Richard Childs retired from Union County and this month began receiving a monthly pension of $3,402.87.He was hired by the county on February 7, 2004, at an annual salary of $18,500. Had he kept at that salary the monthly check he would have gotten this month would have been $557.52. But he didn’t stay at that salary.
His actual base-salary history:
- 2004: $18,500
- 2005: $18,500
- 2006: $23,440
- 2007: $25,485
- 2008: $111,793
- 2009: $113,470
- 2010: $113,470
Assuming 19.89 years of total government service his pension would have been calculated: $112,911 x 19.89 / 55, or $40,833 annually.
The circumstances of his employment are explained very well by Tina Renna at countywatchers but I want to focus on the funding aspect.
Richard Childs worked for New Jersey government at a modest salary for 17 years and a modest pension would have been funded for him (in years when contributions were actually made). Then in the 3 years prior to his retirement he landed a job with a much higher salary and that high-3-year average salary was applied to calculate his benefit accrual over his entire 20-year period of service.
The reverse is also true where a government employee who already has a high-3-year-average salary gets any old job simply to build up service credit to apply to that high average salary.
This isn’t the main reason the New Jersey pension plan will go bankrupt but it’s certainly a contributing cause that will bring about meltdown sooner than even the gloomiest predictions.
NOW WATCH: Briefing videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.