Archive for Monday, March 5, 2012

Support drops for Kan. 401(k)-style plan

March 5, 2012

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— Gov. Sam Brownback’s support has kept alive a proposal to start 401(k)-style pension plan for new Kansas teachers and government workers even as other Republicans in the Legislature lose interest.

Public employee groups, their allies and increasingly skeptical GOP legislators have all but killed chances that Kansas will start a retirement plan similar to ones now common for private companies as a way of controlling the state’s long-term pension costs.

The House Pensions and Benefits Committee is working on an alternative that’s a big step away from a 401(k), even though Chairman Mitch Holmes and Vice Chairman John Grange have supported using that kind of plan in the past. The Senate’s pensions committee is having similar discussions.

Governor not backing away

But their work will amount to little if they don’t get Brownback on board, and he’s not backing away from his support for a 401(k)-style plan. A potential veto could be a powerful incentive for the Republicans who control both chambers to return to the 401(k) fold.

That political reality has made Holmes, a St. John Republican, hesitant about declaring work had ended on a 401(k)-style plan even after he outlined the details of an alternative that will be discussed this week.

“If the governor doesn’t like this plan, we would probably go back,” he acknowledged.

The Kansas Public Employees Retirement System projects an $8.3 billion gap between anticipated revenues and benefits promised to teachers and government workers through 2033. The shortfall led legislators last year to increase the state’s annual contribution to KPERS and require concessions from workers.

But Brownback and many legislators don’t think those changes will be enough to safeguard the pension system’s long-term health. They say the state can’t sustain traditional KPERS plans guaranteeing workers’ benefits based on their salaries and years of service.

Studying the options

Backers argue a new 401(k)-style plan advocated by a study commission last year will stabilize the pension system because the state will tie benefits to KPERS investment earnings. Brownback said in a statement last week that if the state doesn’t take such a step, its credit rating could suffer.

Critics have said starting a new 401(k)-style plan won’t address the funding shortfall in existing, traditional plans and comes with additional startup costs. An estimate said the commission’s plan would cost the state an additional $10.9 billion through 2060, although some lawmakers dispute that figure.

Also, public employee groups contend 401(k)-style plans shift the financial risk from a sour economy from the state to workers, whose benefits are likely to be less lucrative.

Their arguments have resonated, and support for a 401(k)-style plan has eroded. It’s led both pensions committees to consider similar alternatives giving new public employees some guarantees without tying their benefits to their salaries and years of experience.

Comments

Richard Heckler 3 years, 1 month ago

Sam Brownback who is worth about $6 million must like supporting the unpredictable Wall Street Activity. If a retirement plan cannot afford to lose money why move it to a 401k and Wall Street?

Michael LoBurgio 3 years, 1 month ago

Legislators' KPERS calculation a 'perk'

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

lawslady 3 years, 1 month ago

First question; do we really need government? While many people believe and maintain that the government gets in the way and that all its workers are lazy and can't find work in the "real world," many of those same people would be among the first to holler if they stopped getting the help and services that comes from such quarters. Want to give up government services, then say good bye to public roads, prisons, regulation of certain professions, etc.

Assuming you favor employing people to work in the government sector, why would anyone want to work there if they could get more money in the private sector AND get a retirment benefit that is not in some way "better" than in the private sector? A protected guaranteed income after retirment was previously one of the few perks for government employees. If they haven't gotten a raise in 5 years (which is the case for most) and neither their benefits nor their retirment packages are bettter than they'd get in the private sector, why would someone want to work for less pay too?

We can't have it all. Something has to give when/if there are more people taking out of a system than paying into it (ahem - social security). But tampering with a system as complicated as state government is a bit like playing that game Jinga -be careful what stick you pull out. You may just bring the whole thing toppling down by accident. Of course, there are those who would favor such a result. And there are those who may just be secretly working to make it happen.

streetman 3 years, 1 month ago

I have yet to hear a logical explanation of why public sector employees should have any more of a guarantee on amount of retirement plan vs. those in private sector. About time governments admit -- and do something about what private sector figured out already -- these guarantees simply cannot be sustained. Brownback is trying to accomplish exactly what he was elected to do.

jafs 3 years, 1 month ago

There have been many points raised to answer that question.

  1. Traditionally, public sector jobs have paid less than private sector counterparts, and still do for the most part, In exchange for lower wages, public sector employees have gotten better benefits.

  2. The fact that private sector employers don't offer defined benefit plans (for the most part) is not something that we should just accept and apply to the public sector - this is often called the "race to the bottom".

  3. Defined benefit plans are perfectly sustainable when contributions are accurately calculated (and actually made, which the state has failed to do), investment earning percentages are correctly projected (instead of overly rosy projections), and benefits are made based on the first 2 factors. Taking the fact that the state has failed to make the contributions it was supposed to make, projected an overly optimistic earning rate for investments, and perhaps been too generous with benefits and using that to conclude that defined benefit plans are unsustainable seems off to me.

  4. Many people who voted for Brownback are unhappy with what he's doing, and would not vote for him again, which makes it seem unlikely he was "elected to do" this sort of thing.

I hope that's helpful.

streetman 3 years, 1 month ago

I have to call BS on the "public sector paid less" argument -- the jobs pay what they're worth to society and/or the hiring entity -- just like anywhere else (except for corporate CEOs). I doubt anyone ever said when these jobs were created way back when "hey, let's pay less upfront, but give more in retirement!" And perfectly sustainable?? -- yeah -- like Social Security, Medicare . . . .

jafs 3 years, 1 month ago

Please read my post again, and consider what I said in regard to sustainability.

Social Security and Medicare are problematic precisely because they don't follow the guidelines I mentioned.

And, see vertigo's comment as well.

JayhawkFan1985 3 years, 1 month ago

We get this because we signed a contract. We paid in 4% of our gross earnings mandated by state law for 10, 20, 30 or 40 years. At the very end now they want to change the rules? I have yet to hear a logical explanation as to why my total compensaton package should be undermined.

Maybe rather than complaining about what someone else gets, you should try to get a better deal for yourself.

Brownback was elected in the mid-term elections out of fear from the rednecks who don't want a black man to be President. The implosion of the GOP at the national level this year proves that.

jafs 3 years, 1 month ago

Well, unless it changes dramatically, the changes wouldn't apply to those already vested in the system.

It's being proposed for new hires.

classclown 3 years, 1 month ago

vertigo (Jesse Crittenden) replies…

... So they are willing to forgo a higher salary for the peace of mind in that their job will most likely not go away as long as they are a good worker. The sames not true in the private world. March 6, 2012 at 8:43 a.m.

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I'm sure the city's trash workers are feeling that peace of mind right now.

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