os is supposed to be of – complain to the ISBE)

    ————————————————————–

    There’s also a chart in this report that shows the TRS % by district..

    ———————————–

    Then there are the individual contracts on each individual site ( or which are SUPPOSED to be on each district’s site but may not be or can be hard to find or only schedules are shown and not the wording). Wording on the TRS contribution can vary considerably.

    NOTE: There are articles by Larry Snow which I believe Cal has referenced on his site with regard to many, many districts.

    ———————————————-

    Then there’s http://www.ieanea.org/region/47/assets/retirement%20contributions.pdf

    “RETIREMENT CONTRIBUTIONS
    Click on one of these contracts to view the language.”

    This is 29 computer pages and shows contract language TRS examples – some are quite fascinating. Taxpayers will probably NOT be amused.

  10. What is the fair wage for an educator? Should they be compensated for years of experience or performance and education level? What type of retirement should they have? If performance is a criteria, then how is that judged? Let’s put our energy into working on the solution.

  11. Laird keeps writing nonsense or you can’t possibly understand what his sentence means, for example;

    “When the 9.4% is handled as a payroll deduction, the amount is pretax for Federal and Illinois income taxes, but not payroll taxes.”

    Laird’s “pretax” about “Illinois income taxes” is supposed to make people believe teachers will pay a future Illinois income tax when teachers get their TRS pension. It’s a lie which he knows because teachers don’t pay any Illinois income taxes on their TRS. TRS never considers the teacher pensions as 401K money that belongs to the teachers.

    Maybe Cal will point out another lie from Laird, when he writes a comment.

    If a teacher dies at age 50, for example, the teacher’s family doesn’t get a huge 401K account because it was a teacher’s 401K account that would pay for ALL the teacher’s pension.

  12. I agree with Diana. What is an educator worth to those of you who are always after them? They educate our child, the future doctors, lawyers, receptionists, machinists, chemists, scientists, etc., etc., etc., for our world. Are they worth minimum wage to you? Or should we just not have our children learn and be competitive in the world? Who should have to pay for education? Those who have children, or just those who benefit from the education of children (which would be the entire population btw since we all need doctors, etc. through our lives and they are educated by, you guessed it, teachers)?

    There’s a whole lot of complaining going on, but no alternatives being offered.

    And while we’re at it, what are politicians worth? What criteria should we use to judge them?

  13. YMTK – Two whole sentences after the one you quoted (I know that is a lot for you), I indicated that just like 401k’s and every other qualified plan type, TRS benefits are not taxed to Illinois. I think most people read all of a comment or article and caught this. As I requested before, try to read all the way though all of the info presented.

    The main point of Mr. Skinner’s article was taxation of contributions. I pointed out the similarities IN TAXATION. Since Mr. Skinner brought up the comparison with respect to TAXES, I felt it was pretty fair to present the correct information in that context. He misstated that withheld contributions (vs employer contributions) were after tax. I explained that they are not.

    As far as pointing out lies or nonsense, I hope that you realize that most people actually read all of what others write. If you want to be dishonest about what I am writing, you might want to try doing it where the original isn’t as close as scrolling up half a screen.

  14. I’ve seen some terrific teachers, some average teachers and some lousy teachers. Yet the praise that they are all the best and the brightest keeps coming from the Industry.

    No one will convince me they all deserve the same salary and benefits.

    The fact that the Education Industry protects all of the teachers – even the ones who should not be in a classroom tells me a great deal about how much they (as a group) truly care about our kids and our country’s future.

    Let’s figure out what to do about that…….

    A district can also have a non-tenured teacher they know (half way through the year) they are not going to retain yet they’ll let that teacher finish out the year and the kids will lose out on a good education being with that teacher when he or she should be out of the classroom in a New York minute – and immediately replaced. That learning time can never be replaced. But, you can’t do that – they still have to be paid so you’d be paying for two teachers where only one is needed. It’s almost impossible to “fire” a teacher unless he or she does something that makes really bad front page news. And the process doesn’t end there.

    Let’s figure out what to do about that.

