March 7, 2012 at 4:59 pm #155318
Dorothy Ramienski AmatucciParticipant
It seems that federal employees aren’t the only ones coming under fire when it comes to pension costs. State and local government workers are also feeling the pinch — and a new report from the Government Accountability Office shows many plans are facing similar questions about sustainability and cost.
GovExec reports that almost half of all states have put a larger burden on employees when it comes to pension plan contributions. About 35 states have cut back on benefits for future workers, and many have also changed when retirees can start collecting benefits.
GAO also says that budget woes will continue to strain state and local governments when it comes to supporting current and future employees’ retirements.
What do you think? Do you think changes to pension plans are a sign of the times?
March 7, 2012 at 6:34 pm #155334
What I’d like to know is how this compares to other sectors. Is a similar passing along of pain happening in the private sector right now…or are public servants bearing a disproportionate brunt?
March 7, 2012 at 10:55 pm #155332
The Pension is the #1 reason that Illinois is in such big trouble. There are several proposals to scrap it all together and convert us to 401(k)s.
The local press hates the pension and tends to be heavy handed in it’s coverage laying the blame squarely on the public sector unions.
The solution is to cut all departments by 9% – which will result in more overcrowding of prisons and cuts to social services. And about 3,000 layoffs.
March 8, 2012 at 1:50 am #155330
The pensions are the problem in Illinois because several years ago the legislature made the choice to spend a significant amount of money on the projects they thought would get them re-elected rather than fund the pension as required. I remember when it happened because my husband works for the state, and I remember him talking about what they were doing. That is also about the time they decided to cut everyone’s salary by 12% over about four years unless they were in a union. At that point the public unions in the state were not as large as today so many ended up with lowered salaries while some union people got raises of 12% over the same time. The incompetence of their leadership is what pushed the rest of the employees to unionize.
And now that the day has arrived that they knew would come by not funding the pension, they don’t want to ask their constituents to pay because that certainly won’t get them re- elected. And because the general public doesn’t support govt workers, it works to the elected officials’ advantage to just absolve themselves of facing the consequences of their actions by reducing pensions. It is really just such a display of politics at its worst. And it makes it very frustrating at times to be a government employee and a resident of Illinois.
March 8, 2012 at 2:39 pm #155328
We work with many federal employees across the country and it starts with education early in the career. If the employee starts to contribute to the TSP with the match and it is managed conservatively, then the pension benefit will be a supplement to them not the other way around.
Good question Andrew. Yes, the private sector has been moving away from Pensions to qualified plans like tthe TSP for the last 20 years. The system cannot sustain the obligations to payout the incomes promised with life expectancies 20 + years into retirement.
March 8, 2012 at 3:24 pm #155326
This is such a huge issue across government at all levels – rising pension costs, inadequate funding, union gridlock – there are two sides and I think with any type of labor dispute, things get touchy really quick. I’d recommend taking a listen to This American Life podcast, “What Kind of Country,” it was a great episode, touched on a lot of the issues facing government.
Government is locked into pension plans they simple can’t afford anymore. New York State’s Triborough Amendment has made it painfully hard to renegotiate with unions (In a nut shell…can’t renegotiate a contract until a new one is met, and if no agreement can be met – default to most recent agreement) . For good reasons – Unions won’t budge on cutting benefits – and also for good reason – government needs to keep trying, as pensions/mandated salary increases/benefits are bankrupting government.
March 8, 2012 at 4:14 pm #155324
Think of the complexity facing employers trying to adequately fund a defined benefit pension plan. They hire someone new, age 25. They can reasonably expect this individual to stay with them for 5-7 years before moving on, which will vest the employee’s retirement benefits. They can also reasonably expect the employee to collect benefits no earlier than age 60 and no later than age 70 (between 35 and 45 years into the future) They can assume the employee will pass away between 80 and 100 (55 to 75 years after having been hired). How much money should the employer contribute to a defined benefit plan to be confident of being able to make the final pension payment? Or should they just make a payment to a defined contribution plan which the employee can roll over in 5-7 years when they move on to new opportunities? BTW, the employee also has to consider how many DB plans they will need to track throughout their career, how many employers, other than government, will actually still be operational in 75 years and whether they might actually do better with a DC plan they can manage themselves.
March 12, 2012 at 6:50 pm #155322
Janina Rey Echols HarrisonParticipant
Thank you for making this point….I was reviewing the blog to determine if anyone was going to bring up the fact that politicians continually raid funds that, if they were invested, would provide plenty of money to pay the obligations. This is not just in Illinois but nation wide, over and over again.
March 19, 2012 at 12:49 am #155320
Just wanted to let everyone know that I’ve created a group for those interested in discussing state & local pension reforms
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