STUMP » Articles » McCabe's Pension: Round Up of Stories, Some Pension Details, and a Little Bit of Stats » 21 March 2018, 11:16

Where Stu & MP spout off about everything.

McCabe's Pension: Round Up of Stories, Some Pension Details, and a Little Bit of Stats  

by

21 March 2018, 11:16

I thought Sunday would be it for McCabe’s pension discussion, but a whole bunch of links came up in my pension news alert the last couple days, so let’s do this.

BUNCH OF NEWS LINKS

For people who just want the links, and not my commentary, I open with a whole bunch of stuff, starting out with some factual discussion of what exactly is the deal with McCabe being able to or not being able to start taking retirement benefits at age 50.

I’ll push general commentary towards the end of the list.

There’s almost definitely more out there, but that’s all I care to put in this particular list.

SOME REAL FACTS AND COMMENTARY

I linked to this on Sunday and in the list above, but let me actually excerpt it this time. This is from Jane the Actuary, who is a pension actuary, though not necessarily a federal pension actuary (…not sure that the federal pensions even have a fund for reporting, come to think of it…..)

No, Andrew McCabe Isn’t ‘Losing His Pension’

In fact, McCabe is all of 49 years old, likely 50 by the time readers see this, and what he lost out on was, as CNN much more calmly recounts, the ability to take his benefits at age 50, rather than somewhere between age 57 and age 62, and he lost his eligibility to a special top-up in benefit formula. These are, admittedly, tangible financial losses, but it is grossly misleading that various news outlets are giving the general public the impression that he has lost his pension entirely.

But the existence of these special perks, benefits that we in the private sector can barely comprehend in the year 2018, points to a fundamental disconnect between the private and public sector. Why shouldn’t someone whose benefits consist of 401(k) account accruals believe that government pensions work so differently as to punish someone arbitrarily by removing their benefits? Add to this the fact that retirement at age 50 is well-nigh incomprehensible for the average working American, except perhaps in the case of high-risk, health-sapping occupations, which surely likewise added to the impression that actual pensions, rather than generous ancillary provisions, were being lost.

…..
In addition, according to a helpful twitter exchange, the particular nature of McCabe’s pension benefits condition age-50 retirement eligibility on primary law enforcement employment, not just general federal government employment, at age 50; what’s more, being terminated “for cause” wholly eliminates eligibility for special age-50 retirement, according to 5 U.S.C. § 8412.

You can look at Elizabeth Bauer’s piece (aka Jane the Actuary) for more details.

Here is the page with the info on early retirement for FERS, the pension plan McCabe would have been under, because he started working for the feds after 1987. His minimum retirement age, given he was born in 1968, is 56 years, 8 months. Essentially, 57 years old.

ON EARLIER RETIREMENT AGES FOR SAFETY OFFICERS

Safety officers, like police and firefighters, often have retirement eligibility at much earlier ages than other public employees.

The reasoning is not that unusual: they are seen as having physically involved and dangerous jobs, and one really does not want to make them work to when they’re physically decrepit.

Fire & police also often have disability pensions, which they can take at earlier ages, and are involved in some of the worst pension fraud out there. But that is for another time.

(From what I’ve seen of mortality experience on these retirees, they do not generally have worse mortality in healthy retirement than other people… if comparisons are being made between safety officers & teachers in mortality, a lot of the difference seems to come from one being heavily male occupations, and the other being heavily female. I am still awaiting an official broad-based public pension mortality study… but again, for another time.)

Of course, older firefighters and police officers may only be in managerial roles and not in a very physically active role. This has led to pushbacks against mandatory retirement ages.

In any case, it doesn’t seem like whatever McCabe was supposed to be doing as part of his job involved much in the way of physical danger (legal danger, on the other hand….), so I assume he will be just fine continuing to work in some other job somewhere else. Especially since so many job offers are being thrown his way right now.

SOME STATS ON FEDERAL RETIREES

My primary interest in this story is that I wanted to have an idea of the age distributions of federal retirees.

I found some numbers here - an Executive Branch report on statistics from FY 2005-2014 and here – covering FY 2007-2016. I assume others exist, but these are good to start with. I want to grab two figures from the second report.

First, a triple graph — number of retirees per year, average age at retirement, and average years of service.

