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.
Being Reactive Instead of Proactive is Costly
In an article for Forbes, Dan Doonan, Executive Director of the National Institute on Retirement Security (NIRS), discusses the recent decision by North Dakota to close its Public Employees Retirement System (PERS) defined benefit plan for new hires starting in 2025. The legislature has been underfunding the pension plan since 2003, causing its funded ratio to fall 68 percent. Doonan emphasizes the critical importance of lawmakers ensuring proper and full funding of pension plans every year. This commitment is crucial in supporting these plans’ long-term health and sustainability while preventing pension systems’ turmoil and potential closure. However, instead of addressing the underfunding issue, future generations of North Dakota workers will bear the burden of this decision, costing billions of dollars. Michigan, for example, closed its State Employees Retirement System plan in 1997 and has incurred over $300 million in additional costs over the past 24 years. Doonan warns that closing a pension plan can also harm the recruitment and retention of workers, as seen in Alaska, where defined contribution plans have led to higher turnover and quit rates compared to closed pension plans. North Dakota may face similar challenges in the future as a consequence of its decision, further underscoring the need for a proactive approach that prioritizes the financial well-being of pension systems rather than resorting to reactive measures like plan closures, which can have far-reaching negative implications for workers and the state.
The Student Loan Crisis Impacts Retirement Security for Many
A recent article highlights the alarming surge in student loan debt and how its impact jeopardizes the retirement security of Generation X–the next generation to retire– in the US. With the cost of college rising continually since the early 80s, student debt has reached an all-time high. Student loan debt has impacted Gen X’s ability to contribute consistently to their retirement, putting their future financial well-being at risk. Unless action is taken, an entire generation may reach retirement age without sufficient savings, and it sets a precedent for the generations to follow. It’s crucial to ensure that student loans don’t become insurmountable obstacles to attaining a secure retirement.. One benefit of working in a state or local government position is that many public employees are eligible for the student loan forgiveness program, further highlighting the many benefits of working in public service.
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