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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

David Albertson 3 years, 8 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.

Neomarxist123 3 years, 8 months ago

You're absolutely right. Everybody should get a guaranteed pension paid for by the.. you know.. the.. um...

And that's the problem. Politicians promise us money ten years from now for our vote today. Be it a pension, or lifetime health care, or social security, or any of the other promises. But there is not enough money to fulfill those promises.

So realistically - they have to do something like this. Private industry figured this out decades ago and, unfortunately, so now has government. Or at least one party of government.

David Albertson 3 years, 8 months ago

If pensions were operated they way they were intended they wouldn't go broke. Social Security is going broke because politicians from B-O-T-H parties have raided the account.

As long as we keep cutting taxes, the government will stay in the red.

notanota 3 years, 8 months ago

Part of the reason Social Security will run into problems in about twenty years is because they cap payments at $100,000. If they ended that practice, it wouldn't completely fix SS, but it would go a long way.

bethann 3 years, 8 months ago

Since there is a cap on how much SS one can receive then why shouldn't there be a cap on how much one contributes? Otherwise, it's simply an income redistribution scheme.

jafs 3 years, 8 months ago

There is, in fact, I believe that's what nota was talking about.

They only collect SS taxes on the first approximately $100,000 of income.

notanota 3 years, 8 months ago

Because otherwise they're looking at means testing the payments, and that's far more of an income redistribution scheme. If you've reached the benefit cap, as I plan to do, you can enjoy your retirement knowing that you don't have higher crime and healthcare costs and lower worker productivity associated with retirees unable to care for themselves.

notanota 3 years, 8 months ago

This sounds suspiciously like what professional private-industry jobs offer. I wonder if they want to start offering the same salary those jobs offer, too...

deec 3 years, 8 months ago

Will employees be allowed to opt out, since they are unable to do so currently? If government wants ti emulate private industry, then employees should be allowed to decline participation.

notanota 3 years, 8 months ago

That, too. Also they get raises and bonuses during good revenue collection years, since government is supposed to be run like a business.

notanota 3 years, 8 months ago

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

CreatureComforts 3 years, 8 months ago

If I took a drink everytime the name "Koch" was mentioned on this website, I would have died from alcohol poisoning oh so long ago. It's getting really old and cliche...

notanota 3 years, 8 months ago

I'm sure Dave Trabert doesn't think it's so old and cliche when he cashes his paychecks and plugs his biased website, for which he does, indeed, have a Koch to thank.

guesswho 3 years, 8 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.

David Albertson 3 years, 8 months ago

That's exactly why the SS tax should go up.

jafs 3 years, 8 months ago

Actually, it's why the system should be re-structured.

scott3460 3 years, 8 months ago

Actually isn't that exactly the problem fixed by the last reform?

notanota 3 years, 8 months ago

Except that the people living longer are the ones who least need the SS. Professionals are living longer. Coal minors and factory workers are not.

jafs 3 years, 8 months ago

That's why it needs to be re-structured.

I'd like to see separate collection ended (since they don't actually keep the money for SS anyway), and retirement supplementation implemented.

That would mean that those who need it get it, and those who don't wouldn't get it.

notanota 3 years, 8 months ago

There's more public buy-in when we all know it's a system we pay into and we all know it's a system from which we can receive benefits. If it's simply welfare for old people, widows, and orphans, it's going to get scaled back and back and back every time John Birchers get elected, and eventually there will be nothing left.

jafs 3 years, 8 months ago

But it's unsustainable as a Ponzi scheme.

And, it would be like fire, police, and emergency services - they're available if you need them.

We don't seem to mind paying into those systems (unequally), using them if needed (unequally), and we're generally happy if we don't need them at all - I haven't heard anybody complain that their house didn't catch on fire, so they couldn't use the fire department's services.

notanota 3 years, 8 months ago

It's not a Ponzi scheme. Bernie Madoff didn't tell people that if they paid around 5% of their earnings up to $100k or so for their entire working career that they'd get around $1000 a month forty years from now.

It's a worker's insurance and retirement system that doesn't promise miraculous results. It needs a few tweaks in the next twenty years to make sure what we pay in matches what we pay out, but it doesn't require an ever-expanding base of current workers in order to pay retired beneficiaries, and it won't even completely dry up if we did nothing.

One fix I would like to see, beyond removing the 100k cap, is an end to the employer contribution portion. We should just tax everyone a mandatory 10% and remove the self employment penalty from the table. I doubt that would be a popular move, however.

jafs 3 years, 8 months ago

It is a Ponzi scheme, if current revenue is spent on current benefits, which is what's happening, since they spent the trust fund money on other things.