To note: unsurprisingly the average age at retirement is increasing… because more and more federal workers are in the FERS system (started in 1987) and not in CSRS. The FERS system has a progressively increasing minimum retirement age for eligibility. So the increase in 2.5 years in retirement age is not surprising.

That said, interestingly, the average length of service was shortening even as the average age at retirement was increasing. Hmmm.

The second figure is closer to what I’m interested in, but not the detail I really want:

I’ll add the numbers for you. Only 3.1% of the retirees in FY2007-2016 were under age 50. It’s annoying they put the cut point there, but whatever.

39% of the retirements were between ages 50 and 59. That’s a large percentage, and most of those had at least 30 years of service. I consider those retirements at fairly young ages, and it would be nice if we had more detail on the demographics behind these four graphs. It is very difficult to look at trends and comparisons here when all I see are averages, and no indication of the distribution. This is a fairly broad swath to cut.

In any case, I have something of an answer: yes, a lot of federal employees retiree at fairly young ages, but not necessarily super-low ages (like 50). I don’t have enough information to figure out how the ages spread out between 50 and 59. I assume there is a larger number closer to 59 than 50.

INTERLUDE: PEOPLE ARE INTERESTED IN STUPID THINGS





Obviously, I read both Jane the Actuary and Andrew Biggs’ posts when they come up, and read pretty much all their tweets. This is what is important to me… and one could argue it should be more important to more people.

I was extremely disappointed (and still am) that barely any national attention to Medicare, Social Security, etc. was extremely low in the 2016 elections, and I barely hear about it now. WTF. I guess it’s sexier to bitch about Trump’s tweets, whatever they happen to be.

I’m annoyed about this attention to McCabe’s pension, because that, ultimately, is not all that important to anybody other than McCabe himself. It would have been notable if we could have found out just how many people take federal retirement at age 50.

COMMENTARY THAT ANNOYS ME

Powerline’s Steven Hayward on McCabe’s Pension:

A lot of the commentary about the McCabe firing concerns the fact that being fired Friday night means his pension, supposedly with a value of something like $1.7 million (not sure if that is some kind of net-present value figure or other basis), won’t fully vest, lending verisimilitude to the idea that the firing was a politically vindictive move by Trump and Attorney General Jeff Sessions. (And keep in mind amidst the typical lousy reporting: McCabe isn’t losing all his pension benefits—he’ll still collect a pension, just a lesser amount.)

Here’s the thing: McCabe is 50 years old. (In fact, today is McCabe’s birthday, which is why he needed to last to today even though he was effectively fired by FBI director Wray several weeks ago. Happy birthday Andrew.) And he gets that kind of pension when he will undoubtedly go on to work in the private sector? But more to the point: if we moved public employees from defined-benefit pensions to defined contribution pensions (that is, 401Ks) like most everyone else in the private sector, McCabe would probably have an actual account balance in the same neighborhood that would belong to him, in which case it wouldn’t matter when or if he was fired because no one could take it away from him, and he wouldn’t have had to serve out the clock to his 50th birthday or 20-year mark. And since 401K plans are largely transferrable, he could continue building it up at his next position in the private sector, or with another government agency.

It would be the height of irony if one unintended effect of the McCabe firing is adding some force behind efforts to reform public sector pensions at all levels.

Annoyance #1: dear lord, Steven, do you know how to link to sources? There were no links to anything in that post.

Annoyance #2: No, McCabe didn’t lose his pension [as noted many times above]. McCabe lost his ability to take an early early early retirement with some additional perks. And if he had a DC plan, almost definitely he couldn’t be taking retirement income then, either.

Annoyance #3: The push to reform won’t be “Boo hoo, this government employee can’t retire at age 50”, it will be “WTF, an FBI office jockey can retire at age 50? That’s insane!”…but that doesn’t seem to be what the hyperventilating is over.

Annoyance #4: Seriously, there is already a DC plan for federal workers — the Thrift Savings Plan is part of FERS, and I assume McCabe has whatever accumulated value he has in that. It doesn’t disappear just because he was fired, any more than your employer can yank your 401(k) vested amount away if they fire you.

