Groups representing public employees have suggested the same:
ALEC and TIAA-CREF Join The Assault On Public Pensions
The right-wing American
Legislative Exchange Council has jumped into the conservative effort to
dismantle public pension systems in a big way, making it one of its top
2014 legislative priorities, a public pension advocacy group has
warned. The National Public Pension Coalition, which represents public sector employees, in a statement today
flagged ALEC’s entry into the public pension battle as a threat to the
financial security of millions of state and local public employees. It’s an escalation of the campaign against public pensions highlighted in the Institute for America’s Future Report, “The Plot Against Pensions.”
That report focuses on the work of a foundation founded by John Arnold,
a former Enron executive, and a public pensions project of the Pew
Charitable Trusts to promote the notion that there is a public-pension
“crisis” that can only be solved by substituting these pension programs
for programs that shift risks to workers, eliminate benefit guarantees
and create new profit streams for Wall Street money managers. “Studies”
that take advantage of the Pew reputation as a reputable, unbiased
source of information have encouraged several states to take actions to
privatize their retirement systems that, as the report points out,
leaders in some of those states have already begun to regret.
ALEC set the stage for its own intervention into the public pension debate with a report
in August that encouraged states to convert their public pension
(“defined benefit”) plans into 401(k) plans or other “defined
contribution” plans. The report said that the “unfunded liabilities”
incurred by state pension plans could range anywhere from “$750 billion
to more than $4 trillion.” To address the shortfall, the report
concludes, “There is ample evidence to suggest that legislators should
move from defined-benefit systems to properly designed alternatives,
such as defined-contribution, cash-balance, or hybrid plans.” That report was followed by a paper
issued earlier this month by TIAA-CREF Institute, the research arm of
the Teachers Insurance and Annuity Association–College Retirement
Equities Fund, which markets the kind of plans that ALEC wants states to
move to. That paper was written by an associate of the Laura and John
Arnold Foundation, and asserts that a defined-contribution plan is not
necessarily more expensive for workers and taxpayers than a
defined-benefit pension plan...
1 comment:
Defined-benefit plans are generally structured to be better for people in the last 10–15 years of employment, while defined-contribution plans are generally better for younger employees.
For both systems, it is important to keep putting money into the system at a regular rate, both in flush times and tough times. It is easier to see whether this is being done in defined-contribution systems (like TIAA/CREF). Universities using such systems were not hit by the problems that UC is faced with after about 30 years of failing to fund the defined-benefit plan.
Of course, if a plan is underfunded, changing it from defined-benefit to defined-contribution doesn't help—you need the same amount of money in the plan either way. UC certainly can't duck its obligations by switching over to defined-contribution.
Post a Comment