STATE WORKERS ALREADY PAY FOR ALL THEIR PENSION CONTRIBUTIONS | Wis.Community

STATE WORKERS ALREADY PAY FOR ALL THEIR PENSION CONTRIBUTIONS

David Cay Johnston, former New York Times economics reporter and a Pulitzer Prize winner, has a great piece up on Tax.com about how Wisconsin state employees already in effect pay 100 percent of their pension contributions. How is that possible? Well, a Forbes magazine (!) blogger who excerpted Johnston's piece adds some great value through a swell sports analogy. First Johnston, then the Forbes followup:

JOHNSTON: "Gov. Scott Walker says he wants state workers covered by collective bargaining agreements to “contribute more” to their pension and health insurance plans. Accepting Gov. Walker’ s assertions as fact, and failing to check, creates the impression that somehow the workers are getting something extra, a gift from taxpayers. They are not. Out of every dollar that funds Wisconsin’ s pension and health insurance plans for state workers, 100 cents comes from the state workers."

How can this be possible?

Simple. The pension plan is the direct result of deferred compensation- money that employees would have been paid as cash salary but choose, instead, to have placed in the state operated pension fund where the money can be professionally invested (at a lower cost of management) for the future.

Many of us are familiar with the concept of deferred compensation from reading about the latest multi-million dollar deal with some professional athlete. As a means of allowing their ball club to have enough money to operate, lowering their own tax obligations and for other benefits, ball players often defer payment of  money they are to be paid to a later date. In the meantime, that money is invested for the ball player’s benefit and then paid over at the time and in the manner agreed to in the contract between the parties.

Does anyone believe that, in the case of the ball player, the deferred money belongs to the club owner rather than the ball player? Is the owner simply providing this money to the athlete as some sort of gift? Of course not. The money is salary to be paid to the ball player, deferred for receipt at a later date.

 

The whole thing is at:

 

Published

February 26, 2011 - 12:55am

Author

randomness