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Archive for Thursday, April 21, 2011

Kansas Gov. Sam Brownback predicts 401(k)-style pension plan for new teachers, government workers

April 21, 2011, 12:57 p.m. Updated April 21, 2011, 4:14 p.m.

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— Kansas Gov. Sam Brownback predicted Thursday that his state will move toward a 401(k)-style pension plan for new teachers and government workers and said it’s necessary in dealing with long-term funding problems facing their pension system.

The Republican governor favors such a move, and he said during an interview with The Associated Press that he expects legislators to either set up a study commission that will recommend the change or pass a bill this year that creates a 401(k)-style plan for new public employees.

Brownback said the state could eventually have a “hybrid” pension system for new teachers and government workers in which they choose between a 401(k)-style plan or a traditional one guaranteeing benefits up front based on an employee’s salary and years of service. Or, he said, the state could require new hires to join a 401(k)-style plan, as legislation approved by the state House would.

The Kansas Public Employees Retirement System, or KPERS, projects a $7.7 billion shortfall between anticipated long-term revenues and the benefits promised to retirees and current public employees. The House and Senate have approved separate plans for addressing the problem, and their negotiators are scheduled to meet Monday to begin work on a final plan.

Public employee groups strongly oppose a move toward a 401(k)-style plan, in which a retiree’s benefits are based on investment earnings, fearing it means less financial security. But supporters of the move question whether the state can sustain its traditional plans, and Brownback noted that legislators have been wrestling with long-term KPERS funding issues for two decades.

“It’s not as if it hadn’t been worked on for a long time, and that’s why I think for new folks coming in, we’ve just got to get to a different system,” Brownback told AP.

Brownback has avoided endorsing specific pension legislation, having asked lawmakers to draft a plan. In his comments Thursday, he seemed confident that Kansas will at least start a hybrid plan.

“On new people coming in, I think you’re looking at a new system of some type,” Brownback said.

Critics of 401(k)-style plans for public employees note that even if the state starts one, it will have to eliminate the long-term funding gap in existing plans. They argue that pushing workers into a 401(k)-style plan will rob older plans of employees’ contributions, making any funding shortfall worse.

“I still don’t understand why the governor doesn’t understand that,” said Jane Carter, executive director of the Kansas Organization of State Employees.

Public employee groups have pushed legislators to commit the state to making larger annual contributions to KPERS to close the long-term funding shortfall, arguing that shorting contributions for years caused much of the problem. Brownback agreed the state must “get the resources” to meet its obligations to public employees under their current, traditional plans.

Both the House and Senate plans increase the state’s annual contributions to KPERS, starting July 1, 2013. The House plan commits an additional $10 million a year, while the figure is $23 million under the Senate bill.

The Senate proposal increases the percentage of salary that most existing and future employees would have to contribute to KPERS. It sets up a commission to study other changes, including a potential move toward a 401(k)-style plan for public employees.

Senate Majority Leader Jay Emler, a Lindsborg Republican, agreed that the commission will probably recommend a 401(k) plan or hybrid for new public employees. He said the goal in setting up the commission is to get strong guidance from outside the Legislature.

“We will have a lot better input,” Emler said.

The House bill starts a 401(k)-style plan and makes it mandatory for teachers and government workers hired on or after July 1, 2013. Other workers could join that plan — and would have their future benefits cut if they don’t.

Brownback said that if legislators opt to create a study commission, he expects it to recommend either the House proposal or a hybrid plan with a 401(k)-style option.

“I think you’re looking one of those two coming out of the commission — if that’s the final bill that passes — or we’ll see what happens on the House’s proposal on KPERS,” Brownback said.

Carter accused Brownback of trying to “strong-arm” a commission even before it begins a study.

“It seems like a pretty swift and iron hand to me,” she said. “I’m alarmed by it, and I think the general public should be as well.”

The House pensions plan is HB 2333. The Senate's plan is Senate Sub for HB 2194.

Comments

pace 2 years, 11 months ago

Can's we just send our money directly to Koch brothers and leave Brownback out of it? I hate dealing with middlemen.

