Kill Defined Benefit plans. They do not work when run by governments:
The main reason being that there are no funding rules so these plans all morph into pay-as-you-go arrangements at a level of benefits that taxpayers cannot possibly afford to pay so the participants suffer.
This handy chart links to websites and papers (all worth a read) from 28 think tanks that basically agree with that assessment.The chart was put together by the National Conference on Public Employee Retirement Systems (NCPERS) “The Voice for Public Pensions” which is supported by corporations and, according to Union Watch, run by unions:
No report on NCPERS would be complete without documenting just how thoroughly it is dominated by public sector and union operatives. Their president “served 3 terms on the Chicago Fire Fighters Union Local 2 executive board, resulting in two decades of union leadership.” Their first vice president, a retired police officer, “served as the first woman president of her union, FOP Queen City Lodge No. 69, from 2005 through 2015.” Their second vice president “is currently the statewide president of AFSCME Council 67, representing well over 30,000 members in 21 separate political jurisdictions.” Their secretary “has more than 30 years of service as a Tulsa public employee.” Their treasurer “served as a firefighter for 41 years. During his career, he held offices on the board of the IAFF Local 58.” Their immediate past president “is the treasurer of the United Federation of Teachers (UFT), Local 2, American Federation of Teachers (AFT).”
That’s everyone. The entire management team of NCPERS. A government union controlled financial juggernaut, marching in lockstep with the most powerful players on Wall Street. The consequences are grim for the rest of us.
NCPERS, in their code of conduct, requires service providers to, among the usual ‘do-what-is-right’ provisions, “fully disclose all contributions made to entities enumerated in Schedule A that advocate for the diminishment of public defined benefit plans.” Schedule A is that chart with the 28 think tanks and NCPERS is looking to damage their funding because they, to varying degrees, put forth the very sensible proposition that Defined Benefit plans sponsored by governments do not work.
I am not on that list, nor do I get any funding, but here is my attempt to make that list:
NCPERS is a propaganda arm of a dysfunctional public union system that takes as gospel that promises of defined benefits at retirement will be kept even if only a fraction of the true cost of those benefits are being set aside. They should be advocating for Defined Contribution plans where benefits (though not as obviously favoring the older participants who typically populate union hierarchy) will have to be paid in when promised and, outside of investment risk, there would be no ugly defaults.
NCPERS, based on their latest available 990 filing, pays well:
They also provide a pension. In fact, two pensions. There is a Defined Benefit Plan established in 2007 and a 401(k) Plan established in 2006. As of 12/31/15 there were four participants in the Defined Benefit Plan (three of whom were active) and six participants in the 401(k) Plan (four active). However the bizarre twist here is that an organization that advocates for Defined Benefit plans in the public sector and decries all attempts at even a DB/DC hybrid funds the retirements of their own employees primarily through their 401(k) plan.
Of the total assets in both plans over 70% ($677,144 out of $926,211) was in the 401(k) plan. The Defined Benefit Plan to which only $20,000 was deposited for 2015 – compared to $42,718 into the 401(k) – is not the main retirement vehicle and is currently 132% funded. No issues for anyone at NCPERS with getting retirement plan money when the time comes….as there will be for the people NCPERS claims to advocate for.