Before the reforms, public-safety workers could retire at age 50 and receive a pension credit of 3% of their final salary for every year they worked. That means a 50-year-old firefighter who earned $250,000 could retire with a $187,500 annual pension for life—and thereafter work a part-time job that qualifies him for Social Security.
The 2013 reforms reduced the maximum pension credit for new hires to 2.7% and required them to work until 57 to receive it. If they retire earlier, their credit is reduced. Workers are also required to contribute half of the actuarial “normal cost” of their pensions, which doesn’t include the tab for the unfunded liability caused by prior benefit increases.
Despite the 2013 reforms, governments are still drowning in pension debt, which has prompted repeated tax hikes. For every $10,000 that a state firefighter earns in compensation, the state pays $5,000 into the state pension fund. For highway patrol officers, the charge is $7,000. Private workers no doubt wished their employers chipped in 50% to 70% of their salaries to their 401(k)s.
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