It absolutely requires that more people pay in than take out, which is why boomer retirement is an issue.

I would much prefer to see it become a government service like the ones I mentioned, and stop collecting separately, since they don't actually keep the money separate.

The way it works now is absurd by any reasonable standards.

notanota 3 years, 8 months ago

Actually, no. Paying current benefits from current workers does not make it into a Ponzi scheme. It makes it a pay-as-you-go system. You don't need a massively larger number of payers than you do payees, but it is vulnerable to demographic changes, like say, a bunch of retiring baby boomers.

Even so, we've got the next twenty years covered, and the baby boomers are retiring right now.

jafs 3 years, 8 months ago

You may be right.

So, why not just structure it as I suggest, which would also be a PAYG system, and much more sustainable and less expensive over time?

The fact that they've taken the money out of the fund and spent it on other things is absurd, and should bother everybody.

jafs 3 years, 8 months ago

Nope.

Not when the politicians take the trust fund and spend it on other things.

Richard Payton 3 years, 8 months ago

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

Dave Trabert 3 years, 8 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.

jafs 3 years, 8 months ago

But ignoring how the system got into trouble isn't a good idea either.

And waking up today suddenly saying "We're broke!"

I'd like to see your list of "safe" ways to invest in the stock market, by the way.

average 3 years, 8 months ago

"and don't have to pay state income tax on KPERS benefits"

Because KPERS contributions are specifically subject to state income tax. Like a Roth IRA w.r.t. state taxes. Until you stop being doggedly disingenuous about things like that, people tend to dismiss all of your arguments as drivel. And this is coming from someone who is pro-defined-contribution... on your side.

Dave Trabert 3 years, 8 months ago

No, they are not. KPERS will tell you that retiree payments are not taxable for state income purposes and it's right in the State income tax instructions. Employee contributions to the plan are made with after-tax dollars and shouldn't be taxed when withdrawn. But employer contributions and earnings on investments make up about 75% of total payouts and are NEVER taxed for state income purposes. It's all explained in greater detail in the study on our web site.

Gedanken 3 years, 8 months ago

KPERS contributions are taxed by the state, but not by the federal government. The payments from the system are not taxed by Kansas, but they ARE by the federal government. If you move to another state while receiving benefits from KPERS then they will be taxed by the state you moved to as income.

Who cares if the employer (state) contributions aren't taxed? Would employer contributions be taxed if it was a private company and it was sent to a 401K? I don't believe so. At any rate - if they were - then it would be another example of b.s. accounting that you are so fond of pointing out.

You like to pick extreme examples and use it as a prime example of how the system is broken. However - these are the exceptions to the rule. How about you start quoting average figures or median figures on payouts?

Finally, state employees are employees - not indentured servants. They put time in to work, they do a job and these are the benefits that they were promised. This double standard when it comes to who the employer is not right. States are EOE just like the private industry ... you want better benefits or pay - you can switch.

average 3 years, 8 months ago

Employer contributions to KPERS aren't subject to state taxation mostly because it's ridiculous for the state to pay taxes to itself. They generally don't do that. Consider it a 0.28% additional contribution to the KPERS fund. It would be the same difference. Gains aren't taxed since it works like a Roth 401k (where gains aren't taxed federally). Oh, yeah, except that the state pockets the difference when a KPERS retiree retires in another state and can't take the income exemption.

coloradoan 3 years, 8 months ago

Wrongo - the KPERS contributions are added back in on Schedule S for the K40 form, specifically so they can be taxed.

coloradoan 3 years, 8 months ago

You're being disingenuous again - you are trying to focus attention on the untaxed pension payouts ("retiree payouts"), when the poster you replied to was talking about the contributions paid into the system by employees. You seem to be either be confused or to be intentionally trying to confuse the argument. Stick to the facts and we can have a reasonable discussion.

