For a great many working people the idea of having a pension sounds like an anachronistic luxury. That it’s one of the major points of dispute causing almost 5,000 transit workers to strike may be hard to relate to, but here’s where the striking SEPTA workers are coming from, and why they say this is an important issue to them.
The foundation of the pension issue is union members’ belief that pensions shouldn’t be a rarity, but something all workers should demand for security after retirement.
“I think it’s something we need to reinvest in,” said Willie Brown, Transportation Workers Union Local 234 president. “People want to leave here and have the ability to have a normal life.”
The union’s primary complaint is that their pensions are capped, while SEPTA managers’ are not. That means that workers pensions grow in proportion to their salaries until a worker makes $50,000 a year. After that, workers continue to pay 3.5 percent of their wages into the pension, but their annual payout after retirement will never exceed $30,000, no matter how much more money they make. Pensions for SEPTA’s 1,700 Supervisory Administrative and Managerial workers grow in proportion to their pay no matter how much they make.
The union’s complaints about pensions go beyond that, though. There is a general sense that for years managers have been able to benefit greatly from pensions, while workers have been held back. The cap on pay more than $50,000 for workers hasn’t changed in 15 years. The average TWU annual pay, with overtime, is $68,100.
Until this year mangers contributed less of their pay to pensions. Two years ago, when union workers were contributing 3.5 percent, managers only contributed 1 percent. As of this year management pays 3.5 percent of their pay too, but union leaders say managers are still getting a better deal. Pension reforms that started going into effect last year asked for a larger contribution from management, but also improved their retirement benefits.
Pensions are calculated with the following formula, union lawyer Bruce Bodner explained this week.
Years of service x Salary x Multiplier
The multiplier for TWU members depends on years of service, but the average is 2 percent, so a person who retires with 19 years of service, making $50,000, would receive a pension of $19,000 a year. The multiplier was last negotiated in the 2009 strike, according to the union.
When SEPTA pension reforms went into effect in 2015, the average multiplier for SAM workers grew from 1.8 to 2 percent for existing workers (a different formula exists for new SAM hires), but the unions didn’t get a similar adjustment. This is the basis of the union’s complaints that managers are getting a pension increase even as their contributions increased.
SEPTA’s position is that uncapped pensions are an enticement to encourage hourly workers to accept promotions into management positions. It also argues that the increased contributions into the pension will result in $180 million in savings over the next 30 years.
Late Wednesday night SEPTA revealed its pension offer to the union in negotiations. It was scrapping the existing cap and enhancing the pension benefit by eight percent.
“On the union’s central issue of pension reform,” a statement from SEPTA’s board chairman Pasquale Deon said, “we adopted an entirely new plan – at the union’s request – that would increase the benefits for TWU members.”
The union hasn’t responded to that proposal publicly. In earlier interviews, though, what came across most strongly was the sense that union leaders saw their members as being treated as inferior to administrative and managerial workers when it comes to pensions.
“That is to me a slap in the face,” Brown said.