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.
Before you dive into our top stories from this week, make sure you check out stories of public employees helping their communities.
Here are our top stories:
Topeka correctional officer: Moving state employees from KPERS to thrift savings plan is wrong for Kansas by Ben Soza. In his Op-ed for the Topeka Capital-Journal, former Marine and current Kansas correctional officer Ben Soza denounces SB 553, a bill that seeks to switch all future Kansas public employees to a thrift savings plan. We have covered why defined-contribution plans, like the one created in SB 553, are never in the best interest of public employees. These 401(k)-style plans do not provide an adequate retirement benefit and are not suitable for public employees who often make less than their private-sector counterparts. Soza writes, “Throughout my career in public service, I made much less than my counterparts in the private sector–this is a known fact for almost all public employees. In the public sector, the pay isn’t great, but we do receive a pension—a promise that we’ll be able to retire with dignity after our careers.” Not only would this move exacerbate the current recruitment and retention issues already existing in the state, it would also hurt the state’s finances and taxpayers’ pockets, costing Kansas $6.7 billion over a 30-year period.
Pensions Key to Labor Department’s Retirement Savings Campaign by Austin R. Ramsey. While the U.S. Department of Labor continues to evaluate how to address the retirement security crisis, one theme continues to rise–that public-sector pension plans are still the best vehicle for providing an adequate retirement benefit to workers. In a meeting on Monday, Secretary of Labor Marty Walsh and his retirement security advisor Kathleen Kennedy Townsend met with the United Federation of Teachers Union, a kickoff of several planned discussions on retirement security. While 401(k)-style plans seek to fill a void that private-sector pensions are leaving behind, they’re failing at providing adequate security in retirement. According to the Bureau of Labor Statistics, only about 16% of private-sector workers have access to a pension plan, compared to the 86% working in the public sector. There are many benefits to pensions where 401(k)s typically fall short. In this article, Nick Dmitrovich discusses the findings in an analysis by the National Institute of Retirement Security (NIRS) on the differences between defined-benefit pensions plans, compared to defined-contribution plans. The report concluded that traditional pensions have “a 49% cost advantage stemming from longevity risk pooling, higher investment returns, and balanced investment portfolios.”
Equable Institute Issues Retirement Security Policy Scores for Oklahoma House Bill 2486 as Passed in the House and Amended in the Senate by Equable Institute.On Monday, Equable Institute issued a Retirement Security Score for Oklahoma House Bill 2486. HB 2686 seeks to re-open the Oklahoma Public Employees Retirement System (OPERS) that was closed to newly hired state employees in November 2015. After OPERS closed, recruiting and retaining state employees became difficult. Lawmakers believe re-opening the pension system will help to attract and keep more public employees because pensions provide better retirement security for employees, and make up for lower income, compared to higher private-sector worker incomes. Equable scores the two versions based on a flawed comparison. While the Senate version does increase the contribution rate for participants to 10%, resulting in more savings into their retirement account, it still leaves public workers at risk for outliving their savings. The House version would provide a secure defined-benefit pension that would ensure retirees receive a modest benefit that is guaranteed for life.