By: Ronald J. York
POLICEPAY.NET

Next week, on September 5th, I will begin publishing a series of articles that deal with police and fire pension plans and the rationale for their structure. I will attempt to present the facts as fairly as I can. Therefore, every reader will probably disagree and be unhappy with me at one point or another. All I ask is that you consider the issues I raise. I am not King Solomon, just one man with an opinion.

The articles I intend to print are:

September 5 - Why Defined Contribution Pensions Are Best For Employees
September 12 - Why 100% Under-Funding Is Best For Everyone
September 19 - Why Spiking Has To Stop - Now
September 26 - What Is A Reasonable Pension
October 3 - Why Social Security Is A Loser For Public Safety
October 10 - Dealing With Retiree Health Insurance


This week I want to discuss the basic concept of all pension plans. First, pensions are not "fringe benefits." There is no such thing as a fringe benefit - at least not in employment. Pension, health insurance, social security, clothing allowance and other forms of compensation that are not included in your paycheck are not freebies. They are payroll reduction vehicles. The cost of all of these items is deducted from your paycheck. You may not see it, but the employer has already factored that into your check. Suppose you want to contribute twenty-five dollars to the United Way each pay period. Your employer does not pay it for you. He deducts it from your check and remits it to the United Way. Pensions are no different. The only number that counts is the total compensation amount.

Next, we need to understand that pensions, social security, and retiree insurance are deferred compensation, not a reward for a career of hard work. It is not a bonus or recognition for your years of loyal service. It is a business arrangement - plain and simple. It is like Wimpy's proposal in Popeye - "I will gladly pay you Tuesday for the price of a hamburger today." You work now. We will withhold part of your check and pay it to you later. Most places, school teachers work nine months of the year but they get paid for twelve months. Do you think it is because the teachers union has bought off the governor and the legislature? A teacher that makes $72,000 per year is actually being compensated $8,000 per month, but receives $6,000 per month. The teacher is paid $2,000 less per month when actually working for nine months, but receives three monthly checks when not working after the school year is over.

To grasp what I will be talking about over the next several weeks, you will need to fully understand the two concepts I have just presented:

(1) Payroll Reduction
(2) Deferred Compensation

Otherwise, you will be running up every cul de sac along the route. Believe me, there are plenty of them.