Reply to Fairfax county contribute 27.14% towards employee

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[quote=Anonymous][quote=Anonymous]How much retirement contribution from county towards new employee?[/quote]

They still contribute 27% for every current employee--but that's paying into the pension system to pay current retirees (whose payments are dictated by what was in place when they were first hired, often decades ago). New employees' future benefits are governed by the pension agreement at the time they were hired. If you leave your job, you don't walk away with that money (and you may get a reduced or no pension, even if you were also required to pay into it, as public sector employees usually are--Fairfax Co. employees pay 5% to fund the pension in addition to any individual retirement plans they might have for themselves). Current plans are here: https://www.fairfaxcounty.gov/retirement/sites/retirement/files/assets/documents/a066_comparison%20of%20fc%20retirement%20sysems_7-2017.pdf

The way pension systems work at a basic level is that they have to pay out retirees based on whatever conditions they set back when they hired those employees. That costs $x. If a pension system is functioning well (rarely!) then they put money in along the way that has been invested and is covering that. More often, they did not (or borrowed against it, or invested it poorly, or...) and instead they have to put extra in to cover both those costs plus the anticipated future costs for the current employees. It's obviously a little more complicated than that, but that's the issue in a nutshell. Pensions are defined benefits, which are very different from the retirement fund you might have as an average worker without a pension--you get what you get in the end, so if the market crashes, you get less. Pensions instead promise a guaranteed payment (usually a percentage of the average salary in the final years before retirement) so if the investments haven't paid off, you have to make up the difference.

The private sector has already moved away from pensions and public sector is slowly following suit, but part of the reasons companies had them in the first place was to create an incentive for workers to stay at the company over many years, or to entice them to stay for lower salaries than they might have had elsewhere. Those are still big issues to contend with, because while pensions cost money, so does employee turnover and so do higher salaries. It's a balancing act to figure out how to keep employees and create a fiscally sustainable organization.[/quote]

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