Arguing For Traditional Public Pension Plans And Standing Alone

We know the headlines– state public pensions are in trouble. It’s because of a combination of retirement funds taking a hit in the stock market, and a drop-off in state revenues because of the recession, just as the country sees that bulge in retirement age workers.

With estimates of a shortfall of anywhere from $600 million to over $1 trillion in public retirement funds, states are looking to make changes.

Wisconsin Gov. Scott Walker asked state employees to start contributing directly to their pensions.

Rhode Island Treasurer Gina Raimondo made the case on Here & Now for pension reform, saying the system in her state was “too generous.”

New York Gov. Andrew Cuomo calls his state’s pension system “unsustainable.” He wants to offer new employees the option of a 401(k)-type program.

But New York’s elected comptroller, Thomas DiNapoli, is making a passionate argument for traditional, defined benefit pensions. He says they are the cheapest option in the long run, for both states and for employees.

DiNapioli also says that not only do people with a guaranteed pension spend their money, they spend it locally, bringing economic stability to their communities.

Here & Now: States Consider Cutting Public Pensions To Balance Budgets

Guest:

Thomas P. DiNapoli, New York State Comptroller

We welcome comments from all of our listeners. Post below. Please stay on topic and be civil. Comments may be moderated by us, but you are solely responsible for the content of your comments.

http://www.ohioken.com Ken Palosi

As a public employee retiree under the Ohio Public Employee Retirement System (OPERS) I am extremely concerned about all the hyperbole surrounding retired government employees. While OPERS is one of the more solvent ones I am continuing to see my benefits being chipped away at and various movements such as the recent Ohio Senate Bill 5 aimed at destroying our retirement system. What scares me most is at 67 I have reached the end of my working life. No one will hire me in a meaninfulf work because of my age. I am am too old for a decent job and too young to be a door greater at Walmart. Changes to the retirement system for future retirees in Ohio are already in place and more ore under consideration.
Guilfoyle20

Mr. DiNapoli hits the nail on the head and summarizes the defined benefit vs 401(k) argument as succinctly as anyone I have ever heard. I wish voices of reason and experience (like his) could more widely heard in the public debate.
tom sawyer

Its true that traditionally public employees get a pension, traditionally private employees got one too but that has gone by the wayside and so it is only fair that this should happen to the public employees as well. This is simply the new reality, you contribute to a 401k and use it to supplement a social security benefit. We can’t continue to promise more than we can afford to deliver, the sooner we change this the less catastropihic it will be when the funds run out. And you know they will.

Guilfoyle20

I don’t think you were listening to his argument. Funds don’t run out if the pension funds are consistently and adequately funded. It’s a long-term discipline, and long-term thinking as well as discipline of any kind have been in short supply in our society since the 1980s. Just because private employees were thrown under the bus in the name of corporate greed and short-sightedness 30 years ago, it doesn’t mean we should throw public employees under the bus now. the ‘reality’ is that the 401(k) system has failed. Let’s try learning from the actual experience rather than perpetuating and expanding the error.

tom sawyer

Thats right, we’ve known for forty years that the baby boomers were going to stretch retirement resources and nothing was done. Now everyone is going to get less, its just a fact. I don’t blame you for fighting for what you can get.

Anonymous

Private sector employees have been allowing corporate America to chip away at workers protections and benefits because of the threat of outsourcing. That threat doesn’t exist for public sector employees. Better to fix what’s wrong with the private sector than to drag down the public sector.

tom sawyer

I’m not saying its right, its just the reality and since the private sector funds the public sector you can’t expect a level higher than ours.
Guilfoyle20

well said!

Ich936

OMG! DiNapoli said “Public workers are different than private sector workers”!! Here is the problem!! Pub-Sector Egocentricism! Public workers should have only 403B accounts. No pensions. Out here in the real world, we no longer have pensions. Private sector workers should not have to fund public sector pensions. Out here, we often often have to buy our own medical insurance. The entitled public worker does not. Are you also aware that military officers (who have never been to war) get taxpayer funded housing allowances in the range of $1500 to 3000 per month? Outrageous welfare! They have already earned college degrees off the backs of private sector workers and that is OK. But a degree is what allows them to hold a job. That is ENOUGH! (Enlisted men and women do not get these benefits!). And if you only knew how many other benefits they get….discounts on groceries, no fees for airline baggage, and the list goes on. Someone with guts needs to look at all the benefits those in the public socialist welfare sector get.