That said, I do think it would be interesting if some federal employee benefit reform comes out of this. It just may not transpire the way people think. I have seen some rumbling over something that I believe was part of Trump’s agenda even before this:

Trump’s Federal Workforce Goals: Streamline Firing, Automate Jobs

The Trump administration on Tuesday [March 20] detailed its specific goals for overhauling the federal civil service system, including efforts to streamline the firing of poor performers and to speed up the hiring process for senior executives.
…..
“Both employees and managers agree that the performance management system fails to reward the best and address the worst employees,” the administration wrote in the management agenda. “With annual civilian personnel costs of almost $300 billion, the government should always be seeking to ensure its workforce has the right skills, is the right size, and operates with the responsiveness and flexibility needed to best accomplish its various missions.”

By March 2019, the administration is requiring all agencies to remove all steps in the disciplinary process not formally written in law. That would result in all agencies maintaining a consistent approach to punishment, OMB said. By December of this year, the Office of Personnel Management and the Defense Department will come up with “the most promising policies and procedures” to address poor performance. By September of next year, all managers will receive training on dealing with performance and conduct issues. Just before that, OPM and the General Services Administration will begin sending “parachute teams” into agencies to assist them in dealing with performance management issues.

“We make it too hard to hire, too hard to reskill and, yes, too hard to deal with poor performers,” OMB Deputy Director for Management Margaret Weichert said during a rollout for the management agenda in Kansas City, Mo., on Tuesday.

This… may go in very interesting directions. I don’t think this is going to be touching on the pension benefits, though.

BACK TO THE DETAILS

Here’s some of the info about McCabe’s pension on an article that ran before the firing:

As a law enforcement officer covered by the Federal Employees Retirement System, known as FERS, McCabe is set to receive an annual pension payout calculated at a special “enhanced” rate and available at the early age of 50.
…..
Considering McCabe’s number of years at the agency and estimations of his high-level pay grade, formulas published by the US Office of Personnel Management for law enforcement officers show that his yearly payout could hit in the area of $60,000 each year, if McCabe were to retire after his birthday on Sunday.

If he were to be fired before Sunday, it appears likely McCabe could be docked his pension until he hits another, later age milestone.

Experts disagree — and caution that predicting payouts is complicated given the complex federal system and each individual’s personal career particularities — but, per federal rules, McCabe may not be able to draw an annuity until a date ranging just shy of his 57th birthday, and as late as his 62nd. That could put the value of his uncollected pension in the realm of a half-million dollars.

On top of that, McCabe could also lose his law enforcement boost.

“What he would lose — and this is a lot of money — he would lose the enhanced benefits that law enforcement officers get,” said George Chuzi, an attorney who represents federal employees.

Under the rules of FERS, that means he could be left with the standard multiplier of 1% on top of his years of service, down from the 1.7% enhanced rate for law enforcement.

It’s not super-detailed, but that’s not too bad. Here’s a wrinkle people may miss:

The “most significant ‘damage’ to a separated FBI employee is: loss of lifetime medical benefits for self and family,” tweeted CNN law enforcement analyst James A. Gagliano, a retired FBI supervisory special agent.

Yup, though it sounds like his wife has a job as a doctor, and I assume she can help him figure out how to buy healthcare.

The Washington Post was a little less detailed, with an unnamed “expert”, and not quite a sure thing: Andrew McCabe was just offered a job by a congressman so he can get his full retirement. And it just might work.

Rep. Mark Pocan (D-Wis.) announced Saturday afternoon that he has offered McCabe a job to work on election security in his office, “so that he can reach the needed length of service” to retire.

“My offer of employment to Mr. McCabe is a legitimate offer to work on election security,” Pocan said in a statement. “Free and fair elections are the cornerstone of American democracy and both Republicans and Democrats should be concerned about election integrity.”
…..
McCabe’s team is confident that he had at least 20 years of law enforcement work under his belt — defined as carrying a weapon or supervising people who do — which made him eligible to retire on his 50th birthday on Sunday, with full retirement benefits.

With those 20 years, he would need to just go to work with the federal government for another day or so in any job he pleases, whether that’s as a election security analyst for a Wisconsin congressman or a typist for a day, to get full benefits, said the former official who spoke to The Fix. The job doesn’t matter so much as the fact that he’s working within the federal government with the same retirement benefits until or after his 50th birthday. (Though this former official stressed that it would probably look more ethical if McCabe worked for at least a pay period rather than just one day.)

