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 our blog where we recognized 500 stories of public employees helping our communities.
Here are the top stories from this week:
Vermont Needs A Defined Contribution Plan For Retirees by Bill Huff. Earlier this year, the Vermont state legislature proposed several changes to the state’s pension system that would have unfairly fallen on public employees to lower its unfunded liabilities. These modifications would have included increasing employee contributions and the age to retire, as well as eliminating cost-of-living adjustments (COLAs). However, the legislation was tabled on April 2 in favor of creating a task force to study addressing Vermont’s unfunded liabilities. Now, in an op-ed for the Caledonian Record, Huff proposes another idea that would also be detrimental to public employees’ hard-earned retirement security: moving all newly hired public employees into a defined-contribution plan while closing the defined-benefit pension plan. Those who promote this view argue that closing a defined-benefit plan will lower costs, but the experiences of states that have implemented this change show that the opposite occurred. In West Virginia, the state re-opened its Teacher Retirement System (TRS) in 2005 when it discovered that TRS could provide better retirement benefits at half the cost of its defined-contribution plan. Policymakers can avoid these consequences by maintaining a defined-benefit plan and ensuring they make their required contributions to the plan, just as our dedicated public employees do with each and every paycheck.
Milliman analysis: Public pension funding tops 80% for first time in over five years by Milliman, Inc. On Wednesday, the consulting firm Milliman, Inc. released the findings from the second quarter of this year’s Public Pension Funding Index (PPFI), which shows that the funding levels of public pensions remain strong despite the past year’s coronavirus pandemic and its subsequent economic downturn. The index, which tracks the 100 largest defined-benefit plans in the country, reveals that the estimated funded status of the plans increased from 79% at the end of March 2021 to 82.6% at the end of last month. While some claimed that the economic crisis would negatively impact public pensions, this recent data illuminates that pensions are resilient and able to withstand the ups and downs of the markets for their beneficiaries.
Be sure to check back next week for the latest news in the fight for a secure retirement!