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Archive for Wednesday, December 7, 2011

Panel endorses 401(k)-style pension plan for state workers

December 7, 2011, 5:37 p.m. Updated December 8, 2011, 12:31 a.m.

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— A Democratic legislator serving on a commission studying Kansas’ pension system questioned Wednesday whether Republican Gov. Sam Brownback has been improperly involved in its deliberations just before it recommended starting a 401(k)-style retirement plan for new public employees.

State Rep. Ed Trimmer, of Winfield, raised the issue amid the commission’s debate over starting a new 401(k)-style plan, an idea Trimmer opposes and Brownback supports. Trimmer cited a report on The Wichita Eagle’s editorial blog, quoting Brownback from an interview with the newspaper’s editorial board, saying the commission will recommend such a change.

Later Wednesday, the commission voted 8-5 to recommend to legislators that the state require teachers and government workers hired after June 2013 to join a 401(k)-style retirement plan. Kansas Public Employees Retirement System plans now guarantee benefits up front, based on a worker’s salary and years of service, rather than tying benefits to investment earnings, as 401(k) plans do.

Brownback appointed five of the commission’s 13 voting members, and all five supported the move to a 401(k)-style plan for new hires.

Trimmer said Brownback’s role in the commission’s work ought to be examined to determine whether the state’s Open Meetings law has been violated, though he later said he wasn’t accusing the governor or fellow commission members of wrongdoing.

‘Already said before’

Both the governor’s chief spokeswoman and one of his appointees to the commission said the questions are unfounded.

Brownback has predicted repeatedly that the commission would propose a 401(k)-style plan for new hires or at least a “hybrid” between such a plan and the state’s traditional plans. The governor repeated that prediction in his meeting with The Eagle’s editorial board.

“The governor didn’t say anything he hasn’t already said before,” said Brownback spokeswoman Sherriene Jones-Sontag.

The debate over starting a 401(k)-style plan pits the governor and his conservative Republican allies in the GOP-controlled Legislature against Democrats and public employee groups that strongly oppose the idea. Supporters of moving toward a 401(k)-style plan contend the state can’t sustain traditional pension plans, but opponents believe such a plan will lead to less secure and less generous retirement benefits.

KPERS projects an $8.3 billion gap between anticipated revenues and the benefits promised by existing plans through 2033.

The law creating the commission this year also will increase the state’s annual contribution to KPERS and require some concessions of workers, but many legislators and commission members don’t believe it will close the gap. The commission plans to meet again today and must present its recommendations to legislators before they convene their annual session Jan. 9.

The Eagle’s editorial blog quoted Brownback as saying the commission would recommend switching to a 401(k)-style plan for new employees.

“How does he know that?” Trimmer said during the commission’s meeting Wednesday. “It does open up some questions.”

A longer story about the interview, published Wednesday, said Brownback told the editorial board he expects the commission to recommend such a change.

The newspaper provided a transcript from a tape of the interview Tuesday, in which Brownback noted the commission would meet and added, “I think they’re gonna recommend defined contribution system for new hires.” Defined contribution is a term for a 401(k)-style plan.

No inappropriate action

Edward Condon, of Leawood, an executive in a capital management firm appointed by Brownback to the commission, said he hasn’t been a party to any discussions or actions that would violate the open meetings law.

The plan endorsed by the commission was drafted by one of its co-chairmen, state Rep. Jeff King, an Independence Republican, who said after the meeting, “This was not drafted from the governor’s office.”

Legislators and public employee groups opposing a 401(k)-style plan contend its startup costs will divert resources from closing the KPERS long-term funding gap. To lessen those costs, King’s plan would start the state’s contribution at 1 percent for first-year employees, increasing it to 5 percent by their ninth year of employment; workers would be required to contribute 6 percent of their salaries.

But he acknowledged that his plan is aimed at providing financial stability for KPERS for decades, not narrowing the funding gap in the short-term.

Comments

Alceste 2 years, 4 months ago

It "they're" smart, they'll offer a rather attractive incentive to get existing KPERS members to switch over to the this new "hybrid plan". While "they" won't attract the R.O.A.D. Warriors within KPERS (Retired On Active Duty), they might just attact more "middle age" and "younger" types and persuade them to leave KPERS for the new 401(k) "style".

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mloburgio 2 years, 4 months ago

Kansas Legislator Pensions Inflated More Than Ten Fold

The average Kansas legislator with 20 years in the Capitol as of 2011 is eligible for a $29,162 annual pension if he retires at the end of this year. That’s more than ten times what he would receive if the pension was calculated just on salary. Legislators are the only classification of Kansas public employee that can draw down benefits based on a annualized salary.

Kansas Legislator example

Salary: $7,979

Inflation #1: Based on 372 day year = $32,982

Inglation #2: Include $123 per diem (also for 372 days) = $45,756

Inflation #3: Include payments for expenses while not in session = $7,083

Total salary for pension calculation: $83,216

Government employees enrolled in KPERS and hired before July 1, 2009, make a 4 percent employee contribution. State employees hired after that date contribute 6 percent.

Legislators’ make the same percentage contribution but it is based on their annualized total pay and expenses of $83,216. The contribution is 42 or 65 percent of their actual $7,979 annual base pay only. http://kansas.watchdog.org/7604/kansas-legislator-pensions-inflated-more-than-ten-fold/

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mloburgio 2 years, 4 months ago

Comparing pensions

A legislator retiring with an annualized pay of $85,820.52, and with 10 years' service, would have an annual KPERS benefit of $15,018.60, for a monthly benefit of $1,251.55, according to KPERS. If the retiring legislator had 20 years' service, the annual benefit would be $30,037.20, and monthly, $2,503.10.

