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.
Efforts to once again offer defined-benefit pensions to public employees in Alaska continue to play out in the media. This week, Alaska Public Pension Coalition leader Chuck Kopp, a former legislator and retired Alaska police officer, wrote an op-ed for the Anchorage Daily News in support of House Bill 22, Senate Bill 88, and the state lawmakers who are going to bat for the retirement security of public employees. Both bills are, “the latest in a decades-old effort to respond to the overwhelming data documenting the public safety crisis in Alaska,” Kopp writes, “where more than one-third of our communities have no law enforcement at all, and only one trooper exists for every 1,000 square miles.” SB 88, which aims to provide defined-benefit access to all public employees, sponsored by State Senator Cathy Geissel, has yet to be heard by the Senate Labor and Commerce Committee. However, last Tuesday, HB 22, a bill designed to provide pensions to public safety workers, was sent into subcommittee after its first committee hearing. In Alaska, according to Kopp, there are “staggeringly high vacancy rates in all public service agencies,” meanwhile, public employees do not qualify for Social Security benefits. Since 2006, all newly hired state workers have had to rely solely on their 401(k) investments for retirement income, and now a severe recruitment and retention crisis has taken root. Alaska’s experience is a lesson for other states looking to make this devasting switch.
Over recent years, we have seen an increase in anti-pension legislation in states–many of them considering switching public employees to defined-contribution plans as a supposedly cheaper retirement option. However, a report released by the National Institute on Retirement Security (NIRS) earlier this year found that defined contribution style plans, such as 401(k)s are more costly than defined-benefit pension plans. Dan Doonan, NIRS Executive Director, said, “Pensions have economies of scale and risk pooling that just can’t be replicated by individual savings accounts. This means pensions can provide retirement benefits at a much lower cost.” According to the study, the cost of the DB plan would be half that of the DC plan. In other words, a DC plan would cost the equivlent of 32% of employee pay, while a DB plan would e half that amount,16.5%, to have the same result. “These cost differences are a key consideration for employers and policymakers given that most Americans are deeply worried about retirement and retirement savings levels are dangerously low for the typical U.S. household,” said Doonan.
In Jacksonville, Florida, four of the six mayoral candidates are in agreement that the city needs to return to a defined-benefit pension system in order to recruit and retain Jacksonville’s most critical public employees, including firefighters and police officers. In 2017, City Council supported then-Mayor Lenny Curry’s pension reform efforts, which raised taxes and compelled the municipality’s workers to enroll in 401(k)-style retirement plans instead of guaranteed pensions. Noting the sheriff’s office’s inability to recruit and retain enough officers, candidate LeAnna Cumber said, “The 401k simply isn’t working.” Candidate Al Ferraro said the city has been losing money onboarding officers who take their training and head to other municipalities with better benefits–like pensions. He said Jacksonville needs to reestablish “some type of pension plan” for police, but also to consider corrections officers and city linemen. Sounds like prospective city leaders in Jacksonville knows what we know–pensions recruit and retain essential employees.
Be sure to check back next Friday for the latest news in the fight for a secure retirement! For now, sign up for NPPC News Clips to receive daily pension news from across the country directly to your inbox.