    Even though it’s our children’s futures, the taxpayers’ dollars, and the country’s future, there aren’t a lot of teachers telling about what is wrong in their district. Administration wouldn’t like that. I guess you’d have to have a real passion for children to speak up and face the chance of being told that the administration isn’t happy with you. It’s somehow supposedt to be “okay” to strike at negotiation time about how much more you want the taxpayers’ to cough up but not important to strike if the district is really blowing things.

    Let’s figure out what to do about that.

    The unions seem thrilled to share in the good economic times but pretty much refuse to share in the pain of the bad times. One retired teacher told me “We can never pay our teachers enough.”

    Let’s figure out what to do about that concept.

  15. There are two key pieces of legislation being worked on in Springfield affecting IL K-12 education.

    1. Education Reform. SB 7. It’s passed the Senate and House and sitting on Quinn’s desk. The IASB’s analysis of SB 7 is here.
    http://www.iasb.com/govrel/sb7analysis.pdf
    The CTU is lobbying for a trailer bill that affects Chicago schools only.

    2. Pension Reform. SB 512. Senate Committee Hearings are scheduled next week. The IASA’s analysis for SB 512 is here.
    http://library.constantcontact.com/download/get/file/1103777180704-120/Capitol+Watch+051611.pdf

    The House has a pension reform bill HB 149, but SB 512 seems to be getting all the attention lately.

    The Mercer Report, commissioned by the Commission on Government Forecasting and Accountability (COGFA) which is a commission in the ILGA, gives more insight on IL public sector pension woes.
    http://www.ilga.gov/commission/cgfa2006/Upload/2011-MAY-17MercerRetireeHealthcareContributions.pdf

    SB 512 is being sponsored by Madigan and Cullerton and opposed by the teacher unions.

  16. Here’s what’s been happening in the union’s opposition of SB 512.

    Obviously this does not happen in every teacher lounge.

    Teacher hands out a phone # to other teachers. This phone # was set up by the unions.

    Teachers call the number. They can legally do this on their break in the teacher lounge. Not saying teachers don’t deserve a personal break, I am just describing what’s happening.

    Enter home zip code at the prompt and you are automatically linked to your General Assembly representatives’ voice mail.

    The State Senator and Rep receives this message.

    “Vote no on SB512. Do not vote for any bill that diminishes the pension benefits of current or retired teachers. It is unfair and unconstitutional and would break a long-standing promise to teachers.”

    State Senators and Reps have been flooded with these calls by noon each day.

    Also. The IEA union gives postcards to teachers to fill out. The IEA then collects the postcards, gives them to their lobbyists, who give them to their legislators.

    Public sector employee unions in IL are opposing SB 512. They have set up this website to do so.
    http://www.weareoneillinois.org

    Americans for Prosperity and the Civic Committee of the Commercial Club of Chicago are supporting SB 512. They have set up this site to do so.
    http://fixillinoispensionsnow.com

    The Civic Committee of the Commercial Club of Chicago has another website advocating for budget reform at the State of IL.
    http://www.illinoisisbroke.com

    The Illinois Policy Institute has a section of their website devoted to their research on public sector pensions.
    http://illinoispolicy.org/search/index.asp?searchfield=Pension+Reform&Submit=Submit

  17. The IEA teacher union website prompts members to “Email Your Legisators”.

    Clicking on the link, members fill out a form, and the following message is emailed to legislators.

    “I am an education employee and a constituent.

    I am writing to ask you to please reject any changes in benefits to current or retired employees.

    I also want to thank you for passing Senate Bill 7, the education reform package.

    These are both incredibly important issues to educators and to the future of public education in Illinois.”

  18. There are two key pieces of legislation being worked on in Springfield affecting IL K-12 education.

    1. Education Reform. SB 7. It’s passed the Senate and House and sitting on Quinn’s desk. The IASB’s analysis of SB 7 is here.
    http://www.iasb.com/govrel/sb7analysis.pdf
    The CTU is lobbying for a trailer bill that affects Chicago schools only.

