Archive for Friday, September 25, 2009

Parkinson dismisses moving KPERS to 401(k) model

September 25, 2009

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— Gov. Mark Parkinson signaled Friday that he opposes moving Kansas toward 401(k)-style pension plans for teachers and government employees.

Parkinson’s administration is studying ways to deal with long-term funding problems faced by the Kansas Public Employees Retirement System. But he dismissed the idea of getting away from guaranteeing benefits based on employees’ salaries and years of service, regardless of KPERS investment earnings.

“I don’t think that’s out there,” Parkinson said. “You talk to most folks who have 401(k) plans right now, and they’re sitting at about half of what they were last year.”

The Democratic governor’s comment puts him at odds with Republicans who control the Kansas House. GOP House leaders want to consider 401(k)-style plans, at least for new teachers and government employees.

“We’ve got to look at some other options with KPERS, because what we’re doing right now is not working,” said House Speaker Mike O’Neal, a Hutchinson Republican.

At the end of 2008, the projected gap between income and expenses over the next 25 years was $8.3 billion, according to KPERS.

In a recent report, the Center for Applied Economics at the University of Kansas suggested that the state move away from its current plans toward 401(k)-style plans.

Supporters contend such plans make it easier to control costs, because benefits ultimately are tied to investment earnings. They also argue that workers, particularly younger ones still decades away from retirement, will receive better pensions.

Critics are skeptical, especially because of many Americans’ experiences with their 401(k) plans in the past year. They also argue teachers and government workers accept pay that’s lower than it is in private industry because their pensions are secure.

The University of Kansas report raised eyebrows by describing KPERS as “fundamentally flawed” and “bankrupt.”

Even some officials who agree with the report, like O’Neal, won’t go that far. State Treasurer Dennis McKinney, a Democrat who serves on the KPERS Board of Trustees, called such descriptions “reckless.”

Parkinson also said KPERS is far from bankrupt, adding, “The issue is really 15 to 20 years from now.”

State officials say pension plans generally are treated legally as contracts between employees and employers, limiting the options for closing the long-term KPERS funding gap. Parkinson said the state won’t — and can’t — cut the benefits of current retirees.

Parkinson said he sees nothing wrong with the basic design of KPERS plans if they’re adequately funded.

“The problem is that we just haven’t adequately funded this over the years,” he said.

Comments

redfred 5 years, 6 months ago

That's one of the first intelligent things that Parkinson has had to say about KPERS.

Dear Mr. O'Neal - " because what we are doing right now is not working". That's the problem, the legislature is not doing anything. Start funding the states portion and start making payments plus interest on past years defaulted payments and maybe things would start to turn around.

somebodynew 5 years, 6 months ago

redfred - +2. Spot on, the legislature is the main part of the reason this system isn't working right now. Find a way to do what you have been supposed to do for years, then come back and ask to change the system.

Bob_Keeshan 5 years, 6 months ago

Mike O'Neal is either ignorant or completely disrespectful towards his employees.

The reason KPERS has issues is because of large losses in the market.

Of course, if the state switched to 401(k)s then those losses would just be “touch luck” for employees.

But then what do you expect from a guy who pays his secretary more than employees who actually manage state programs and pays his chief of staff a $20,000 signing bonus?

Hypocrite. At least he got his wife a job on the state payroll to go with her job on the State Fair's payroll.

Hypocrite. A 401(k) but only for new state employees? How about for all current legislators? Perhaps Mr. O'Neal doesn't want to give up the KPERS boondoggle legislators get where their earnings over 4 months of work are "annualized," granting then an average salary 3 times their actual pay.

Dan Eyler 5 years, 6 months ago

The middle class tax payer doesn't owe state employees a retirement. We don't owe state employees a guaranted return on their investments. This KPERS system is going to fail and the state is going to disappoint a lot of people. if the state wants to contribute a minimal amount of money to state employees retirement is fine and fair within reason. But the tax payer is not an insurance fund that assures any return on state employee retirements. Where does anyone get off expecting anything else.

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