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:
Educators under attack from Legislature by Kim Cook. Cook, a retired Florida educator, writes about the Florida State Senate’s passage of Senate Bill (SB) 84, which would close the Florida Retirement System (FRS) to nearly all newly hired public employees and place them in an inferior defined-contribution plan instead. Cook shares that SB 84 will harm the teaching profession in the state and raise costs and threaten the retirement security of the first responders who would be allowed to remain in the pension plan under the proposed law. “Although first responders have been excluded from the pension bill, their pension is at risk too,” she writes. “There will be many fewer entering the plan, so funding will drop dramatically. The state is going to have to use more taxpayer dollars to keep it afloat.” A study from the National Institute on Retirement Security (NIRS) on states that closed their defined-benefit plans to new hires proves Cook’s argument. The research examined the experiences of Alaska, Michigan, and West Virginia after they shut off access to their defined-benefit plans. In each state, the unfunded liability skyrocketed following the closure of the plan. SB 84 is now under consideration in the Florida State House, where lawmakers will have to decide whether to pass it onto the governor before the end of the state’s legislative session on April 30.
Retiring While Black by Brian Vines. In an article for Consumer Reports, Vines writes on Black Americans’ challenges in achieving a secure retirement. According to Vines, “83% of Black seniors do not have the assets they need for retirement.” He also notes that Federal Reserve data from 2016 shows that “retirement accounts held by Blacks have little more than a third of the balance of accounts owned by whites,” which can be attributed to “systemic oppression and bias in housing, healthcare access, and educational opportunity, as well as employment and wage inequality.” We’ve previously shared that protecting pensions can help Black Americans achieve financial security in retirement; since Black Americans are more likely to work in the public sector, the rates of pension access are comparable between Black households and white households.
Pension governance and task force plan voted out of Government Operations Committee by Greg Sukiennik. On Wednesday, the Vermont State House Government Operations Committee advanced a bill that would create a task force to study the state’s unfunded liabilities and expand the membership of the Vermont Pension Investment Committee. The task force aims to include public employees from the state retirement systems, making it a departure from the State House’s previous attempt at pension reform, which was drafted behind closed doors and recently shelved due to a lack of input from all the stakeholders involved in the issue.
Four Ways Covid-19 Has Changed Retirement by Carla Fried and Benjamin Curry. The Covid-19 pandemic and the subsequent economic crisis have financially devastated millions of Americans, causing workers who are nearing retirement age to reconsider their plans for their golden years. Fried and Curry’s article in Forbes about the volatile state of retirement today cites research from NIRS, which “found that about half of Americans are now more concerned about their retirement security in light of the Covid-19 pandemic and are considering the possibility of working longer.” The pandemic has also led to many workers weighing on whether they should delay retiring, with the NIRS survey finding “that nearly one third of respondents were rethinking when they plan to retire—and the vast majority of them were considering working for longer.” Thankfully, most public employees who have been on the frontlines of the public health emergency will have access to a defined-benefit pension, which is crucial for them to retire with security.
Be sure to check back next week for the latest news in the fight for a secure retirement!