    2. Pension Reform. SB 512. Senate Committee Hearings are scheduled next week. The IASA’s analysis for SB 512 is here.
    http://library.constantcontact.com/download/get/file/1103777180704-120/Capitol+Watch+051611.pdf

    The House has a pension reform bill HB 149, but SB 512 seems to be getting all the attention lately.

  19. Right now there is pension reform is being proposed in the Illinois General Assembly. A decision is due by the end of May when the legislature adjourns. You can type “SB 512″ in the “Search by Number” field at http://www.ilga.gov to learn more.

    Another source of information is the Illinois Association of School Administrators (IASA) analysis of SB 512 which can be found here.
    http://library.constantcontact.com/download/get/file/1103777180704-120/Capitol+Watch+051611.pdf

    You can get the union spin on pension reform at http://www.ieanea.org and http://www.ift-aft.org.

    SB 512 is being sponsored by Madigan and Cullerton and opposed by the teacher unions.

    The Mercer Report, commissioned by the Commission on Government Forecasting and Accountability (COGFA) which is a commission in the ILGA, gives more insight on IL public sector pension woes.
    http://www.ilga.gov/commission/cgfa2006/Upload/2011-MAY-17MercerRetireeHealthcareContributions.pdf

  20. I see a lot of invective here on the issue of local school boards paying the TRS contribution. My district, CHSD218 in Cook County, pays none of my contribution. As this is a local bargaining issue, it is on the taxpayer to attend school board meetings and make it clear that they do not want their money paying that section. If you’ve not gotten involved in the district, then there isn’t much to complain about.

    For the record, I make a decent salary, generally working from 7am or earlier until 5pm or later. I also work on curriculum throughout the summer as well. In addition to the 9.4% I contribute to TRS, I contribute an additional 7% to my annuity and 9% to my credit union. Were it completely up to me, I would take control of my own pension and save it myself- especially since the state would have been bankrupt years ago had they not been putting their hands in the pension cookie jar. If the state would let me transfer all my contributions directly to an annuity with no tax penalty, I would do it in a heart beat.

  21. The reality is, many who have been in the pension systems for a long time at high pay rates do get great pensions. Many abuses exist, that should be weeded out.

    But not everyone is a 9-month employee making $150K! Those are examples on the far end of the scale. A small fraction of those affected are teachers. At the college where I work (not teach) we have to pay our contribution. THE STATE HAS FAILED to keep up its end of the bargain, illegally, KNOWING FULL WELL this would be the result. How would you like it if your employer failed to make your Social Security or 401K contributions for 15 years, then was able to make a law absolving them? That’s what is going on here! If an employer fails to make Social Security payments they go to jail. In public sector, they get re-elected. Most people don’t realize that many of us who worked in private sector before public get a large chunk of our Social Security denied to us, even if we collect just a partial pension – just because.

    None of this is fairly distributed. They’ve omitted judges in the hopes of coercing them to OK an unconstitutional law. They’re not addressing everyone’s pensions, but rather saddling negative public sentiment rooted in the bad economy to go after a group that so many love to hate – teachers. And dragging down many, many others in the process.

    NONE of what they are doing is justifiable, fair, legal or moral. They want to balance the budget they’ve been pilfering for decaddes on the backs of what they see as the easiest target. SHAME ON ILLINOIS!! BOO!

  22. Two of the three teachers whose salaries you post are involved as coaches in at least one sport, and at least one is a department chair. The pay is all rolled into that one number. These are hard-working people. The way I see it, most of the public (unless they volunteer in schools) has very little idea of what teaching actually involves. It’s MUCH harder and more demanding than you could ever imagine. I work for CLSD #47. We’ve ALWAYS paid our 9.4% out of the salaries you see posted on public websites. The district has never to my knowledge paid any portion of our pension payment. My paycheck shows 9.4% of my salary going to the pension system. The AVERAGE teacher pension in Illinois is around $45,000.

    If you think we’re having trouble attracting quality educators in Illinois, keep heading down the teacher-bashing path, cutting salaries, adding children to the classroom, reducing benefits…and see where we are 10 years from now.

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