Welcome to March’s first 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:
Legislators can’t praise hardworking front-line workers while undercutting their retirement fund by John O’Brien. O’Brien writes in an op-ed for the Miami Herald that Florida state legislators have been heralding the work of frontline public employees during the coronavirus pandemic. At the same time, they are also trying to pass a bill that would strip many public employees of their retirement security. Lawmakers are currently considering Senate Bill 84, which would close the Florida Retirement System (FRS) to all newly hired public employees and place them in a riskier defined-contribution plan. A defined-contribution plan does not offer the same amount of security that a defined-benefit plan would because a defined-contribution plan does not pool risk collectively, leaving it more vulnerable to market downturns. Closing FRS to new hires would also harm retired public employees in the state, as the plan would lose a source of future revenue. We think O’Brien is on the right track by comparing this move to “intentionally cutting off the flow of water that maintains Lake Okeechobee, ensuring that farming and regional water use supporting our communities will drain the lake dry, leaving only uncertainty for every person and industry counting on that source of water.”
New report shows Oregon state worker compensation is competitive, thanks to generous benefits by Hillary Borrud. In this article for the Oregonian, Borrud covers a recent report from the Oregon state government’s human resources office on state employee pay and benefits. However, when mentioning public employees’ “generous” pension benefits, the article neglects to note that many retired public employees in Oregon earn a reduced pension benefit due to reforms passed in 2003 and 2019. In 2003, pension benefits were lowered for retired public employees in the first two tiers of the Oregon Public Employees Retirement System (PERS) in order to create a new defined-contribution plan. In 2019, Governor Kate Brown proposed shifting employee contributions in these same tiers to pay down PERS’ unfunded liability, even though the plan was well-funded at 80% at the time. In short, this proposal created “a tax on current public employees,” unfairly impacting public employees’ retirement security. After the state legislature narrowly passed it and the governor signed it into law, it faced various legal challenges before the Oregon Supreme Court ultimately upheld it. Because of these reforms, Oregon’s retired public employees earn 45% of their pre-retirement income, which is lower than several other states and below the 80% of pre-retirement income that experts recommend to retire. The reforms from 2003 and 2019 are helpful to keep in mind before current benefits for Oregon’s hard-working public employees are labeled as “generous.”
Be sure to check back next week for the latest news in the fight for a secure retirement!