Archive for Wednesday, March 16, 2011

House committee blocks bill on 401(k)-style pensions

March 16, 2011, 2:57 p.m. Updated March 16, 2011, 3:34 p.m.


— A proposal to move Kansas toward 401(k)-style pensions for teachers and government workers failed Wednesday to clear a committee in the state House, a victory in a Republican-leaning state for public employee unions hoping to preserve traditional retirement plans.

The House Pensions and Benefits Committee indefinitely tabled a bill to establish a new 401(k)-style plan for public employees on July 1, 2013. Most workers hired on or after that date would be required to join, while others would have the option of giving up traditional plans promising benefits up front, based on salary and years of service.

The Kansas Public Employees Retirement System faces a projected $7.7 billion gap between anticipated revenues and benefits promised to teachers, judges, police, firefighters and other government workers over the next several decades. A national report said last year that KPERS assets would cover 59 percent of its long-term pension liabilities, second-lowest of any U.S. state, behind only Illinois.

Public employees are resisting proposals that require them to make concessions, and they oppose efforts to move toward 401(k)-style plans that base retirement benefits on investment earnings. The committee’s decision Wednesday suggests some Republicans, who hold large majorities in both legislative chambers, harbor doubts about moving toward 401(k)-style plans, at least in the near future.

“It may be a good idea — in fact, I think it is a good idea,” said Rep. Charles Roth, a Salina Republican. “But we need to fix what we’ve got first.”

Both chambers are considering proposals to increase the state’s annual contribution to KPERS by up to $23 million to help eliminate the long-term funding gap. Public employee groups say such a commitment is the key to improving the pension system’s long-term health, arguing that state officials have shorted it for years.

Critics of traditional pensions for public employees argue that Kansas and other states — like businesses that already have switched to 401(k)-style plans — simply can’t afford plans that don’t tie benefits to investment earnings. Derrick Sontag, state director for the anti-tax, small-government group Americans for Prosperity, said moving toward 401(k)-style plans isn’t a cure-all but will at least keep the state’s promises in check.

“It is a logical first step,” Sontag said. “I’m baffled why they would table that at this point in time.”

But Jane Carter, executive director for the Kansas Organization of State Employees, called the bill “very anti-worker.” Several hundred members of Carter’s group, teachers’ organizations and other unions converged Wednesday on the Statehouse to lobby legislators, with pensions a key issue.

“We don’t want to gamble our retirement in the stock market,” Carter said. “If you have a pension system, it’s got to be there.”

Other critics of moving toward 401(k)-style plans argue that doing so sets up competing systems, both of which require contributions by the state, even as it must close the long-term funding gap for its traditional plans.

“You have a leaky roof and you’re putting in a new carpet,” said Rep. Louis Ruiz, of Kansas City, the pensions committee’s ranking Democrat. “You’re not fixing the problem. What you’re doing is dressing up things that don’t really need to be addressed at this time.”

Committee Chairman Mitch Holmes, a St. John Republican, acknowledged that he’s disappointed in the committee’s decision to table the bill, but he’s not giving up on debating this year. He said he’ll poll committee members to see whether modifications to the measure will allow it to clear committee.


ysnot 7 years, 3 months ago

Derrick Sontag, state director for the anti-tax, small-government group Americans for Prosperity

But Jane Carter, executive director for the Kansas Organization of State Employees, called the >bill “very anti-worker.”

Hmm... shouldn't that second one read: "But Jane Carter, executive director for the Kansas Organization of State Employees, a pro-tax, big-government group..."

“We don’t want to gamble our retirement in the stock market,” Carter said. “If you have a pension >system, it’s got to be there.” But it's not there. KPERS has been mismanaged and is now in debt. She's acting like they have the money but don't want to give it to them. And really you don't want to gamble in the Stock Market? Why do you think your pension plan is bankrupt?

pittstatebb 7 years, 3 months ago

The pension plan is NOT bankrupt. It may become bankrupt, but is not currently bankrupt. If the stock market takes off in the next fiive years as it did in the early 90's every thing will be just fine again (not really, but that is what we will be told).

somebodynew 7 years, 3 months ago

Well ysnot, the stock market is just part of the reason. The other part is that the State Legislature has not put in their share of the money for several years and used it on other stuff.

Jimo 7 years, 3 months ago

401(k) "style" plans have proved to be an abysmal failure. I, for one, don't like the idea of paying increased taxes down the road for 80 year old retirees living off discount catfood because Kansas decided that, literally, putting its millionaires and billionaires on welfare mattered more than paying its bills. Pull the Kochs off the public teat.

pittstatebb 7 years, 3 months ago

Jimo has a very good point (about 401k's). 401k's will not work if workers are not required to contribute to them. We are quickly setting our country up for a scenario were retirees MUST live off of SS because they have next to nothing in their 401k's. This is why DB plans outperform 401k's on average (as studies have recently shown). DB's require contributions by law and 401k's do not (nor do they provide employers with incentives to get employees to contribute).

Charles L. Bloss, Jr. 7 years, 3 months ago

I understand that a large part of KPERS investments are in the stock market, just to make things clear. Thank you, Lynn

average 7 years, 3 months ago

As I predicted a week or two ago. It's not that they're ideologically opposed to defined contribution plans (and I'm not opposed, either). Kansas legislatures have been for it, ideologically, for decades. But, those require putting money into fiduciary trust, not looting it and promising to make it up later. So pragmatically, they don't want to have to do that, plus they don't want to face paying current KPERS retirees with no more money coming into the defined-benefit plan. So, kick the can down the road.

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