How much is that pension in the window?

by Ben Waxman

Published Jun. 14, 2010, 2:37 p.m. ET

Last Thursday, City Council voted to close a loophole in the city's pension system that allowed Managing Director Camille Barnett to get a lifetime award of nearly $50,000 annually, although she only worked in Philadelphia for two years. Barnett was eligible because of her previous government service and also because she paid $120,451 into the system. Under the new rules, city employees will need to be on the payroll for at least five years before being able to buy into the pension fund.

So what does this mean for taxpayers? To find out, we did some rough calculations for the pension that Richie McKeithen-- Mayor Nutter's pick to be the new chief of property assessment-- could be eligible for if he stays for the next five years.

We picked McKeithen because he's a good example of someone coming to Philadelphia with a long history of public service elswhere. If confirmed by City Council, he'll also be one of the highest paid employees in city government, with a salary between $130,000 and $140,000.

So how much could McKeithen get if he stays long enough to be eligible to enter the city's pension system? Retirement benefits are calculated using two factors: length of service and salary. Based on the biography provided by the city, McKeithen has been in public service for at least nine years, starting with DC's Office of Tax and Revenue in 2001. He'll be able to apply that time to his city pension by "buying-in" after he's been with the city for five years. (It's a formula based on prior service. Barnett paid $120,451.)

If he does stay for five years, he'll get 2.2 percent of the average of his three highest salaries for the first ten years and 2 percent for every year after. For simplicity sake, let's say the salary average used to calculate his pension is $130,000. That means, with 14 years of total service in government, he'd be entitled to 30 percent of $130,000 or $39,000 annually.

What should we make of all this? If you thought Barnett's pension was a problem, the only difference in the new rules is that workers will have be employed by the city for five years instead of two. That doesn't seem like a huge change. At the same time, it's important to remember that only a small number of employees are even eligible for this type of deal. Most city workers-- especially those who stay long enough to get a pension-- don't hop from city to city. That only happens for city government professionals like Barnett and McKeithen. So, while it might seem problematic that someone can get a fat pension after just five years, it's not exactly a widespread problem.