Archive for Thursday, December 8, 2011

Statehouse Live: Commission recommends end to legislative pension perk

December 8, 2011, 1:22 p.m. Updated December 8, 2011, 5:15 p.m.


— The traditional pension plan for future and some current public employees would be eliminated and replaced with a 401 (k)-style system under a recommendation finalized Thursday by a state commission.

Proponents of the plan called it a responsible fix to a long-term funding problem in the Kansas Public Employees Retirement System.

“We made a major step forward,” said Sen. Jeff King, R-Independence. He said no future generation of Kansans will find themselves in the “financial hole that we are in today.”

But opponents said the proposal placed retirement risks onto public employees and would produce financially strapped retirees. Sen. Laura Kelly, D-Topeka, said she was “stunned” by the plan. “This is a recipe for disaster,” she said.

The recommendation goes next to the full Legislature. Gov. Sam Brownback, a Republican, has repeatedly said he supports a system that looks like the one being offered by the KPERS study commission.

Under the recommendation, KPERS employees, such as teachers and government workers, hired after June 30, 2013, and those workers not vested in KPERS by that date, would be enrolled in a defined contribution plan in which they would be required to contribute 6 percent of their wages. The state would contribute 1 percent the first year and increase its contribution by one-half percent each year until it reaches a maximum of 5 percent in the ninth year of work.

Currently, pensions are financed through contributions from employees and employers, as well as investments made by the system. Employees who have retired receive a “defined benefit” based on how long they worked and how much they made on average in the final years of employment. For example, a typical worker earning $40,000 a year who worked for 20 years will receive an annual pension of $14,000.

KPERS has more than 250,000 working and retired members and handles investments of more than $13 billion.

But a devastating downturn in investments in 2008 during the recession, plus years of the state failing to contribute sufficient amounts, has left the system with a long-term funding gap between assets and promised benefits.

Sen. Kelly, however, argued that a bill approved during the last legislative session provided the needed revenue in future years to put the plan in actuarial balance.

Converting to private-sector style retirement plans may be good for higher-paid workers but will leave low- and middle-wage employees with little to retire on, she said.

She said the state of West Virginia tried a similar conversion and found many employees were retiring with about $35,000 in total benefits. “You know what that makes them? That makes them poor. Who takes care of the poor and the elderly? The state,” she said.

But King said the transition better reflected the modern work environment where people change jobs more frequently. They will be able to move their retirement accounts to other jobs, he said. He said he believed public employees will benefit more under the proposed plan.

On another matter, the commission was unanimous in recommending elimination of a golden pension perk that Kansas legislators enjoy.

Currently, legislators, for purposes of calculating their state retirement benefits, are able to annualize their part-time salaries and expenses. This drastically increases their pension.

Commission member Rebecca Proctor said it wasn’t right to “slash benefits” to regular state workers, but preserve the legislative perk. “It is not fair or equitable … that their (state employees’) benefit is not nearly as nice as what the legislators get.”

Proctor, an attorney who represents the Kansas Organization of State Employees, made a motion to treat legislators the same as all other state employees under the proposed new system. That motion was approved unanimously, which included the votes of legislators who serve on the study commission.

The vote on the legislators’ pensions would prohibit them from annualizing their salaries and using expenses as part of their salary. It would also put them in the same proposed defined contribution plan and apply to current and future legislators, and those receiving benefits now.


kochmoney 6 years, 1 month ago

Why give yourself a reward from something you intend to dismantle and defund? Their perk was outrageous, but at least it was a sign that they intended to keep KPERS healthy. Now they'll have no incentive to invest wisely or make sure current workers get retirement benefits.

Frank A Janzen 6 years, 1 month ago

Who will apply to work for the State of Kansas without the current retirement plans?

JayhawkFan1985 6 years, 1 month ago

Why do legislators who are part time state employees even get a pension? They like to call themselves a citizen legislature that has other jobs most of the year. cut this benefit for them and reserve it for people who work for the state more than on a part time basis.

As for this plan, it is a Great Leap Backward. You gotta love how the Republicans don't want to tell anyone what to do, but the wii by law require state employees to invest 6% of their earnings in a state sponsored 401k but then they match it with 1%. It should be matched dollar for dollar as most private employers do with 401k plans.

David Reynolds 6 years, 1 month ago

Sen. Laura Kelly, D-Topeka why should you be stunned? Most workers & their families are on 401k plans since they were first instituted back in the 1980's. Why should government workers (Federal, State & Local) be so privileged as to have a defined benefit plan when the people paying for that plan do not?

The world is rapidly realizing we can no longer afford socialist programs. I realize the trauma involved when a security blanket is withdrawn. Like most companies that initially started 401k plans they grandfathered in existing employees. New employees know what they have to do to prepare themselves for a future retirement.

With regard to the low wage earner argument. Why do we insist they stay low wage earners? As a society why do we perpetuate the "Dependency State"? Why are we not, as a society, creating expectations of achievement and greater personal & financial success? Our forefathers worked hard to ensure the "next & future" generations were more successful then they were.

We have lost that expectation of ourselves.

Some will argue that some members of society can not be independent because of sickness or disability. We always have seen to their care. But the vast majority do not need to be dependent.

Life has never offered any of us "guarantees" in any aspect. America does offer the opportunity to improve your lot in life if you wish to put forth the effort. This involves taking charge of your life & not being dependent on others for your future.

William Weissbeck 6 years, 1 month ago

citizen1: you do realize that the "defined benefit" pension was the traditional form for decades. Workers, especially those in large industrial companies, benefited from the financial success of their employers. It also added a good deal of conservatism, prudence and oversight to the running of a pension plan which is completely lacking when you are in a 401(k). It was a cost of doing business to look after your workers as opposed to the new system which benefits from imprudent, unwise choices of some.

FlawontheKaw 6 years, 1 month ago

Hey citizen you said, "Most workers & their families are on 401k plans since they were first instituted back in the 1980's." So what! Most people have also lost their Azz on 401ks. They are just another mechanism for Wall street to gamble away my hard earned saving dollars. You have missed the point that those 401ks were completely voluntary deductions from my paycheck. Kansas Kochies are now going to force me to contribute 6% to this illegitimate game of three card monte? If we were all paid decent living wages there would not be any need for such ridiculous contrived schemes to separate middle and lower income people from their savings and their retirement.

David Reynolds 6 years, 1 month ago

FlawontheKaw interesting points. To address some of your points.

First in the short term there have been losses. But for those who invested for the long term there investments are much higher over time. Also one should never invest entirely in one asset type. Diversity is the long term winner. But to this point what makes you think if the current system is not reformed that those "supposed" defined benefits will be there for the long term. The system is already broke. I personally would not count on them. By the way, I live off of 401k investments so money management is not theory with me.

Regarding the voluntary VS involuntary aspect. Involuntary would probably work for those who do not have the discipline to invest. I personally would promote the voluntary but would strongly recommend the "Retirement Age Plans" offered by many investment firms. This would allow someone to define what income they wanted in retirement & thus have a defined investment rate prescribed for them.

With regard to the "living wage" argument. This is wearing real thin. I (like many, many, many others) was once at that point. We set a goal to improve our lot in life & did it. I have always operated under the mantra of "No Excuses".

As I said before, we need to set our expectations for ourselves beyond the living wage. No one ever achieved success being dependent on government.

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