"Excess Earnings" of DB Plans.

[joel]

It takes about $600,000 to provide a lifetime pension of $50,000 to a 55yr old. In a contributory plan the retiree's account balance may approximate $100,000 or 1/6 of the cost. (Most DB Plans in the public sector require the employee to contribute at a rate of about 5% of pay while the Plan guarantees interest of about 5-6% per yr.) At first glance one would say "what a generous sponsor"!!. After, however, adding onto the individual's account balance the true investment earnings that were never credited to the account the retiree has in reality contributed about half the cost of his or her pension not one sixth as the Plan Administrator and the Union leaders would have the participant and the taxpayer believe. Such "recordkeeping" substantially reduces one's death benefit prior to retirement as well as the amount eligible for rollover should one leave employment without a vested benefit.

[This message has been edited by joel (edited 12-14-98).]