McCabe began working at the FBI’s New York field office in 1996, was promoted to a supervisor position at the FBI’s headquarters in 2006, and held various jobs at the bureau until 2016, when he was named deputy director. His final job at the FBI was an executive perch that likely doesn’t count toward his law enforcement job, said the former retirement official.

He’s vested, that’s not under consideration. It’s the enhancements that are really under question.

Some later reporting, via Yahoo Finance: Trump’s decision to fire McCabe 48 hours before his 50th birthday could cost him an estimated $60,000 a year over the next 5 years — here’s how it works

Under the Federal Employees Retirement System (FERS) — a retirement plan for government employees — McCabe was set to receive a pension payout of around $60,000 a year, according to an estimate by CNN. This is a “special ‘enhanced’ rate” based on his 20-plus years of service as a member of law enforcement and his high annual salary.

Now McCabe is at risk of losing access to his pension until at least age 55. In addition to not receiving monthly payments during this period, McCabe would also lose out on health insurance coverage for himself and his family.

I believe it’s actually age 56 years, 8 months. It looks like it’s primarily regurgitating the CNN stuff.

But I must remark on this part, a few paragraphs down:

What is a pension?

Pensions are defined benefit retirement plans offered through an employer. They’re most commonly seen for US government employees, but traditionally they have been offered for union jobs through major corporations.

In a defined benefit plan like a pension, employees pay into the plan over the course of their tenure at the employer. Their payments guarantee a payout from their employer after they retire — either monthly annuity payments or a lump sum. The amount for both of these is determined by how long they worked for a government agency and how much they earned in their position.

In a pension plan, the employer manages the investments for the contributions, and assumes the risk and responsibility of making the payments to retired employees. In recent years, the 401(k) plan replaced the pension at many employers, moving that risk and responsibility to the employees in what’s called a defined contribution plan, which doesn’t guarantee a given amount in its payouts.

The pension affected by McCabe’s dismissal is the FERS retirement plan, which has three elements: the Basic Benefit Plan, Social Security, and the Thrift Savings Plan.

I find it interesting they saw the need to explain what DB pensions are, but sure, why not. Most people aren’t deep into pension policy.

So, interestingly, federal employees are on Social Security like everybody else (unlike some state workers), and have a DB plan (Basic Benefit Plan) and a DC plan (Thrift Savings Plan).

Back to McCabe’s situation:

McCabe was a member of law enforcement having worked for the FBI, so his pension plan was under the Civil Service Retirement System (CSRS). With a 20-year tenure, McCabe would have been eligible for an annual annuity payment — the aforementioned “enhanced rate” — of up to 2.5% of his “high-3” average salary.

McCabe may be able to recover his pension

Had McCabe’s “involuntary separation,” or firing, happened after his 50th birthday, he would have still received an early retirement payout equal to one-sixth of 1% for each full month under age 55. Now it’s unclear how much of his pension he’ll receive before he turns 55, if any.

…..
But another former law enforcement official, Bob Ballentine, threw cold water on the suggestion on Twitter, reported Business Insider’s Michal Kranz.

“Unfortunately, you cannot just hire him as a federal employee for 3 days to save his pension,” Ballentine wrote. “It has to be a primary law enforcement position, or else he has to work another 10 years.” Ballentine added that McCabe can file an appeal since it appears there will be no criminal charges related to the firing.

Yet. No criminal charges yet.

Remember, some people are already being charged for lying to federal investigators as part of the whole brou-ha-ha. It sounded like part of the basis of firing was about McCabe lying about stuff…. so…. there may yet be criminal charges.

Perhaps people should pay attention to that instead of the pension issue.

Yes, various Democrat politicians are offering jobs to McCabe, and as Ballentine notes, that may not be good enough. That’s for McCabe to worry about, really.

But I’m assuming that the potential federal criminal charges may be a wee bit more important to him than the pension issue. The pension can wait.

TWITTER COMMENTARY

That’s it for the substantive content on this post. The rest will be tweets and animated gifs… so y’all can move along if you have important things to do.







I’m kind of surprised Alec Baldwin censored himself there.




(for those who don’t get the joke — this twitter account is not actually Trump ex-press secretary Sean Spicer, but a parody.)




That’s it for me:

via GIPHY


Related Posts
The Kentucky Pension Mess: Ain't Getting Cleaned Up Now
Nevada Pensions: Liability Trends
Pennsylvania Pensions: Nibbling at the Edges