Topeka 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.