This is probably of interest to no one, but I am procrastinating. So you get the ugly details:
When I started, I had the irrevocable option to join the state’s defined benefit plan or a defined contribution plan. So the school would contribute a stated % of my salary to either the DB plan or the DC plan, (and I would contribute a different stated %). I started without tenure, so I thought that (given the probability I would be leaving within a few years) it made more sense to accrue benefits in the DC plan. That all sounds normal, although I think it’s a little weird to exclude people from the federal SS program based only on their participation in a DC plan - it’s semi-privatizing SS!
But that’s not where it ends. It turns out that, unsurprisingly, the state’s DB plan is woefully underfunded. So every month what actually happens is that the school contributes the stated % of my salary in two pieces:
part of it goes to my DC plan/accont
the remainder goes to the underfunded DB plan, which I will never benefit from
This generated some controversy a few years ago when the school increased the amount/proportion of “DC” contributions they were sending to the underfunded DB plan. It was very shady - they would tell an incoming employee, “Hey, here’s what we contribute to your retirement account” and have some trivial footnote that’s like, “Of course, you only get half of that amount because the other half is sent to the DB plan. But it’s in your name!”. And it’s doubly shady when that diversion (which you probably didn’t know about in the first place) increases over time. There was a lawsuit over this and I ended up getting about a thousand bucks last year, but that’s a very small percentage of the diverted-to-DB funds I’ve “contributed”.
The most rage-inducing event was when we got an email saying something like this:
This email is to inform you that, starting in June, the school’s contribution to the state DB plan was increase from 3.5% to 4%. As a result, the school’s contribution to your DC plan will decrease from 9% to 8.5% (or whatever, the point being the school was lowering the amount actually contributed to my account by 0.5% because they had to increase the funding to the DB). Although this may sound negative, the school is also increasing your mandatory DC contribution from 5% to 5.5% (or whatever). As a result, you should not be concerned about this change, as your total DC contribution will remain unchanged.
Just absolutely infuriating. I am not generally a punitive person, but I kind of hope whoever came up with that messaging got fired.
Not long ago I had the opportunity to pursue a position at what I imagine is the same institution. This was really tempting because I have family in the area and the department is appealing. One of the hang ups I had was trying to parse the retirement options there, just infuriating. Especially as someone who is already long vested in SS but still plans to work for a couple decades. They apparently claw back your SS benefits somehow if you retire under the state pension although the details on that are a little obscure. I got too aggravated trying to figure everything out and took my name out of the pool early lol.
Yes, at some point I’m going to have to understand how this works, as I accrued a lot of SS benefits prior to moving to Ohio. One of the now-retired guys here used to spend hours talking to me about exactly how the clawback formula worked and whether or not you could game the system. I thought he was a lunatic for investing that much time into something that I didn’t understand at all. But I’m certain to become exactly that same lunatic 10 years or so from now.
Hmm, I feel like there may be a miscommunication here because this makes it sound much worse than it is. How it works, using made up numbers:
School says, “We will pay you $100,000 per year. You will have a DC retirement plan. We will contribute 9% of your salary to that plan, you will contribute an additional 4% to that plan, for a total of 13%. [Super-small text with the DB diversion I described above.]”
What I would expect to happen: I contribute $4,000 (4%) of my salary, school contributes $9,000 (9%) of my salary. So a total of $13,000 is deposited in my self-directed DC plan.
What actually happens: I contribute $4,000. The school’s $9,000 contribution is split so that $6,000 actually goes to my account and the remaining $3,000 is sent to the state DB fund. So net, my account goes up by $10,000. None of my actual contribution (the 4%) goes to the state fund.
I want to be clear that absolutely no one should be feeling sorry for my job situation. Even though I often feel a lot of stress and job irritation, being a tenured professor is comparable to being a federal judge in terms of job security and flexibility. People like me complain a lot about our jobs at conferences, but that’s because if we tried to complain about our job to normal people we’d get rightly mocked for how cushy they are.
It’s like major league baseball players complaining that room service at the Ritz closes at 11pm and why can’t they stay at the St. Regis?
Even so its hard to read this as anything other than subsidy from DC plan members to DB members. Is there any upside to you? Like if the DB plan has 1 in a 1000 luck and fund returns 20% for 10 years and all the boomers die at 80, do you get any of those gains?
Well, on the other hand you’re subsidizing people that are in an even better position. Fuck that. They’re not giving part of your DC plan to the homeless, they’re giving it to the older DB people that surprise surprise kicked the can down the road in their own DB plan and now want someone else to underwrite it.
I had to make a pretty similar choice but it was pretty easy for me to pick DC since I was starting at age 50. I put in 7%. They match 8%. As far as I know they could be paying more on top of that 8% into the DB plan “in my name”. But they never told me about it, which is clearly the right play. Also they can’t ever lower their match (I think).
I don’t know of any upside to me. It’s a state law that requires these diversions to the state’s DB plan, so I’d bet infinity money that the state would just absorb any gains.
Yes and no. This is a state teachers fund, for teachers at all levels. So it’s not just me funding the DB plans of my older colleagues, it’s me funding the DB plans of public school teachers, who have average salaries that are probably lower than mine.
But goddamit, I had already made peace with this and now you guys are getting me all riled up again.
We do have the ability to contribute to supplemental plans (403b and 457b), but I have not done this. I haven’t really looked into it, but I already feel like I’m a little over-saved in my retirement accounts and would be reluctant to put more on those accounts. Maybe I’ll feel differently when my kids’ college expenses have been taken care of.
I apologize that this has turned into a “spidercrab finances” thread.
For the record I re-flinched and bought back in this morning to everything except Cinemark. Yes I know I am doing everything all wrong that you’re not supposed to do.
I decided to take the 2-day haircut and stick to the original plan of holding until they recover to somewhere between pre-covid levels and all time high.