Welcome to this month’s last 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:
If we want great teachers, we must invest in keeping them by Ed Leavy. In this op-ed for the Hartford Courant, Leavy, President of the State Vocational Federation of Teachers, refuted attacks on Connecticut’s pension system, such as “exploding pension debt.” Because of concessions public employees made in the 2009, 2011, and 2017 State Employees Bargaining Agent Coalition (SEBAC) agreements, the state saved $1.7 billion in the past two fiscal years, Leavy wrote, and pension liabilities have been greatly reduced. These accomplishments were made possible thanks to sacrifices that state employees made. For example, in the technical high school system, educators have had to forego “negotiated raises, seen their health care and pension contributions increase, normal retirement age rise and early retirement penalties double.”
South Carolina Governor Calls for Closure of Defined Benefit Pension by Michael Katz. Katz covered South Carolina Governor Henry McMaster’s proposal to begin enrolling newly hired public employees into a 401(k)-style defined contribution plan instead of the state’s defined benefit pension system. This would be a disastrous move for the state’s public employees because defined benefit pensions collectively pool risk, providing more financial security in retirement. Kentucky also attempted to do this proposal in 2017, and an actuarial report released late last year showed that the move would’ve ended up costing more over the long term.
KY Could Look to Neighbors for Lessons on Teacher Retirement by Nadia Ramlagan. In this article for Public News Service, Ramlagan reported from Kentucky on how the neighboring state of West Virginia could provide valuable lessons for the commonwealth on teacher pensions. “In the early 1990s, the West Virginia Teachers Retirement System closed after decades of underfunding by the state,” Ramlagan writes. “When the state moved to offer teachers 401(k) plans, they were fraught with problems, including lack of diversification in stock options.” As a result, “the 401(k) plan also left thousands of teachers grossly unprepared for retirement.” Ramlagan also shared that when West Virginia teachers were given the option to switch back to a pension system, “nearly 80% of West Virginia teachers made the switch.”
Report: AZ Public Pensions Boost State’s Economy by Mark Richardson. In another article from Public News Service, Richardson wrote from Arizona about how the state’s public pension system boosts Arizona’s economy. Richardson cited research from the National Institute on Retirement Security (NIRS) which found that benefits from pension plans generated more than $7 billion in economic activity in the state in 2016. Additionally, Richardson referenced NIRS research which showed that every dollar that Arizona taxpayers invested in public pensions supported more than $6 in economic activity throughout the state.
Policy Matters: Our retired public servants deserve our support by Ahniwake Rose. Rose, the executive director of the Oklahoma Policy Institute, wrote this op-ed for The Journal Record about why Oklahoma’s retired public employees deserve a cost-of-living adjustment (COLA). Retired public employees in Oklahoma have not had a COLA since 2008, Rose wrote, and “since that time, the general cost of living has gone up by 16% and their cost for health insurance has risen by 42%.” Providing a COLA would not only help Oklahoma’s retirees keep up with the cost of living and medical bills; it would also provide benefits to Oklahoma as a whole. A 4% COLA, for example, “would subsequently inject $44 million into our economy statewide,” Rose wrote. This would be a significant investment in Oklahoma’s economy.
Andy Beshear’s budget fully funds pensions, undercuts legislature’s pension bill by Daniel Desrochers. On Tuesday, Kentucky Gov. Andy Beshear unveiled his proposed budget to the Kentucky legislature, which included fully funding the Kentucky Teacher Retirement System and the Kentucky Employees Retirement System. Desrochers reported from the Kentucky state capitol that “the Kentucky Employees Retirement Systems will receive an additional $56.5 million in the 2021 fiscal year and $63.9 million in the 2022 fiscal year.” The Teachers Retirement System, Desrochers wrote, “will receive an additional $500,000 in the 2021 fiscal year and an additional $14.8 million in 2022.” Unlike plan design changes, such as moving employees to a 401(k)-style plan, funding systems is the most efficient way to alleviate an unfunded liability.
Bill would raise retirement age from 55 to 59½ for Wisconsin Retirement System participants by Riley Vetterkind. In the Badger State, Vetterkind reported for the Wisconsin State Journal on a proposal from the Wisconsin state legislature that would raise the retirement age for members of the Wisconsin Retirement System (WRS) by nearly five years. Under the bill, Vetterkind reported, “retired teachers or other former employees participating in the Wisconsin Retirement System (could) be rehired and work full-time for a WRS employer for up to three years and still collect their pension payments.” However, employees under the age of 40 would see their retirement age increase as a result. In the article, Peggy Wirtz-Olsen, vice president of the Wisconsin Education Association Council, criticized the bill, which would “exempt protective service employees — a male-dominated profession — while raising the minimum retirement age for the primarily female teaching workforce.”
KY lawmakers urged universities, public agencies to leave pension system. None have. By John Cheves. In this article for the Lexington Herald-Leader, Cheves wrote about how lawmakers have not heard much interest in exiting the Kentucky Retirement Systems (KRS) from regional universities and quasi-public agencies in Kentucky. Last summer, the Kentucky legislature passed House Bill 1, which gave regional universities and quasi-public agencies the decision to either leave KRS or pay the entire cost of their employees’ pensions. Cheves reported that around 9,000 Kentuckians work at the affected agencies, and many have expressed concern about their employer quitting KRS and switching to a defined-contribution 401(k) style retirement plan.
Pension plans are no windfall by John Hepp. In this op-ed for the News-Gazette, Hepp rebutted the anti-pension think tank Illinois Policy Institute’s article, “The 1%: Illinois’ pension millionaires.” The Illinois Policy Institute insinuated that a retired public employee who only paid $100,000 into the pension system would receive a lump sum of $1 million in retirement, with most of it coming from the taxpayer dime. However, Hepp refuted these arguments by arguing “that $100,000 was paid in over a working career of many years, possibly 30 years. The investment returns on that $100,000, and the matching funds from the state, would make that original contribution worth a lot more today.” Assuming “an annual return of 7 percent (typical of a portfolio of combined stocks and bonds), the amount at retirement would be closer to $500,000 at retirement,” Hepp wrote. Furthermore, even if someone was owed $1 million in benefits, it would “be paid out over a similar period in the future,” instead of all at once as a lump sum.
Be sure to check back next week for the latest news in the fight for a secure retirement!