Welcome to this month’s final 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:
Overhaul to Texas state government employees’ retirement accounts advanced by House by Shawn Mulchay. On Wednesday, the Texas State House passed Senate Bill (SB) 321, which proposes closing the state’s Employees Retirement System (ERS) to newly hired public employees and enrolling them in a cash-balance retirement plan instead. According to Mulchay’s piece in the Texas Tribune, lawmakers in the State Senate have until Sunday to approve or reject the bill. As we’ve covered before, cash balance plans attempt to combine features of a defined-benefit plan with a defined-contribution plan but often fail to create retirement security for hard-working public employees. Cash balance plans are not structured in the same way that a defined-benefit plan is. For example, defined-benefit plans operate under a structured formula that allows them to pay out a modest monthly benefit. Depending on how a cash balance plan is organized, workers pay into individual retirement accounts with pay credits and service credits. When an employee retires, these credits determine one’s retirement income, which the retiree can withdraw as a lump sum or as an annuity. Last week, Tanisha Woods, a correctional officer who has worked for the state for the past 12 years, wrote that eliminating the defined-benefit pension would also make it more difficult for Texas to recruit and retain highly qualified public employees. “If you care about having a high-quality state workforce, Texas needs this benefit to compete for good workers,” she stated. “Adding uncertain benefits to the low pay will make it harder to hire and keep staff, especially at the Texas Department of Criminal Justice, which is already woefully understaffed.”
Average Retirement Savings in the U.S.: $65,000 by Jack Caporal. Caporal highlighted the average retirement savings for Americans in an article for the Motley Fool, which illustrates how, even before the onset of the coronavirus pandemic, most workers do not have adequate retirement savings. Caporal cites data from the Board of Governors of the Federal Reserve System that show the average retirement account savings for American households was $69,500 in 2019. While this number may sound like a lot, experts recommend that to retire with security, a worker has to be able to pay themself 80% of their pre-retirement income when they retire. This data conveys the importance of protecting pensions for the dedicated public employees who devote their careers to serving their communities, as a pension can guarantee economic stability in retirement.
Be sure to check back next month for the latest news in the fight for a secure retirement!
