Pension Plans

This article from the Pension Rights Center is an ongoing list of employers who have reduced their “defined benefit” retirement plans.

Defined benefit” plans promise to pay out retirement benefits regardless of the plan’s ability to pay – a promise for tomorrow that few employers keep today. Nevada’s government offers this kind of plan to its employees. Under PERS (Public Employee Retirement System) employees will get from 50% to 75% of their highest three years salary upon retirement, depending on how many years they actually worked.

Defined contribution” retirement plans, on the other hand, pay out what was paid into them over the years (by either the employer or the employee themselves) plus investment earnings. Federal law allows employee contributions to be exempt from income tax in the years contributed, but the proceeds are taxed as income when the employee retires and draws down on the plan. The idea is the retiree’s income will be lower in retirement years, so the tax percentage will be scaled back.

Increasingly, non-government (and even some government) employers are eliminating “defined benefit” retirement plans because they have failed to adequately save money to foot the bill. It’s become more important in recent years as non-government organizations are now required to report the unfunded liabilities and costs associated with these promises. Governments are not, allowing them to get by just making promises they either won’t keep or will have to raise future taxes to keep.

Nevada’s defined benefit plan is called PERS (Public Employment Retirement System) and is about 75% funded. Employees of state and small county local governments pay half their contribution. Employees of Washoe and Clark county local governments don’t pay any.

All government employees in Nevada are exempt from social security tax so they do not have the 6.2% paycheck deduction that private employees lose.

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