Welcome to the latest edition of This Week in Pensions! We have gathered the best stories about pensions and retirement security from the previous week. This is the news you need to know in the fight for a secure retirement.
As prices soar, cost-of-living increases for pensions in many states are not keeping up by Gretchen Morgenson. This past October, the consumer price index spiked an annual rate of 6.2%, up from 0.1% in May. This is its highest level in over 30 years. In this piece for NBC News, Morgenson examines how this recent rapid inflation is hurting public pension recipients. As the basic costs of living skyrocket, the monthly pension benefit of retirees stays the same, leaving many of them struggling to cope. “When we talk about retirees from public pension plans, inflation is affecting the purchasing power of the retirement benefit they’re receiving,” says Alex Brown, research manager at the National Association of State Retirement Administrators. “And without the presence of any adjustment for inflation, this depreciation in purchasing power can affect the adequacy of that retirement benefit.”
Board of Education hears about workforce struggles by Jim Sabatoso. This week, the Vermont Board of Education listened to testimony about severe staffing shortages for K-12 schools at their monthly board meeting. Executive directors of the Vermont Superintendents’ Association and the Vermont Principals’ Association both proposed potential solutions to the state’s problem that involved improving Vermont’s pension system. “In terms of recruitment and retention, things don’t look great. Nationally and in Vermont, (fewer) teachers are coming into the field, more teachers are leaving the field earlier and in Vermont, we also have the disadvantage of having the weakest teacher pension and retirement program in the Northeast. We pay less on average than the states around us with the exception of Maine,” said Jay Nichols, executive director of the Vermont Principals’ Association. As we’ve discussed previously, defined-benefit pensions play a crucial role in recruiting and retaining competent and qualified public employees, who often make less in the public sector than they would in the private sector.
Marin Voice: Protect pensions for teachers, public employees in Marin by Fran Rozoff. In an op-ed for the Marin Independent Journal, Rozoff, who recently retired after nearly 20 years teaching in Marin County, argues for preserving pensions as a valuable tool for recruitment and retention. Citing a recent report by Nari Rhee, the director of the retirement security program at the University of California, Berkeley Labor Center, Rozoff notes that public employees of the same education level earn 17% less on average than their private-sector counterparts. Defined-benefit pensions, says Rozoff, are the best way to make up for this difference: “The most efficient and effective tool we have to help offset this wage discrepancy is a defined benefit pension. These pensions provide secure retirement income and powerful incentives to keep skilled workers in public service, at about half the cost of a comparable 401(k) benefit.”
We’re taking next Friday off for the holiday, but be sure to check back in December for the latest news in the fight for a secure retirement!