Guilfoyle20

You’re obviously angry about benefits that you think are excessive or unfair. Remember, though – that is a different subject than pensions! You think 403(b)s are so great?? Have you saved diligently in your 401(k) or 403(b) all your working life? If you have then you are the ONLY person I’ve ever who met who has accomplished that! Getting rid of employer-controlled pension plans has become a great way to ensure that the average worker ends up poor in their ‘retirement’. It’s not socialism to pool long-term investments to maximize growth over time. You need to educate yourself about basic economics!

tom sawyer

I was vested in a pension plan at 5yrs, and that was frozen so I was given the option of rolling it into a a 401k and did it. I’ve been putting money in for the last ten years, with ten more to go. I watch my investments daily. Its not that hard to do. I expect to have something to add to social security. Exactly how much is anyones guess. I’ll have the house paid off and the kids out of the house so the only big question mark is healthcare. Nobody can have enough money to deal with that.

tom sawyer

I thought that comment was bogus myself. Everyone is told they have a certain benefits package, and the fact that it might have to change isn’t unique to the private sector.
Mike

Deserved compensation for going up against the Taliban and various over bad guys — If you stand the chance of getting shot at as part of your job, you deserve those benefits…

Ttangretti

Please consider the fraud in pensions as described in WSJ reporter Ellen Schult’s book The Retirement Heist.
JHWillson

An interesting discussion with Mr. DiNapoli. One item that got my attention was his statement that it might be possible for private pension plans to partner with public plans. As a Delphi Salaried Retiree, our pension plan was taken over by the PBGC during the government orchestrated General Motors/Delphi bankruptcy and the automotive bailout. The 20,000 salaried retirees who were not afforded “top ups” (as were union represented employees) lost up to 70% of our earned pensions. We are currently in litigation against the PBGC to recoup our pensions in Michigan’s 6th District Federal Court. The PBGC has threatened to “default” on our pension plan in the event that the Federal Court finds in our favor. We have a very strong case and the possibility of incorporating the balance of the salaried pension plan and any damages awarded into a public plan such as New York’s is intriguing. If interested background and court proceeding may be found at: http://www.delphisalariedretirees.org/delphi/
OccupyBuffalo grandma

I completely agree with Thomas DiNapoli. Here is what I want to see: More contribution to the pension fund out of public employees’ salaries. Definitely! caps on overtime, if not complete elimination of overtime over the last three years, as partial determinant of the pension. Requirement that the employee not only put in the required number of years but reach age 65. The retired public employee cannot receive the pension while he/she is working at another job after retiring (i.e., no double dipping). Most important: the pension funds must be invested only in municipal or state bonds. No stocks, no hedge funds, no private investment at all. This way the pensions will be funding schools, roads, libraries, etc., as they should be. This also curbs the possibility of anyone making money through fees on the public retirement money.

tom sawyer

I totally agree.

Peter

Pensions, public and private, need to be transportable, predictable, simple and easily available to all people equally, not exclusive to public employees and big companies.

tom sawyer

Lets just fund social security and let everyone draw that.

Geezer

I am the recipient of a public sector defined benefit pension so my interest lies there. I would like to make a couple of points that I rarely hear discussed.

First, my fund is insolvent. During the dot com bubble in the stock market, my fund managers reduced the time to qualify for receipt of the guaranteed annual benefit adjustment (GABA) from 3 years of retirement to 1. At the same time, they increased the GABA from 1.5% to 3%. These increases were not requested by the recipients. I calculated that if I lived for 20 years after retirement, this would constitute a 12% increase in my pension benefit. A group of fund members contacted the fund managers and questioned the actuarial wisdom of such a move and were arrogantly dismissed. Three months later, we received notice in the fund newsletter that the fund was insolvent. The point here is that a careful look at the practices of the fund managers must be done to avoid this kind of reckless management.

Second, I contributed to my defined benefit pension for 30 years. When you retire from a public sector job, that is all you have. A friend started a small business about the same time I started my career. He worked very hard, slowly grew his business and sold it and retired about the same time I retired. He built his business to the point where he is able to retire in a much more lavish style than folks with public sector pensions. The big differences I see in comparing our careers is that his choice entailed great risk where my choice was secure and he also provided employment for others. Some public sector jobs do this and some don’t.

I don’t have any solutions but I did want to point out these two rarely mentioned considerations that ought to be part of the discussion.
Mike

It’s no one’s job or responsibility to to fund my retirement but me. If my employer is willing to do it, but I don’t trust them. I have planned since I started working after school to be able to self fund retirement. Any social security or employer related pension will be a nice bonus but not expected or counted on.

Come on people – take some personal irresponsibility!
Chinamanb

I don’t understand why people will fight to take away something they don’t have from someone else instead of fighting to get it for themselves. Everyone keeps saying that the private sector pays the public pension. While that is true don’t forget that public employees pay a portion into their own pension but also pay the same taxes as you that fund it. Quit complaining about what you don’t have and fight for what you deserve!
johnlee

Good Stuff. On the money!
iamamalted

Finally! Defined benefit financial advantages are being forcefully made known by those who know the facts. The con job that has resulted in dumping DB plans for defined contribution plans and 401(k)s has gone on for too long, with too little opposition.