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:
Reduce spending first through reforms, not cuts by the Las Vegas Review-Journal Editorial Board. In this editorial, the Las Vegas Review-Journal Editorial Board argues that Nevada Gov. Steve Sisolak should move all public employees participating in the state’s Public Employees’ Retirement System (PERS) to a hybrid retirement plan to shore up the state’s budget due to the coronavirus-induced economic crisis. This would not solve the state’s fiscal problems. Moving public employees out of a defined-benefit plan can raise costs by leading to higher unfunded liabilities, additional fees to administer other retirement plans, and employee turnover, which increases training costs. Reducing benefits by shifting to a hybrid plan would also damage the state’s economy. According to the National Institute on Retirement Security (NIRS), state and local pension spending supported 27,401 jobs and $4 billion in total economic output in Nevada in 2016. Policymakers in Nevada should practice fiscal discipline and ensure PERS receives optimal funding because changing it to a hybrid system would not solve its budget gap.
Pensions boost economy, generate revenue by Ted Cox. In this article for One Illinois, Cox writes about an updated study from the National Conference on Public Employee Retirement Systems (NCPERS), which shows how pension spending is a critical asset for both the economy and tax revenue. The report found that, in 2018, public pension spending contributed $1.7 trillion to the national economy and $341.4 billion in state and local tax revenues. In Illinois specifically, Cox writes, “the $21 billion in pension checks paid out in 2018 wound up contributing $52.8 billion to the economy and generating $9.7 billion in revenue.” As the COVID-19 pandemic has demonstrated, it’s more important than ever to protect pensions’ ability to stimulate the economy and provide tax revenue, as many states (like aforementioned Nevada) will face budget shortfalls heading into the next fiscal year.
Study: People Living Longer; Lifetime Income Strategies Needed by Business Wire. This article from Business Wire sums up a new study from the Longevity Project, which shows how increased life expectancy impacts retirement outlook. According to the Longevity Project, “the average American turning age 65 today can expect to live 40% longer than someone who turned 65 in 1950.” This creates new challenges for retirees looking for ways to have enough income to last through retirement, as more recent retirees tend to either withdraw money too quickly because they overestimate their expenses or underspend because they are concerned about depleting their income. If only there was a retirement plan that could guarantee income during retirement, ensuring retirees do not have to worry about meeting their basic needs in their golden years…wait, there is one! Thankfully, most public employees still have access to a defined-benefit pension plan, which ensures they can retire with the security and dignity they deserve after serving the public.
(P.S. We will not publish This Week in Pensions next Friday, November 27, due to the holiday, so be sure to check back next month for the latest news in the fight for a secure retirement).