On the Fed level, there are two options. One, you take pre-tax dollars and put them into a 401(K), and then get taxed on the payouts, OR you put in after-tax dollars into a Roth IRA, and get proceeds without Fed taxes. In either case, taxes are paid on one end of the process. You appear to be arguing that on the state level, employees should be taxed on both ends of the transaction. Help me out here, what am I missing?

notanota 3 years, 8 months ago

You're missing some way to claim you're lowering taxes for everyone else by charging it to teachers twice.

jafs 3 years, 8 months ago

Still waiting for your list of safe ways to invest in the stock market.

notanota 3 years, 8 months ago

Dave prefers the stork method of posting. Dump a bunch of worthless material and then fly off until the next time he gets a Google alert about KPERS.

notanota 3 years, 8 months ago

Ah yes, right on queue, paid Koch mouthpiece.

notanota 3 years, 8 months ago

If Kansans shouldn't be expected to pay retirement benefits that are better than the private sector, they're going to have to increase wages in order to retain quality employees, since deferred compensation and job stability are both being taken off the table in recent years. That is, unless your goal is to make sure we only hire from the bottom end of the job pool. Is that your goal?

The whole thing reminds me of the recent story of the landlord who is attempting demolition of his historic property by neglecting it until the city has no choice but to let him bulldoze it.

It's also a transition nightmare, since you couldn't end KPERS for people currently in the system, so you'd just be paying out without having new people paying in, but I suppose that's not Brownback 's problem, since he'll have long since left to enjoy a cushy retirement himself.

average 3 years, 8 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.

notanota 3 years, 8 months ago

I'm sure they'll figure out a way to stop paying retired teachers at that point, too.

IgnorantYokel 3 years, 8 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.

jafs 3 years, 8 months ago

Sure.

Because the stock market is such a reliable way to save for retirement.

Richard Heckler 3 years, 8 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?

Richard Heckler 3 years, 8 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.

jafs 3 years, 8 months ago

Based on what exactly?

Offering employees a choice can't be illegal, can it?

average 3 years, 8 months ago

It was due 30 years ago, yes. But what is different in Topeka now than during the Graves' years? If they couldn't pass it then (not because of political pressure, but because the transition problems were more immediately ugly and expensive than the status quo), why do we think it can pass now?

Stuart Sweeney 3 years, 8 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!!

average 3 years, 8 months ago

Another reason it hasn't been passed in the past, despite plenty of GOP majorities. Kicking out the legs of the KPERS stool (i.e., not having new members pay in) endangers the knotheads' expected gravy train.

One_Name 3 years, 8 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.

One_Name 3 years, 8 months ago

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

Eride 3 years, 8 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.

coloradoan 3 years, 8 months ago

False. KPERS employees contribute 4% of their pay upfront, and are still taxed on that contribution. This is done with the expectation/promise that the state will contribute funds to meet future obligations. We have "bucked up", it's the Legislature that has failed to fund the system in line with the promise made to employees at the time of signing on.

average 3 years, 8 months ago

6% for those hired more recently, with crappier payouts.

jafs 3 years, 8 months ago

So should the state follow the private sector in other ways, like outsourcing labor, and keeping wages low relative to costs of living, etc.?

People who have made long term employment decisions based on the promise of KPERS to retire on shouldn't see that disappear - they don't have the chance to go back in time and make different decisions.

New employees, if given all of the information up front, can make their own choices.

And, it's obvious that companies would prefer for the employees to take the risk in the stock market, rather than the company guarantee the retirement benefits, but that doesn't make it right.

By the way, if employees can do well in the stock market for their retirement, then the companies could also do the same for pension plans, no?

pittstatebb 3 years, 8 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

jafs 3 years, 8 months ago

Interesting articles.

The second one, though, mentions some details that make me think that people are also making some funny decisions.

The guy and his wife both have 401K's, his well into the six figures, and she'll have a small pension as well. If you have a $500,000 chunk, and you invest it, getting say 5%, that would generate about $2,000/month without cutting into the principal.

Add her chunk, their SS, and her pension, and they should do ok, except for the fact that they still have a "large mortgage", according to the article. People used to buy a house in their 30's, and pay it off, so that when they retire, they don't have a mortgage payment.

Also, people shouldn't necessarily expect to maintain the same lifestyle they had while working - again, traditionally, people scale down into smaller homes, live more modestly, etc.

pittstatebb 3 years, 8 months ago

True, but I wish for the days of 5% CD's again. If you know of such a place please let me know.

I also agree that the 85% of FAS is probably high. In another article I read, it was suggested that you should try for 85% of your take home pay instead of gross salary.

jafs 3 years, 8 months ago

I don't know of any right now.

But, I'm figuring that a pretty conservative stock market investment could get about 5%/yr. average.

Mutual funds invested in bonds, or something like that.

jafs 3 years, 8 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?

Dave Trabert 3 years, 8 months ago

Most 401(k) plans offer a variety of mutual fund investments which operate very much like a money market fund. The rate of return is low but that's the trade-off for security. There are also some US Treasury funds and some municipal bond funds that are very safe.

