Better retirement / pensions
Union workers are more likely than their nonunion counterparts to receive health care and pension benefits, according to the Bureau of Labor Statistics. In 2004, 89 percent of union workers in private industry participated in medical care benefits, compared with only 67 percent of nonunion workers. Union workers also are more likely to have retirement and short-term disability benefits.
As the chart below illustrates, 84 percent of union workers are covered by pension plans versus 56 percent of nonunion workers. Seventy percent of union workers have defined-benefit retirement coverage, compared with 16 percent of nonunion workers. (Defined-benefit plans are federally insured and provide a guaranteed monthly pension amount. They are better for workers than defined-contribution plans, in which the benefit amount depends on how well the underlying investments perform.)
Note: Defined-benefit pensions are a subset of all pensions. Disability refers to short-term disability benefits. Source: Bureau of Labor Statistics,
Publications and other Documentation, Employee Benefits in Private Industry,
NEW March 2006
Survey
Central Pension Fund vs. IRA or 401(k)
How do the benefits stack up?
Scenario: Two participants (A & B) work for ten years, each having a pension contribution of $5,700 per year. Participant A belongs to the Central Pension Fund while Participant B's contributions are invested in a regular annuity with a 10% annual interest rate.
The first chart below shows how both participants' monies add up over the ten-year period.
|
A's Central Pension Fund: |
|
B's Regular Annuity in IRA or 401(k) |
| Years |
Age |
Both Annual
Contribution |
A's Fund Balance |
|
Rate |
Interest
Account Earned |
Balance |
| 1 |
55 |
$5,700 |
$5,700 |
|
10% |
$570 |
$6,270 |
| 2 |
56 |
$5,700 |
$11,400 |
|
10% |
$1,197 |
$13,167 |
| 3 |
57 |
$5,700 |
$17,100 |
|
10% |
$1,887 |
$20,754 |
| 4 |
58 |
$5,700 |
$22,800 |
|
10% |
$2,645 |
$29,099 |
| 5 |
59 |
$5,700 |
$28,500 |
|
10% |
$3,480 |
$38,279 |
| 6 |
60 |
$5,700 |
$34,200 |
|
10% |
$4,398 |
$48,377 |
| 7 |
61 |
$5,700 |
$39,900 |
|
10% |
$5,408 |
$59,485 |
| 8 |
62 |
$5,700 |
$45,600 |
|
10% |
$6,518 |
$71,703 |
| 9 |
63 |
$5,700 |
$51,300 |
|
10% |
$7,740 |
$85,143 |
| 10 |
64 |
$5,700 |
$57,000 |
|
10% |
$9,084 |
$99,928 |
At age 65, what retirement benefits will the employee receive?
In our scenario, both A and B are now 65 and retired. Central Pension Fund Participant A will receive a monthly benefit equal to 3.3% x $57,000 = $1,710/mo. or $20,520 per year. For apples-to-apples comparison, Participant B starts drawing the same amount ($20,520/yr) from his/her IRA/401(k) account. The chart below shows the pension benefit each will receive during their retirement years through age 71.
|
A's Retirement Benefit |
|
B's Retirement Benefit |
| Year |
Age |
Mo. Benefit |
Yrly. Benefit |
|
Yrly. Draw |
10% Interest |
Balance |
|
$1,710 |
$20,520 |
|
|
$99,928 |
| 1 |
66 |
$1,710 |
$20,520 |
|
$22,572 |
$7,736 |
$85,091 |
| 2 |
67 |
$1,710 |
$20,520 |
|
$22,572 |
$6,252 |
$68,771 |
| 3 |
68 |
$1,710 |
$20,520 |
|
$22,572 |
$4,620 |
$50,819 |
| 4 |
69 |
$1,710 |
$20,520 |
|
$22,572 |
$2,825 |
$31,072 |
| 5 |
70 |
$1,710 |
$20,520 |
|
$22,572 |
$850 |
$9,350 |
| 6 |
71 |
$1,710 |
$20,520 |
|
$22,572 |
|
-$13,222 |
| Every Year for life: |
$1,710 |
$20,520 |
|
THIS PLAN IS OUT OF FUNDS! |
At age 71, which retirement plan do you want to be in?
Central Pension Fund-Summary Information
Credited Service
A participant earns credit service when contributing employers report hours and contributions to the Fund on their behalf. A participant's benefit is determined by the total contributions made on their behalf.
Benefit Formula
The monthly benefit is 3.0% of the total contributions made on the participant's behalf.
Example
5 years x 1,500 hrs./year = 7,500 hours x $5.30 = $39,750 x 3.0% = $1,192.50/mo.
Your Central Pension Fund At-A-Glance:
- Governed by a Board of Trustees comprised of employee and participating employer representatives
- Currently serving 52,000 Retirees nationwide
- 103,000 current vested and active participants
- 80 participating IUOE Locals
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