Saturday, July 15, 2017

Why It Made No Financial Sense To Take The ATR Incentive.



























In the last two months at least three UFT leadership officials tried to convince me that the ATR incentive was a good deal and if I am planning to retire in June of 2018, I should jump at the chance to get an extra $50,000.  Of course, I politely refused the UFT and DOE's generous offer to retire and take the money and fade into educational oblivion.  Here is my rationale why I declined to take the ATR incentive.

First, the ATRs who take the $50,000 incentive are really only getting 50% of the money or $25,000 after taxes if a New York City resident.  Moreover,  the money is not pensionable, meaning that the incentive will not be included in the ATRs pension.  Finally, The money will put me into a higher tax bracket for this year, especially with the terminal pay.

Second, any ATR who wanted to take terminal leave, cannot do so, since the incentive does not allow for it.

Third, if the ATR wanted to join NYSUT's Comprehensive Major Medical Plan, they can't since you must be an active member as of January 1, 2018.

Finally, the largest of the contract raises of 3% will not be available to ATRs who took the incentive.

Obviously, if the ATR was planning to retire anyway or was subject to a 3020-a hearing due to incompetence or misconduct, I can see taking the incentive. However, here are my reasons I didn't take the ATR incentive and its really financial.

First, I'm not ready to retire this school year and the $50,000 is not financially good enough to change my plans and here's why.

By staying for the 2017-18 school year, I increase my pension by the 2% each year adds to the pension.  Furthermore, my final average salary will increase by an additional 4.5% due to the increase in the salary scale and it will be my 25th year of service.  That means that my pension is expected to increase 6.5% by staying another year.  A quick and rough calculation tells me that I will receive an extra $4,574 annually on my annual pension by staying till June 2018.

In staying an extra year, I will contribute another $24,000 to my TDA and receive a 7% return.  By simply taking out the 7% interest annually, I will be getting an extra $1,680.  Add that to the pension and I will be making an extra $6,254 each year and its exempt in New York State from State and Local taxes!  Moreover, my ASAF will increase by an additional $140 by staying an extra year

Finally, I expect to have a full semester of terminal leave and that means an extra 1% increase in my pension, assuming no contract raise for the 2018-19 school year.  Therefore, my pension of $57,008, excluding the ASAF,  increases to $57,581  Moreover, by adding an extra $12,000 to my TDA, I will also gain an additional $840 of interest income.  Add it all together and excluding the ASAF.  I will increase my retirement pay by $7,666 by staying an extra year, all exempt from State and local taxes!

In four years after retirement I will have already far exceeded the actual take home pay from the ATR incentive.   Further, let's not forget the increased Social Security I will receive by adding an extra year on my benefit.  Therefore, if you figure out the financial aspects, you can see the ATR incentive is no bargain and that's why I didn't even consider it.








23 comments:

chris sullivan said...

I can say over the years I am so grateful that you are a blogger . Without you I would of been in the dark about so many things . You motivated me to educate myself about Doe , Uft , pensions system/TDA , 55/25 , NY government and NYC government. Thank you

Anonymous said...

That's right Chaz. Stay another year. Stay until you are able to retire financially. Good luck!

Anonymous said...

Wow Chaz. Good analysis of why we shouldn't have taken the ATR incentive. By putting it in numbers it shows how inferior the incentive really is.

Bronx ATR said...

It made no sense for most ATRs -although I believe many desparate appointed teachers may have taken it, as they'll be jumping ship sooner rather than later. It really should have been offered to all teachers, but they just want ATRs gone ASAP. It feels great to be wanted, doesn't it? The best, most experiences teachers given the bum's rush, like a panhandler at the Waldroff. They may have another buyout in the future, though the UFT will of tout this now lapsed 'terrific opportunity' as a major victory for ATRs based on the opinions of the two famed ATRs brought up at the Executive Board meeting - Tweetle Dee and Tweetle Dum.

Shad C. said...

This article makes me sick to my stomach. Why doesn't anyone ever tell the truth? Out of the pool of ATRs - maybe at most 3 to 5 percent had investigations for sexual misconduct. I would guess 70 to 80 percent are in the pool - without any charges and every year being satisfactory.

Wall Street Journal is garbage.

https://www.wsj.com/articles/the-teachers-no-one-wants-1499989012

Anonymous said...

Shad, That one is even worse than the Post's, and I didn't think that was possible (from what I preceived as a reputable paper). We have been sacrificed on the altar of the Wall Street Journal's false living god of capitalism and the charter school demi-gods. Very disgusting article - we're all drunks and perverts. UFT and the DOE should immediately respond to this one.

Anonymous said...

WSJ, owned by Murdoch of the NY Post-what do you expect...

Anonymous said...

That math you used gave new meaning to the term fuzzy math. First of all, 4.5% will not be the increase for pension calculations if one retires in 2018 because the money from 2009-11 that we should have gotten way back then is already included in the pension calculations. Did you read any of the TRS stuff. Your pension is calculated as if the 4%+ 4% was included and you are including it twice in your calculation. In terms of pension, the contract is front loaded. You would have to stay around through June 2019 to have that complete 3% included that would be included is if you stay around for a year after June 15, 2018. It's only 2.5% for this year as the other 2 are already included from 2009-11. Remember, that money is only one year of the final three which is the final average salary that a tier 4 pension is based on.

