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:
Here’s what a President Joe Biden would mean for Americans’ retirement savings by Alessandra Malito. NPPC’s executive director, Bridget Early, was quoted in this story in Market Watch about what decisions President-elect Joe Biden would make on retirement security. Early commented that “there’s more information available based on what a Biden administration would want to do for retirement security versus the current administration.” Some of the actions the administration could take include allowing caregivers to make “catch-up” contributions to their retirement accounts, since caregivers sometimes have to leave the workforce and stop making contributions to their retirement plans, along with providing tax breaks to small businesses that would allow them to offer retirement plans for their employees more easily.
These Pension Reforms Are Needed to Deal with the Crisis by Michelle Jones. In this article for Value Walk, Jones cites a report from the Institute for Pension Fund Integrity that misleads the reader with the claim that public pensions are in a state of “crisis,” requiring states to take dramatic action. First, the vast majority of public pensions are well-funded and are structured to withstand market volatility. For example, a recent report from the Center for State and Local Government Excellence and the Boston College Center for Retirement Research showed that the average funded ratio for local plans in the fiscal year 2020 was 70.8 percent, and 72.4 percent for state plans, which is roughly the same as they were in the last fiscal year despite the coronavirus-induced economic slowdown. Second, states legally cannot declare bankruptcy unless, as the article mentions, Congress passes a law that would allow them to do so. The odds of such a bill passing Congress and being signed into law are incredibly remote, especially with the likelihood of a divided Congress to exist in January. This kind of inflammatory, incorrect fear-mongering is not helpful for our nation’s retired public employees.
Boomers vs. Millennials: A Look at the Financial Gap Between Generations by Cameron Huddleston. In this article for Yahoo Finance, Huddleston writes about the financial gaps between the baby boomer and millennial generations. One area where less of a gap exists, however, is retirement. Many baby boomers and millennials cannot count on defined-benefit pensions in the private sector anymore because “as of 2016, just 18% of private-sector workers had access to a pension plan.” Furthermore, both generations are also not saving enough to prepare for retirement, as “39.2 percent of millennials have less than $10,000 saved for retirement compared with about a quarter of boomers.” Thankfully, most public employees still have access to a defined-benefit plan. According to the National Institute on Retirement Security (NIRS), 73 percent of state and local employees say they would be more likely to leave their job if their pensions were reduced, making pensions a critical tool for recruitment and retention that need to be protected now and in the future.
Be sure to check back next week for the latest news in the fight for a secure retirement!