Welcome to this week’s edition of This Week in Pensions! This is the news you need to know in the fight for a secure retirement.
Before you dive into our top stories from this week, check out some stories of public employees helping their communities during the coronavirus pandemic.
Here are the top stories from this week:
Pension Reform for the New Normal Economy—Examining Colorado’s Successful Model by Zachary Christensen. In this blog post for the pension skeptical Reason Foundation, Christensen examines how the Colorado legislature passed legislation impacting the Colorado Public Employee Retirement Association (PERA) in 2018. The final bill, which was intended to bring the system to 100 percent funded status in 30 years, included increasing employer and employee contributions, capping cost-of-living adjustments (COLAs) at 1.5 percent for retired public employees, and the legislature appropriating a yearly $225 million payment to the system. While Christensen is correct that these adjustments have positively impacted PERA’s funded status, he neglects to mention that it was possible because the process involved parties impacted by the bill’s terms. If state lawmakers are going to consider making changes to a system, the employees who pay into the system with every paycheck and the system itself must contribute to the negotiations. Furthermore, Christensen also neglects to mention that bills like the one passed in Colorado are only successful if every participant holds up to their end of the bargain. In June, the Colorado legislature skipped a supplemental $225 million contribution to the system that it previously agreed to due to the coronavirus-induced economic crisis. Now more than ever is the time for state legislatures to uphold the promises they’ve made to public employees and practice fiscal discipline during this economic crisis.
Conservative Think Tank Calls for NYC Pension Reform by Michael Katz. Katz writes for Chief Investment Officer about a new report from the Manhattan Institute, a conservative think tank, which argues that all future public employees in New York City should be switched from a defined-benefit plan to a defined-contribution plan. This recommendation is a terrible idea for both employers and employees, as defined-contribution plans like 401(k)s are more expensive to implement than defined-benefit plans and these plans also do not offer the same amount of security in retirement. Ideas like this one should also be taken with a grain of salt because it was proposed by a special interest group that has previously attempted to undermine public employees’ retirement security.
Retirement, It Is A-Changin’ by Charlie Nelson. In this article for the Street, Nelson writes on how the COVID-19 pandemic is changing retirement in America. Nelson cites a recent study that shows that 54 percent of employed Americans are planning on working in retirement, with 40 percent of them saying they plan on continuing to work in retirement to meet unexpected costs. This is one reason why protecting pensions is so important. Because pensions are not subject to the whims of the market, unlike 401(k)s, they provide income that retirees can count on if they face unexpectedly higher financial costs in retirement.
Retirement Readiness Gaps Have Widened in 2020 by John Manganaro. Manganaro writes for Plan Sponsor about this year’s edition of the Wells Fargo Retirement Study, which examined how the pandemic has impacted readiness for retirement. The study found that the pandemic has disproportionately impacted female and Generation Z workers. Women affected by the pandemic have saved less than half the amount that men have, for example, and 52 percent of workers in Generation Z say they do not know if they’ll be able to save enough to retire due to the pandemic. Most public employees, however, still have access to a defined-benefit pension, which can help close the retirement gap between men and women and are proven to help recruit and retain younger generations in the public workforce.
Be sure to check back next week for the latest news in the fight for a secure retirement!