But that's not the solution for a defined benefit plan. Even if the money was all safely invested, the cost to provide the benefits are much higher because the formula in the DB plan provides very generous retirement benefits. Very few private sector workers have retirement plans that, combined with Social Security, provide an income roughly the same as they had when working. If they want to have a retirement income equal to their working salary, they have to have a lot of personal savings to supplement their 401(k).

jafs 3 years, 8 months ago

All investments in the stock market come with the disclaimer Merrill quotes.

Some are lower risk, and offer lower returns, like the ones you mentioned.

Companies could easily invest pension funds in those investments, and offer defined benefit plans, as long as the promised benefits are in line with the appreciation. The problem you mention is one of over-promising benefits, over-optimistic ideas of appreciation, and insufficient contributions by the state to the program, as well as flawed investments (pension plans should never be invested in things like sub-prime mortgage backed securities, as they're obviously too risky).

The fact is that they, and you, would prefer that employees take the risk in the stock market, rather than employers.

notanota 3 years, 8 months ago

No, no, silly. He doesn't want you to invest in the stock market, because money market funds would be in deep doo-doo if we had another crash like the toxic asset mess we had recently. I'm sure that part was an accidental suggestion. Investments in the government are safe, though. You heard the man.Treasury bills and municipal bonds. Because we can trust the government to pay its debts.

coloradoan 3 years, 8 months ago

You keep harping on the comparison between private and public sector benefits, without also addressing the fact that the private sector gets bonuses in good years, as well as raises. The state employees have not had Step increases in eight-and-a-half years. No raises, no bonuses, nada. When I worked in retail we got bonuses and Christmas dinners. In consulting, the pay was tremendously better, and one could have surplus to invest in an alterntive retirement plan; not so with the state.

notanota 3 years, 8 months ago

Look what the stork brought in.

Hmm, if treasury funds and municipal bond funds are safe, that seems to say that the government can pay back investments, like say, the investments state employees make in a deferred compensation plan where they earn less money now and retire in more security later.

If you want to change that, aside from the very messy and expensive taxpayer funded transition, you're going to have to change the deferred part of the compensation. More compensation now that employees can then put into these theoretically safe investments (which wouldn't be so safe if people continued to starve the government in exchange for lower tax rates on the upper class.)

Jimo 3 years, 8 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.

Blessed4x 3 years, 8 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.

pittstatebb 3 years, 8 months ago

You are correct and incorrect. You are correct that the employee should pay more (which new hires are doing, but probably not as much as they should).

You are incorrect that I as a public employee do not pay for your private employee retirement. Your money (wages and benefits) do not grow on trees. They come from my and millions of others buying of your products or services. It is similar to my salary and wages coming from your and millions of others paying taxes. When money leaves my and your pocket it goes to two places, taxes or consumption. We are able to control both to a certain extent, although admittedly it is easier to control consumption than taxes without relocation.

notanota 3 years, 8 months ago

Is a 401k really "good enough" for you and the rest of the private sector or just as good as you can get from many private employers in exchange for higher total compensation?

Dave Trabert 3 years, 8 months ago

If you want to truly compare government and private sector workers, let's count it all. According to the state's own salary survey, most government workers are at or very near comparable private sector pay levels. State workers retirement is many times better than private sector, they pay much less out-of-pocket for their health care, have more sick leave, much more paid leave and enjoy much greater job security. Sure, there are exceptions, but there really is no comparison for the vast majority.

coloradoan 3 years, 8 months ago

More leave? How's that? The Feds get two more holidays (Presidents Day and Columbus Day), and about one more week of annual leave. Local private businesses get Presidents' Day and Columbus Day, and some get Good Friday. State does not.

The rest of your generalizations also do not match up to reality. Re-stating them over and over does not make them true. I have significant out-of-pocker costs for my health care, and my retirement is sketchy at best.

notanota 3 years, 8 months ago

The one on the Kansas government website? Hmmm "Based on the Hay Group’s finding that the State is, on average, 9% behind market..." I'm assuming, based on the date of the study, that the plan was never implemented and the wages remain below market. I'm not a state employee, but the ones posting here seem to think they haven't gotten a raise in a while.

I suspect if you corrected for experience and education level, you'd find above average health benefits on the low end of the public pay scale and typical health benefits on the high end. It would be in line with the benefit packages I've seen for the KC area, but it makes for easy skewing for propaganda purposes.