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tomatogrower 2 years, 11 months ago

Read about how the legislature has been milking the KPERS system for a long time. Why hasn't LJWorld reported on this? I wonder if their 401's will get calculated on pay they didn't actually get and pay they really don't deserve anyway? Their KPERS should only be calculated on what they were actually paid, not some cooked up figure. Read this story about their little "perk".

http://www.hutchnews.com/Todaystop/kpers-and-leg-2--2

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Paul R Getto 2 years, 11 months ago

http://www.nakedcapitalism.com/2011/01/gingrich-touting-state-bankruptcy-bill-to-gut-pensions.html The real, long-term agenda is to let states get out of the pension business and just dump the whole thing. "Former House Speaker and possible GOP presidential contender Newt Gingrich is pushing for federal legislation giving financially strapped states the right to file for bankruptcy and renege on pension and other benefit promises made to state employees…Mr. Gingrich discussed the proposal in a Nov. 11 speech before the Institute for Policy Innovation, an anti-big-government group based in Lewisville, Texas. " You-know-who gives supports this effort.......... http://tpmcafe.talkingpointsmemo.com/talk/blogs/d/a/david_seaton/2010/08/the-koch-brothers.php Ah, KochKansas, where the unicorns and the billionaires play. Will the last person leaving please turn out the lights?

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chrac8 2 years, 11 months ago

I have worked for the State 35 years. Put my 4% in for 35 years and you better damned well believe that I am going to get my share that I put into KPERS...the State promised they would match that money when I hired on in the 70's. That was the "BIG Benefit" of being with the State. Now they are wanting to back out because the "Powers that be" pay themselves more than anyone should make. We PUT these people into office to HELP us out of this mess and NOW he wants to take AWAY what is RIGHTFULLY ours. WE worked long and hard for that money. And if this Governor can't think of any better way of decreasing the debt than by taking away money that is already rightfully a STATE workers that has been VESTED in Kansas then it is pretty sad.

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chrac8 2 years, 11 months ago

I have worked for the State 35 years. Put my 4% in for 35 years and you better damned well believe that I am going to get my share that I put into KPERS...the State promised they would match that money when I hired on in the 70's. That was the "BIG Benefit" of being with the State. Now they are wanting to back out because the "Powers that be" pay themselves more than anyone should make. We PUT these people into office to HELP us out of this mess and NOW he wants to take AWAY what is RIGHTFULLY ours. WE worked long and hard for that money. And if this Governor can't think of any better way of decreasing the debt than by taking away money that is already rightfully a STATE workers that has been VESTED in Kansas then it is pretty sad.

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William Weissbeck 2 years, 11 months ago

No mention by the Gov about increasing the workers' pay so that they have something to contribute to their retirement. Otherwise, it's a pay cut. What's the match going to be - dollar for dollar up to 4 percent? And doesn't this just go to show that for most a retirement fund is both impractical and a pipe dream? The theory behind the defined benefit plan is that the employer by pooling all the resources can do a better job at investing and assuring the employee's retirement. Well if KPERS failed at that, then how is the employee supposed to do any better? In order to save for retirement you have to be paid enough to have real disposable income to save and invest.

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Blessed4x 2 years, 11 months ago

My brother works for a police department and has KPERS. I sat down the other day and did some rough calculations. He'll be retiring in 2 years at 52. If he lives another 25 years (hopefully) he'll receive somewhere in the neighborhood of $750,000 in pension money. To date, he has paid in slightly less than $50,000. Does anyone else see a problem here? These pensions are simply unsustainable. As people live longer and more and more people get on the government dole, these pensions are going to become a bigger and bigger burden on those of us that are footing the bill. The participants are contributing nowhere near enough to cover the benefits they are likely to receive no matter how well they are invested. If a 401k is good enough for me and the rest of the private sector, it's good enough for government workers. I should not be paying for their retirement as I have my own to worry about. Accept some responsibility over your own future.

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Jimo 2 years, 11 months ago

How typical.

Exactly when employee-benefit experts are warning that the 401k style experiments have failed, Kansas comes along and wants to start(!) such a system.

Employers love such schemes as it makes their obligation to fund employees' retirement go away on the cheap, leaving them more cash. Woow! It's bad enough when some money-sucking corporation does this but for the government itself to do so is horrific.