The News asked some KPERS retirees about their pension benefits. Their answers varied widely.

A state employee who was a supervisor for juveniles on probation retired after 34 years with an annual benefit of about $25,000. A municipal wastewater treatment plant superintendent, with 24 years' service, estimated the earned benefit at $2,300 to $2,400 monthly.

A state social services worker in a supervisory role retired in 1995 after 15 years and draws a monthly KPERS benefit of $524. That is equal to the monthly benefit for a county-level commercial appraiser who retired at 65, vested at nine years with KPERS.

'Insult'

Kathy Mendenhall, a public speaking instructor at Hutchinson Community College and past president of the Hutchinson National Faculty Association, had not been aware of the annualized pay formula for legislators.

"Oh, wow," she said.

"Teachers work so hard for their pay. We give our heart and souls to our job," Mendenhall said. "There's a level of insult to our profession when those kinds of things happen."

"I think it should be fair and equitable for everybody, and I don't think that one group should receive any kind of preference over another," said Jane Carter, executive director of the Kansas Organization of State Employees.

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William Weissbeck 2 years, 4 months ago

I'm not the smartest guy in the room, but the last paragraph raises a ton of questions. One, employees will be required to contribute 6%? In the private world 401(k)'s are voluntary. While financial planners recommend that workers should save 10% toward their retirement - that assumes a 5% contribution, 5% match. And why not a full match from year one? The state is taking advantage of the new normal where workers will have 3-4 or more jobs in their working years. Which financial services company is going to be bidding for this juicy 6% contribution? If the states is only going to match at an initial low rate, maybe the employee can invest his or her money with someone else for a better return. Often you go with your employer's crummy plan, because it is offset by the matching contribution. Also, keep in mind it wasn't the state employees that cheated the system. It was the tax payers through their elected representatives. The tax payers cannot claim the high moral ground - they can only plead circumstances beyond their control.

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texburgh 2 years, 4 months ago

At least Senator King won't have to worry. He's already vested in his super-annualized KPERS defined benefit retirement plan. While his proposal all but eliminates a retirement plan for new employees and those who have not yet vested and puts the benefits at risk for all the other active employees who have vested, he doesn't have to worry. The legislature voted themselves in a super annualized benefit, paid fully by the state. No, don't worry about them. You can be sure Jeff King and his ilk will take care of themselves.

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Ken Hunt 2 years, 4 months ago

I think you mean a 403b plan. Any plan should have fees of 1% or less on investments. Too often retirement plans charge from 2-5.5% front end fees. Many plans also include 12b-1 fees which take another .25% when you drawn down your own money. I wonder what plan elected state representatives have? Be careful...never trust an investment advisor who represents an investment company.

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verity 2 years, 4 months ago

Follow the money. Who does it benefit for the state to change to a 401K plan?

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verity 2 years, 4 months ago

Remember when the stock market tanked and our 401Ks went pufft? Remember how the people who tanked our 401Ks received huge bonuses while we had to defer our retirements? I think a lot of people must be too young to remember that.

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ljwhirled 2 years, 4 months ago

Go ahead and move to the private sector.

I am sick and tired of the argument that municipal, state and federal workers are working for such sub-par wages.

It simply isn't true. Considering the working environment, public sector workers have a sweet deal. Hence the 99.8% employee retention rate.

In the private sector you are expected to work past 4:59PM, you are responsible for the outcome of your programs and you don't have the security of knowing that you can appeal every HR decision 10 ways from Sunday.

Nothing is funnier than sitting in the lobby of the Lawrence City Hall at 4:50 and watching the staff roll out. By 4:59 only a few upper managers are anywhere to be found.

Will you make more money moving to the private sector? Maybe. if you are good. But, if your programs fail to make money or contribute to the bottom line you will be out on the street.

Many, many public sector workers that I have worked with wouldn't last 1 week in the private sector. The pace is too fast and the organizations are too outcome oriented.

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redfred 2 years, 4 months ago

Good luck on getting government employees with this type of plan. If I wanted to work under a a 401(k) I would go to work in the private sector where I could make more money to put toward retirement. The current retirement system is one of the reasons that you can get employees at less than the going rate vs. the private sector.

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JayhawkFan1985 2 years, 4 months ago

I find it absolutely amazing that teachers and state employees who by STATE LAW contribute 4% or 6% of their gross earnings to KPERS were not included on this Commission. The problem is the Commission was hand picked by people whose sole purpose is to dismantle state and local government including public schools all for the benefit of the Koch Brothers and other 1% people. Teachers and state employees are core members of the 99%. We need to protect their interests because they are us. The Brownback Great Leap Backward continues. I also hope and pray that those of you who are not teachers or state employees don't fall victim to the right wing propoganda that in a recession you can't hope for better. The fact is that many teachers and state employees have been paying into KPERS for decades and have a contract with the state that guarantees KPERS as part of their compensation package. I'll point out that teachers and state employees take home pay is below market rates. Their pension plan helps but doesn't completely equalize that. Government jobs are jobs too!

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geekin_topekan 2 years, 4 months ago

...and if the Publishers Clearing House would just pay off.

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