Welcome to the latest edition of This Week in Pensions! This is the news you need to know in the fight for a secure retirement. We have gathered the top stories about pensions and retirement security from the previous week.
National News
According to a new study by BlackRock’s Emergency Savings Initiative, access to emergency funds as modest as $1,000 can serve as a buffer preventing lower-income workers from dipping into their retirement savings. Results indicated that families without adequate emergency savings are 13 times more likely to make hardship withdrawals from their retirement funds. Early withdrawals often compound financial losses with the combination of fees and lost interest, which undermines retirement security. The research also found that workers with emergency savings were 70% more likely to contribute to their defined contribution plan. Unlike defined benefit pension plans, 401(k)-style defined contribution plans rely on individuals to manage and plan their investments, leaving most participants vulnerable. Defined benefit pensions are risk pooled and guaranteed for life.
State News
[Alaska]
The National Institute on Retirement Security (NIRS) released a comprehensive report on the effect of eliminating pension benefits on recruiting and retaining public employees. Alaska Teacher Recruitment and Retention Study: Options and Analysis Supporting Retirement Plan Design comes on the heels of a legislative session that saw Senate Bill 88, a bill that would provide pensions to eligible state and local government employees, stall out in the Senate Finance Committee, rolling it over into next year’s session. The study sheds light on the relationship between the 2006 closure of the Teachers Retirement System (TRS) and the recruitment and retention rates of public school educators in Alaska. It revealed that retirement benefits play a vital role in the overall employment package, and determined that teachers who were hired under the defined-benefit plan exhibit a higher retention rate, highlighting the importance of reliable retirement offerings–such as defined benefit pensions–in retaining qualified educators. The study also notes that states that offer a pension component have higher teacher retention rates.
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