Underfunded elderly people are a ticking social time-bomb that will end up costing future taxpayers even more! After all, poverty is as anti-growth and anti-prosperity as anything out there.

Repeal your damn tax cuts and start paying for civilization.

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jafs 2 years, 11 months ago

I wait, in vain, for Dave Trabert, to provide a list of safe ways to invest in the stock market.

According to his post, there are "lots of safe ways" to invest in it.

By the way, if that's true, then employers (or the state) can just invest their pension plans in those safe ways, and provide defined benefit plans, can't they?

If not, why not?

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pittstatebb 2 years, 11 months ago

Erdie -

Q. How many of the fortune 100 companies offer a pension plan to employees?

A. 17 (in 1985 it was 89/100)

http://www.towerswatson.com/press/1956

Q. Which type of retirement plan will offer a private employee a better retirement on average, defined benefit (pension) or defined contribution (401k)?

http://online.wsj.com/article/SB10001424052748703959604576152792748707356.html

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Eride 2 years, 12 months ago

Simple fact is, KPERS is a system funded by taxpayers and why should the taxpayers be paying for a system (pension plans) that even the most blue chip corporations have long since jettisoned for not making financial sense? Almost no one in the state has a pension plan besides government employers (and the odd union here and there). There is absolutely zero reason why millions of KS taxpayers should be paying for an insanely expensive benefit that almost none of them get in their own jobs. A benefit that even the best non-public companies long ago got rid of because they are insanely expensive to run.

It doesn't make sense. Public employees need to buck up and realize this is the trend that is happening and instead of fighting the inevitable fight to make sure they get the best terms possible for the new order.

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One_Name 2 years, 12 months ago

Sorry, I meant blood-sucking leech, as opposed to a passive, osmosis-type "leach".

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One_Name 2 years, 12 months ago

I signed up and started working at the state pen almost 3 decades ago. It wasn't a fun place. Now, I'm a leach on society, because the promise they made is coming due. Go figure.

Guess I'm the fool.

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Stuart Sweeney 2 years, 12 months ago

If you really want to see an abuse of the KPERS retirement look to the knotheads (aka Representatives) in Topeka. They make 30 Grand plus or minus as reps. With 10 years in Topeka the Grand Poobahs draw a pension based on a salary of 90 GRAND from KPERS. check it out!!

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toe 2 years, 12 months ago

This common sense effort to fix KPERS is long over due. Of course, it was inevitable. The old system was unaffordable 30 years ago.

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DeaconBlue 2 years, 12 months ago

I'd give them a social security style pension plan paid for within their own little ponzi pool.

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Richard Heckler 2 years, 12 months ago

"Brownback said the state could eventually have a "hybrid" pension system for new teachers and government workers, in which they choose between a 401(k)-style plan or a traditional one guaranteeing benefits up front based on an employee's salary and years of service. "

That is dangerous talk. He might open himself up to prosecution.

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Richard Heckler 2 years, 12 months ago

Every sale of stock on the stock market includes the disclaimer: "the return on this investment is not guaranteed and may be negative"--for good reason. During the 20th century, there were several periods lasting more than 10 years where the return on stocks was negative.

After the Dow Jones stock index went down by over 75% between 1929 and 1933, the Dow did not return to its 1929 level until 1953.... 24 years.

In claiming that the rate of return on a stock investment is guaranteed to be greater than the return on any other asset would be lying.

I say double the input to Social Security Insurance for a secure portion of retirement. Then everyone is free to gamble anyway they choose beyond Social Security Insurance. Tuning the entire nation over to white collar criminals in Wall Street and the Insurance industry is not too smart.

Brownback brought D.C. beltway politics to Kansas like it is an addiction. Wonder where Brownback has his personal investments?

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IgnorantYokel 2 years, 12 months ago

I support a 401(k)-style plan. It will work best if the State encourages the teachers and government workers to invest in low-cost target retirement funds or a balanced portfolio of index funds.

Defined-benefit pensions are archaic and unsustainable. Clearly.

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consumer1 2 years, 12 months ago

"401(k)-style plan or a traditional one guaranteeing benefits"

Boy that statement takes alot of base, balls. You mean like the current system guarantee's benefits?

