If you’re a regular reader of This Week in Pensions, our weekly wrap-up of the latest pension news, you may have noticed a common theme in our last two editions: public employees advocating for the preservation of pensions. From California to North Dakota, Vermont to Alaska, public employees are worried about threats to their pensions and the broader implications of these threats.
Anne Adasiak-Andrew’s letter to the editor argues that Alaska’s teacher recruitment and retention issues have an easy solution. We’ve written about it before: Alaska is a cautionary tale for states and municipalities looking to close their pension systems and switch to a 401(k)-style plan. After closing its Public Employees’ Retirement System (PERS) and Teachers’ Retirement System (TRS) in 2005, Alaska has had difficulty recruiting and retaining public employees, including teachers and state troopers. The recruitment of teachers costs the state roughly $20 million a year, and some school districts have to offer $3,000 signing bonuses to recruit new teachers. The Alaska Department of Safety also cites the lack of defined-benefit pensions as a barrier to recruiting state troopers around the state. Our one-pager on the difference between defined-benefit plans and defined-contribution plans shows how defined-contribution plans provide less retirement security while also costing more money for administrators.
In an op-ed for the Marin Independent Journal, Rozoff, a recently retired Marin County teacher, argues for preserving pensions as a valuable tool for recruitment and retention. 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.” Our document on recruitment and retention highlights states and municipalities that made the mistake of converting employees to defined-contribution plans.
Ellie Shockley, a political psychologist, social scientist, and education researcher in North Dakota, wrote to The Bismarck Tribune cautioning the legislature not to make changes to the established pension system too quickly. While legislators consider the impact of changing public employees from a defined-benefit pension to a defined-contribution plan, Shockley warns that this essentially would amount to a pay cut for employees. In our 401(k)s: America’s Failed Experiment video, we dive into exactly how inadequate defined-contribution plans are at providing a secure retirement and how they weren’t designed to be a primary vehicle for retirement in the first place.
Finally, the Vermont Board of Education listened to testimony from the Vermont Superintendents’ Association and the Vermont Principals’ Association about severe staffing shortages for K-12 schools. “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. Our Pensions on Main Street video shows how strong defined-benefit pensions keep competent and qualified public employees in their jobs.