Alabama has strong public pensions. The Retirement Systems of Alabama manages assets of over $37 billion and annually pay out close to $3 million in benefits. RSA earns strong returns on their investments, while having the lowest investment costs in the public pension industry. Yet despite the strength of the public pension system, anti-pension ideologues in Alabama are pushing for changes that would gut the retirement security of Alabama’s teachers, firefighters, and other public employees.
One of the key players here is the Pew Charitable Trusts. Pew is a large organization, involved in a lot of areas of research. One of their projects is called the “Public Sector Retirement Systems Project.” Over the past four years, and continuing until 2019, this division of Pew has received almost $10 million in funding from John Arnold. While Pew purports to be a neutral research organization, the research they have published and the advocacy they have pursued has been hostile to traditional defined benefit pensions- just like John Arnold. Specifically, Pew strongly advocates for what is called a “cash balance plan.” We’ll have more to say on cash balance plans in the coming weeks, but they are a remarkably unsuccessful way of ensuring retirement security for public employees. However, despite the weakness of these plans, Pew has been advocating for them, not just in Alabama, but also in Kentucky, Virginia, and other states.
Last year, the Alabama legislature created a study commission to examine potential changes to Alabama’s public pension system. The commission is still meeting and has made no recommendations so far, but it has heard testimony from Pew in favor of a cash balance plan. It’s too early to say what the commission will do, but a recommendation to transition to either a cash balance plan or a 401(k)-style defined contribution plan would be a blow to the retirement security of Alabama’s public employees. Alabama has a strong pension system: there’s no need to change it just to appease the ideological beliefs of John Arnold and the people he pays to promote his views, like Pew.