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average 2 years, 12 months ago

I'm in favor of going defined-contribution. Don't get me wrong.

But, the transition is ugly. Without new teachers (and firefighters, etc) putting money into KPERS, it brings the day of reckoning for the underfunding problem to a 'right damned now' budget issue, not a 'down the road' growing monster.

Which is why this will have a hard time getting passed. It's not like there wasn't a GOP supermajority in the Statehouse when Graves or Hayden was in office who couldn't have passed a defined-contribution plan back then. But, the GOP kicked the can down the road then, and I suspect many of them will vote to do so now.

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Dave Trabert 2 years, 12 months ago

The unfunded liability is far worse than the $7.7 billion figure mentioned. That figure does not include $1.7 billion in losses already incurred but which don't have to be reported yet. KPERS also acknowledges that the 8% future investment return is probably too high and dropping it just a half point adds another $1.3 billion to the deficit. So the real plan asset value with a 7% investment return puts the unfunded liability at $12 billion.

We (Kansas Policy Institute) published a comprehensive review of KPERS (available at http://kansaspolicy.org/ResearchCenters/BudgetandSpending/BudgetandSpend... which shows that employees with 35 years of service can retire with at least 61% of their Final Average Salary and don't have to pay state income tax on KPERS benefits. They also receive Social Security. The income tax benefit to KPERS recipients is estimated at $52 million per year; KPERS agrees with the logic used to make that estimate.

Fully funding the state/school portion of the plan would require $247 million MORE this year - not total - MORE funding. That number only gets worse in coming years. KPERS estimates that contributions would hit $1.9 billion by 2033 unless changes are made.

Most taxpayers have a 401(k)-type retirement plan (if they have anything at all). Taxpayers shouldn't be expected to provide government employees with benefits that are multiple times better than what most people get. Would it be nice to have higher retirement benefits? Sure, but we simply can't afford it. By the way, 401(k) plans are as risky as the individual allows them to be. The employer doesn't decide how to invest the money - the employee does, and there are lots of safe ways to invest money through 401(k) plans.

KPERS payments by individual are (only) available at http://www.kansasopengov.org/Retirees/tabid/793/Default.aspx

The highest payout in 2010 was a City of Olathe Police & Fire member who took home a one-time payment of $531,642 and monthly payments totaling $50,388. The high payout in 2009 was a Lawrence school district retiree with a one-time payment of $607,435 and receives an annual pension of $60,000. And didn't have to pay state income tax.

Debating what could or should have been done differently in the past doesn't change the reality of being $12 billion underwater today. Absent serious reform of KPERS, the amount left over to fund schools, social services and everything else will start dropping precipitously in a short time.

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Richard Payton 2 years, 12 months ago

BrewDog is serving viagra laced beer just in time for the Royal wedding. Hope Brownback keeps his mouth away from this beer.

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guesswho 2 years, 12 months ago

Part of the reason social security is becoming broke is because of two important demographics: 1) people are leaving way longer then they used to and 2) we have a bulge in our population known as the baby boomers. There are fewer younger workers working to support the older ones in retirement.

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notanota 2 years, 12 months ago

Countdown to Koch's paid mouthpiece telling us why this is a great idea in 5...4...3...

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nschmi04 2 years, 12 months ago

Kansas is in trouble. We have elected ideologues at every stop. They are ripping women of their rights, voter rights and now government workers rights. This is what you get when you elect C Street douchebags like Brownback.

We are only a generation or two away from the obsurdity that is Brownback. Hopefully he succumbs sooner than later. What a zealot P.O.S.!

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David Albertson 2 years, 12 months ago

I love it. You put a percentage of your salary in to an account and they'll match a percentage of that. A percent of a percent? You're "retirement benefit" is a percent of a percent? On top of that, your funds will be invested in to the stock market where 50% of your retirement can evaporate overnight. (And don't get me started on where that money actually goes). And then...........And then..............they want seniors to pay another $6500 out of pocket for their healthcare while at the same time giving another Trillion dollars worth of tax breaks to the wealthy.

Give me a break. It's pretty obvious who's interests they're protecting. It's not the comman man that's for sure.

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