Traditional pensions are still the most efficient way of guaranteeing retirement security for workers. The economy benefits too, as pensions are a highly efficient source of financing that ultimately provides income and jobs for others. If states go the route of replacing them with 401(k)-style plans, it will end up costing them more in the long run.
There’s also an adverse impact to society when Americans, after a career of working hard to provide for their families, become vulnerable and angry because they could not retire with dignity.
These are the conclusions shared by a panel of state leaders and policy experts at a press briefing yesterday at the National Press Club. Participants took turns separating fact from fiction on budget and policy proposals regarding defined benefit pensions.
Leading the panel was New York State Comptroller Thomas P. DiNapoli who called Gov. Andrew Cuomo’s proposal to create a new pension system – including an optional 401(k)-style account for newly hired workers – “unacceptable.”
“I am a firm believer that defined contribution systems are simply not adequate,” he said. “In times of fiscal distress, we should be focusing on ways to strengthen public pension plans, not take them away.” He reminded everyone that “New York has one of the strongest pension funds in the country because it has been managed and funded responsibly over the years.”
North Carolina State Treasurer Janet Cowell decried the fearmongering and the tendency by some states “to react with broad, drastic changes that could negatively impact defined benefit systems that are working well.” She called for “thoughtful, fact-based conversations on a state by state basis to determine what the best plan is for public workers.”
“The existing public pension system has provided retirement security for tens of millions of workers,” added Dean Baker, co-director of the Center for Economic and Policy Research. “There is no reason that it cannot continue to do so for decades into the future.”
Hank Kim, executive director of the National Conference on Public Employee Retirement Systems, pointed out that the public pension model is “a key pillar for retirement security” and can be extended to the private sector.
Lending an eloquent voice to those who don’t have retirement security was Dolores Bresette, a retired Rhode Island state worker and a member of AFSCME Retiree Chapter 94.
“I contributed 9 percent of my salary to my pension fund during the 37 years I worked for the state,” she said. “Now, after years of saving and preparing for my retirement, so much of what I and thousands of other public workers were promised by the state is being taken away. I am angry – angry that something like this could happen when I played by the rules all of my life.”
Rhode Island cut the cost of living adjustments to state workers’ pensions. To Bresette, that adds up to approximately $70 a month.
The press briefing was sponsored by the National Public Pension Coalition of which AFSCME is a leading member.
The Coalition engages in state-based activities in support of public employee defined benefit pension systems.
Reprinted with permission from AFSCME Greeline Blog.