Begin With the End in Mind - Understanding Your Pension and Threats It Might Face

"Begin with the end in mind." - Stephen Covey

The quote above is the second of seven habits from Stephen Covey's 7 Habits of Highly Effective People. It means to begin each day, task, or project with a clear vision of what you want it to look like at the end, then take a proactive approach to make it a reality.

Besides the legacy we chisel out while working a long and productive career, the end for most of us will be a financially secure retirement. This hopefully means collecting a pension we have contributed to since our first steps on the job. Consider this: At its founding on February 28, 1918, the very first 36 delegates of the International Association of Fire Fighters established the common goal to "…live and work with dignity, with care for their safety and concern for their families."

Pension laws were among the first 20 resolutions adopted to benefit firefighters and the fire service. To reach that end, we are compelled to follow the direction of Stephen Covey and take a proactive approach to make our financially secure retirement a reality. Here are some steps every union member contributing to a pension system needs to take:

• You may not be alone in your retirement system. You need to know who the other stakeholders are. Other types of employees may share in your system. 
• If so, you need to ask; do their contribution rates match yours? 
• Will they receive the same benefit?
• Is there parity in how and when they reach eligibility to be vested
• Is there parity in how and when they reach eligibility to be retired?
• What will these other members be willing to sacrifice without parity to improve their situation? 
• How will any concession on their part affect you? 

Knowing the answers to these questions is essential. If you are not at the table, you are on the menu. Know your plan.

Pensions come in different forms. There are two main types: defined benefit and defined contribution. The defined benefit model provides a set monthly payment for life upon retirement. For most of us, the guaranteed monthly payment will be based on a percentage of our last year's salary.

A defined contribution model is an investment account. The account is worth the total of contributions, plus or minus investment gains and minus investment and administrative fees. Your contribution will be predetermined. Upon retirement, the monthly payment amount is based on the account's value.

A board, executive management, functional staff, and contracted service providers will govern your pension system. The board will comprise appointed and elected officers, depending on how it is structured. A member of the board will serve as its chairperson.

Executive management will administer your plan, including the direction of the investments, accounting, and fiduciary responsibility. Functional staff includes those who will process your enrollment, process your retirement, schedule your hearing, determine your eligibility based on documentation received from you and your employer, calculate your benefit, and issue your payments.

Contracted service providers may be attorneys, auditing firms, or even public relations firms. All personnel under the board will be hired and managed by the board. They will operate within the parameters of the statutory framework dictated by state and local laws.

In most cases, public pensions are funded by employee contributions, employer contributions, and returns on investments made with pension funds minus investments and administrative fees. The ratio of employee and employer funding varies but is often fairly close.

Once our members understand these structural parts of their pension systems, they must examine what parts of their compensation package are considered "pensionable." Overtime, stipends, and other economic benefits are not always factored in. Therefore their contribution and the matched contribution will be lower than a percentage of their daily rate.

We must be vigilant to be sure our contributions are correctly calculated and that both employee and employer meet their obligations. If we can negotiate additional compensation into pensionable categories, that may prove beneficial for our members.

Be afraid. Fear will keep us safe. By keeping a watchful eye and not taking our benefits for granted, we will be on alert for threats. Keep the end in mind and use that as continued motivation to fight off any and all threats to your retirements.

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Photo by Aaron Burden on Unsplash

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Robert Beattie is a second-generation North Plainfield, NJ firefighter joining in 1991 as a volunteer "callman" and spending the last 23 years on the career force. He is a New Jersey certified fire officer, fire official, level 2 fire instructor and emergency medical technician. Rob works as an instructor at the Somerset County Emergency Services Training Academy in Hillsborough, NJ and was previously a Fire Inspector with the Howell Township Fire Bureau in Howell Township, Monmouth County, NJ.

A proud member of International Association of Fire Fighters Local 2983 North Plainfield Fire Officers, Robert served 3 terms as 2nd District Vice President to the Professional Firefighters Association of New Jersey where he contributed to several committees and projects advocating for and protecting safe working conditions for all New Jersey firefighters.