Six-figure salary and a buyout create quite a pension
Of all the state pension checks cashed in 2012, none was bigger than John F. Veiga's.
The Coventry resident spent 37 years teaching business at the University of Connecticut. In 2009, he accepted an early retirement buyout offer from the state after contributing $222,128 to his pension during his UConn career.
Now, at age 70, that pension pays him $276,364 a year, the largest amount paid to a single state retiree in 2012, nearly nine times the $31,666 average state employee pension.
According to calculations by the data analysis firm VisiGov: Visible Government Online Inc. for The Day, Veiga could collect another $4 million in his lifetime.
"I don't know what to tell you," Veiga said. "Is it fair? It was what was offered. It seemed fair at the time."
Of the top 10 state pensions in 2012 - all six figures - all but two were paid to former employees of UConn or the UConn Health Center. Nine retired under the most generous retirement plan, called Tier I.
Veiga left Kaiser Aluminum in 1968, earned his doctorate in 1971 and became a professor at UConn after a brief stint teaching at Northeastern University in Boston. He said his former boss called him "crazy" to leave Kaiser, where he was earning $50,000 to $55,000 as a senior industrial engineer, for an assistant professor position at UConn with a starting salary of $16,000.
But over the nearly 40 years that Veiga worked for the state, that salary gap narrowed. Private companies cut back pension and retiree health benefits, according to a 2012 Employee Benefit Research Institute report. More and more, private companies came to rely on "defined contribution plans" - 401(k)-type plans that have no guaranteed annual benefit amount.
Veiga said the early retirement incentive package offered in 2009 during Gov. M. Jodi Rell's administration was too good to pass up. More than 4,700 state employees took advantage of the offer.
The buyout "made it very hard to say, 'Well, I am going to keep working,' when I can earn as much on a pension as I can working," Veiga said. It added three years to his to his term of service, and the state let him add three more years because he had worked as a residence hall director at Kent State University in Ohio, and another year because he had been an assistant professor of management at Northeastern University. That brought his credited years of service to 44.
His pension also comes with annual cost-of-living adjustments, Medicare insurance and prescription drug coverage, and supplemental health insurance and prescription coverage through the state. He pays a co-payment at the doctor's office occasionally, he said, but otherwise he does not pay for his health care.
State Comptroller Kevin Lembo said early retirement incentive programs put a lot of stress on pension systems. While they reduce payroll, they increase lifetime pensions because they add additional years of service. To Lembo, "They are short-term thinking at best."
The tier system
Veiga served as chairman of the management department at the School of Business for more than two decades and as the interim dean of the School of Business in 1991 to 1992. He was named the Northeast Utilities endowed chairman of business ethics in 2000, and a Board of Trustees Distinguished Professor in 2001. His final average salary for pension calculation purposes was $361,293 annually.
State retirees are classified according to a system of "tiers." Tier I, the most generous, was closed to new employees in 1984. As a Tier I retiree, Veiga's pension is determined by several factors, including his credited years of service and the average of his three highest salary years.
He also receives a cost-of-living adjustment ranging from 2.5 to 6 percent.
Pension benefits have been reduced as each new retirement tier was added. Under Tier II, retirees' benefits were based on a smaller percentage of their annual salary. Tier IIA, which began in 1997, required retirees to contribute to their retirements. With Tier III, which began in 2011, the retirement age was increased.
The Tier I average annual pension benefit in 2012 was $36,404; for Tier II, $23,106; and for Tier IIA, $11,556. Data for Tier III retirees is not yet available.
According to The Day's analysis, Veiga was one of 492 Tier I retires who, because of their high salaries, collected six-figure pensions in 2012. That number represents just 1.6 percent of the 30,472 Tier I retirees.
Although the Connecticut State Employees' Retirement System is funded at only 42 percent, Veiga said that will change when the economy rebounds in the next five to 10 years. People wouldn't even be discussing whether retirees' benefits were too rich if the economy hadn't gone downhill or if the state had managed its pensions better, he said.
"Every chance they get, where it is not obvious, they use the money right now and don't fund it all," Veiga said. "Can you imagine having money in a 401(k) somewhere and them saying, 'We will, for the next five years, not give you any interest or earnings, we are not going to do our part?' That is basically what they did."
From fiscal years 1996 through 2013, the state rarely contributed the annual amount recommended by actuaries. If it had done so, there would be $2 billion more in the State Employees' Retirement System fund, according to the State Comptroller's Office.
In the 2013 fiscal year, the state did meet its annual required contribution amount - $1 billion - for the Connecticut State Employees' Retirement System. The Malloy administration said it also met the annual required contribution amount in the 2012 fiscal year. The comptroller's office reported that the state contributed $118 million less that year than actuaries had recommended.
For additional pension data go to www.theday.com/ctpensionproject
A Day In The Life Of A Retired School Teacher
Join the conversation
As part of its CT Pension Project, The Day has arranged for pension experts to hold live chats on theday.com this week.
Monday, Julie McNeal, CPA and director of finance and operations for the Connecticut Society of CPAs, will answer questions from noon to 12:30.
Tuesday, Dan Livingston, a Hartford attorney who represented the unions in the 2011 State Employees Bargaining Agent Coalition agreement, will answer questions from noon to 12:30 p.m. Check in at www.theday.com/ctpensionproject and email your questions to email@example.com or Tweet them using #ctpensionproject
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