Paid holidays vary by industry, even within the public sector. I'm guessing a bank teller has more paid leave than an KNI worker, for instance. And more stability these days. Oops. They probably also get stock options, holiday bonuses, commissions, and other compensation simply not found in the public sector.

And again, you want to include retirement as part of that package - that was my point exactly! Retirement IS part of that package, and people make career decisions based on the idea that they're deferring their compensation for retirement.

barlowtl 3 years, 8 months ago

A portion of his pay has been deferred and used by the state for however many years he worked & contributed. In lieu of a higher salary the state also agreed to contribute a % to that fund. Retiring at 52 is not the usual for civil service, life expectancy for both police and fire in gereral is shorter than average. Neither my brother nor my cousin would have lived to enjoy any retirement if they had waited tilll 65. They were both firemen. If you are ever in a burning building & happen to meet a fireman risking his life to get you out be sure to tell him how lucky he is to be getting such a good deal on his retirement and also mention that your taxes are paying his salary. Meanwhile, tell your brother I thank him for his service and I hope he lives a long well deserved retirement. Sadly there are too many in his profession who don't.

Jimo 3 years, 8 months ago

"If a 401k is good enough for me and the rest of the private sector"

But it is not "good enough". You seem to believe that the 401k system is some tried-and-true retirement scheme. They're not! They are recent (accidental!) innovations that not one single generation has ridden to maturity. You need look no further than such socialist rags as the Wall Street Journal to read frontpage banner headlines trumpeting the failure of these schemes to provide adequate savings for their owners to avoid penury and welfare reliance in their old age.

In short, you can pay now or pay later. You can pay through a rational pre-planned system that can bargain between pay today and deferred benefits later. Or (as seems to be your preference) you can pay later when these people are destitute and decrepit. There you have it: rational and pre-planned or short-sighted, self-righteous and guaranteed to come back to bite you later in your sanctimonious ass.

Pensions are the sole proven means of providing reliable retirement savings to the masses. Their "fault" is that they are expensive. They are expensive because they work rather than (a) kick the can down the road and (b) avoid illusory "saving" by transferring liability from Account A to Account B.

jafs 3 years, 8 months ago

He may be right, though, that the structure is not sustainable. And, it should be made sustainable.

notanota 3 years, 8 months ago

It's only not sustainable when we want to scoop all the filling out of the pie to hand out in tax cuts and then act all shocked that we have no pie left for later.

Some of this is a crisis of the moment. Revenue is down. For now. The economy will recover, and it will be back, but for the last five years or so, the state has been hiding their spending cuts, and KPERS has been one of they ways they've done it.

And then they did pass some sort of fix a couple years back that increased payments and lowered the benefits. Obviously that won't change things for people currently in the system, but I'm not sure that they aren't using the current fiscal crisis to justify further fixes that aren't necessary. I'd have to see the numbers from someone who doesn't have such a clear agenda to end the system.

jafs 3 years, 8 months ago

That's not the only reason there's a sustainability issue.

If you look up how the program works, you can easily find some features that won't be sustainable over time.

notanota 3 years, 8 months ago

I haven't looked at the changes they made enough to know the true impact. But I think the key difference here is that while it may not be self-financing, that doesn't mean it's unsustainable. It's part of the total compensation package for state employees and should be budgeted for.

jafs 3 years, 8 months ago

A 401K is not at all "good enough" unless you're extremely lucky.

Look at all of the folks who have recently lost money in their retirement accounts, just when they were planning to retire.

pace 3 years, 8 months ago

It seems similar to Ryans idea of sending people out of acute care to buy on the street health insurance with a government voucher. It is one thing to buy an insurance policy at 20 rather then 92. I don't think these GOP solutions are suppose to take care of the consumer, consider them perks for the industry.

William Weissbeck 3 years, 8 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.

chrac8 3 years, 8 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.

chrac8 3 years, 8 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.

gphawk89 3 years, 8 months ago

Pretty much what millions of private sector workers are going to be saying about social security in a few years. Upsetting, but there's nothing we can do about it. I deal with it by telling myself I'm helping to fund my parent's payments. There won't be a dime left for me by the time I retire. Different fund, but strangely similar.

notanota 3 years, 8 months ago

When are you going to retire? Because even if they don't fix it, SS will still be able to fund 75% of benefits in 20 years when they run into the crisis. They could fix it by having us pay a little more into the system and removing the 100k cap.

tomatogrower 3 years, 8 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

pace 3 years, 8 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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