Public Pensions

Reader comment on: Underfunded State Pension Plans

Submitted by J.Johnson (United States), Oct 4, 2010 14:07

It is interesting, indeed somewhat astounding, that the Federal Govt. was a leader in moving away from defined benefit pensions toward defined contributions. The federal defined benefit plan was eliminated for most new federal employees hired after 1986, although employees already in the plan were allowed to remain in it. New employees after 1986 were (are) put into a sort of hybrid plan which is primarily, although not completely, a defined contribution plan where employees' contributions are matched up to a certain level by employer contributions and employees can choose several investment options for the funds. No doubt it is still a better deal for employees than most private sector defined contribution plans, but it was a big step in the right direction and was a step that most states have not taken with their pension plans for teachers and other public sector state/local employees. I suspect that inaction at the state and local levels is due primarily to the strength of teachers unions, police unions and other state and local unions that have little impact at the federal level because, in general, federal law prohibits unions representing federal employees from collective bargaining in the areas of wages and benefits. California, Illinois and New Jersey are the big canaries-in-the-coal mine on this issue, with Pennsylvania and several others not far behind. www.pensiontsunami.com has good coverage of what's happening.

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