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:
OPINION: Alaska state employees deserve to retire with security and dignity by Madeline Holdorf. In her Op-ed for Anchorage Daily News, volunteer state president for AARP Alaska, Madeline Holdorf advocates for HB 55 and HB 220. Since the closing of Alaska’s Public Employees Retirement System and the Teachers’ Retirement System in 2005, Alaskan public-sector workers have only participated in defined-contribution style plans, which has escalated the state’s retirement crisis and caused alarming declines in the recruitment and retention of public employees. Because public-sector workers make modest wages, they cannot contribute as much to their retirement as those working in the private-sector. Alaska’s public employees also do not get to participate in Social Security, making their defined-contribution plans their only source of income in retirement. Pensions are known to provide public-sector workers with a “modest, stable, guaranteed lifetime benefit” to retire with security and dignity. According to the National Institute on Retirement Security (NIRS), the average pension benefit in Alaska is between $1,898 and $2,913. Pensions not only support public retirees in retirement by providing guaranteed income, but they also support the economy by providing 8,778 jobs in Alaska and $1.6 million in economic output. Holdorf urges, “legislators should pass HB 55 and/or HB 220 for the good of Alaska communities and to honor a commitment to our public employees with a retirement that provides independence, security, and dignity.”
Bill to repay PERA wins preliminary approval in Colorado House by Marianne Goodland. House Bill 1029, a bill that seeks to pay back PERA for its 2020 missed payment of $225 million, was passed and won preliminary approval in the House Monday. In 2018, the Colorado General Assembly pledged to chip away at PERA’s unfunded liability with yearly payments of $225 million, as well as an increase to required employee contributions. In response to the pandemic and recession, lawmakers skipped their contribution to PERA in 2020. While the approved payment neglects to repay the $78 million in interest lost since July 2020, this bill highlights the importance of funding discipline in supporting pension plans. States must practice funding discipline for their pension systems, especially during economic downturns. Not doing so can lead to more financial difficulties following the financial crisis. Colorado public employees contributed to PERA with each and every paycheck, so lawmakers must make their promised contributions to ensure that essential public employees are guaranteed a secure retirement.
Best and Worst States for Pensions by Joel Anderson. Yahoo! Finance released an article rating the best and worst states for pensions based on the state’s unfunded liabilities. However, as we have covered with similar reports in the past, articles like these do not accurately report the facts on public pensions for three reasons:
- Unfunded likabilities are taken out of context.
Unfunded liabilities are similar to mortgages in that fact that they are paid off over a determined amount of time and do not need to be paid off all at once. Because some state lawmakers have repeatedly skipped or deferred their required contributions to the pension system, it makes their unfunded liabilities seem larger because there isn’t enough money invested to earn optimal investment returns. Skipping or deferring contributions also threatens a state’s credit rating, making it more expensive to fund future projects.
- Pensions make up a small portion of the state’s overall budget
According to the National Associati0on of State Retirement Administrators (NASRA), public pension spending made up less than five percent of all state and local government spending.
- Public pensions are a benefit to taxpayers.
Research from the National Institute on Retirement Security (NIRS) shows that pensions benefit taxpayers. In 2016, pension benefits supported $202.6 billion in federal, state, and local tax revenue, according to NIRS.
Be sure to check back next Friday for the latest news in the fight for a secure retirement!