Welcome to the latest edition of This Week in Pensions! We have gathered the best stories about pensions and retirement security from the previous week. This is the news you need to know in the fight for a secure retirement.
Here are the top stories from this week:
How Republican Governor Matt Bevin Lost Teachers and Lost Kentucky by Katie Reilly. On Tuesday, Andy Beshear declared victory over incumbent Gov. Matt Bevin in the Kentucky gubernatorial race. While Bevin has not yet officially conceded in the race, Beshear outpaced him by about 5,000 votes. What helped push Beshear over the top? Bevin’s attempts to gut teachers’ hard-earned pensions mobilized educators from across the state, writes Katie Reilly for TIME Magazine. “Kentucky was one of several red states that saw mass protests last year by educators who were fed up with years of education budget cuts and low pay,” Reilly wrote. “In Kentucky, teachers called in sick to protest the passage of a bill overhauling the state’s public pension system, arguing it left educators with less generous retirement benefits and would further discourage new teachers from entering the profession.” Following these protests, educators turned their organizing energy to the governor’s race, and it appears as if their hard work has paid off.
Cost-Sharing Features Can Help State Pensions Manage Economic Uncertainty by Greg Mennis & Aleena Oberthur. Mennis & Oberthur use the public retirement plans of Tennessee and other states that include cost-sharing features to argue that these features do a better job of managing economic uncertainty than traditional defined benefit pensions. In reality, the cost-sharing plan in Tennessee was not an ideal solution for public workers. On our blog in September, we pointed out that the new plan increased the retirement age, increased employee contributions, started a defined contribution plan for newly-hired employees and gave fund managers the ability to freeze cost-of-living adjustments for retirees, reducing retirement security for Tennessee’s public employees.
Pension vs. 401(k): What’s the Difference? By Roger Wohlner. In his article for The Street, Wohlner examines major differences between defined benefit pension plans and defined contribution plans such as 401(k)s. While Wohlner gets many details correct about the differences between these retirement plans, he falsely claims that the underfunding of pension plans “is an all-too-common problem across the country,” citing his state of Illinois. Most public pension plans are well-funded and their funding levels are improving; states like Illinois’ public pension system are the exception, not the norm when it comes to funding levels. In these states, politicians skipped making contributions to the pension system, often for decades. Learn more in our pension FAQ.
Be sure to check back next week for the latest news in the fight for a secure retirement!