Yes the marginal tax rate will be higher but 50% on $50,000? I don't think so, particularly when the TDA contributions are not included? ATRs will come home with over $35,000 to retire. Just figure out what you get back after you file your income tax return, not what is deducted now. $25,000? No way.

Not many retirees need the extra year to get 25 years. If someone has over 30 years and is 55, pension will only go up 1.5%.

The terminal leave and termination pay only apply to people who have days in the sick bank. Some of us do not. Termination pay is spread over three years so it is not exactly a big tax hit and someone will still get that money in addition to the $50,000. We are all going to take the tax hit for the October retro money but I would still like to have the money rather than saying it isn't worth it because I have to pay more to the taxman.

Taking the $50,000 for most people is better than terminal leave. A little better on your pension and some more TDA contributions isn't going to make that much of a difference and then someone who gets the severance gets the termination pay too.

You are right about the catastrophic health and I have no problem if you want to continue working but don't mislead people by implying that those who chose to leave did not make a smart financial decision. It's just not true. Many ATRs have had it and the fact that the DOE gave us money to leave just makes them and the UFT look crazy for not offering it to everyone else.

Chaz said...
This comment has been removed by the author.
Chaz said...

Anon 6:19

Fuzzy Math? I calculated my pension for both 2017 and 2018 and came out with the numbers. Moreover, you ignored the additional TDA interest accumulation and the advantages of taking terminal leave that will allow you to enhance the pension and the TDA. Finally, while you apparently defend the ATR incentive, in almost all scenarios the ATR incentive is a loser's bet.

Maybe, its your analysis that suffers from the fuzzy Math.

Anonymous said...

All right, all right! What works for one does not mean it will work for another. Everyone's situation is different (financial, insurance, medical insurance, medical necessities, TDA contributions, years served, age, etc., etc.) so let's consider that. Thank you Chaz for putting in the time to provide others with a synopsis of what should be considered. Thanks again.

Anonymous said...

Hey Shad, I can't access that article. Anyway you could copy and paste it or send it to Chaz if he wouldn't mind?

Anonymous said...

I agree with 7:38. What works for you might not work for me. If you would have said the ATR incentive is no bargain "for me" I would say ok. But in your comment you say, "In almost all scenarios, the ATR incentive is a loser's bet." That is insulting to those who chose to take it.

Your comparison is kind of apples to oranges because if anyone works more years, you get a higher final average salary and make more money and have more in your TDA. That goes for anyone. But by leaving, someone is cashing pension checks and not working for that time. The 3% does not take effect until June 30, 2018 pay period. You have to be retiring in 2019 for it to matter much.

I repeat that you can work if you like but do not criticize ATRs who got out and with a little extra money in the pockets. Not a bad deal. Friends who are not ATRs got nothing.

Chaz said...

The only scenarios when the ATR incentive is appropriate is when the ATR is retiring anyway or losing their job due to a 3020-a.

ed notes online said...

Good analysis Chaz. What you don't include is the psychic/stress cost of working. I retired at 57 just as Bloomberg first 2002 contract came in. I had time to change my mind and consider working another year or 2 and making a much bigger pension - I was Tier1 but chose to leave and have had no regets in having my freedom for those extra years. I compare every year of work to a tire -- the treads get lower and lower.

Anonymous said...

Chaz, great post on the financial implications for staying another year. It's too bad or union doesn't provide such invaluable information. Instead they browbeat us in taking an inferior incentive.

Anonymous said...

the uft and the doe both suck ass! its like being in an abusive relationship.

Shady C. said...

It all depends on the individual. For some who can retire and get their retro then it is not a bad deal. For others who need a year or two to retire then it is not that great of a deal considering they lose their retro.

Anonymous said...

Good analysis from a purely financial point of view.

It was my initial instinct that 50K was financially insufficient unless one had 30 years in the pension system, one was 55 years old, and one was seriously considering retiring in any case.

Obviously everyone is different and there may be considerations other that financial as you note in your post.


Anonymous said...

Some of what you said is correct. However, our pension is based on an AVERAGE of our last three years' salary. Also, taxes on $50,000, although sizable, would not be 50%. Another factor to be aware of is the clause you pointed out previously, "However, to ensure that the educator doesn't pad their pension in the last year, there is a 10% cap.  That means that if any one year is greater than 110% of the FAS, than that year's salary is capped at 110% and not higher". Anyone like me, who just finished 20 years, will be affected by this.

Anonymous said...

So, yuor uft dr said to take the buyout as long as you were planning to retire anyway, and that was bad advice because?

Chaz said...

Anon 7:23

The ATR buyout only made sense if you were retiring anyway or going to be terminated under 3020-a charges. Otherwise, it made no sense taking it.

Anon 6:37

I calculated the AVERAGE of the FAS in my calculations and the 50% tax bite include3s Social Security and Medicare. Moreover, the 110% cap is not an issue here. Finally, the $50,000 is taxed while the pension and TDA only are subject to federal taxes.

Anonymous said...

Well, the UFT and DOE are certainly not kissing or sucking our ass that is for sure.