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Archive for Thursday, May 3, 2012

Support drops for state 401(k)-style plan

May 3, 2012

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TOPEKA — 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.

Gov. 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

Alceste 2 years, 9 months ago

And what are the lawmakers doing to reform their own sweetheart payout which they had quietly given themselves???? Here's what they give themselves now:

Even though they only really "earn" for a couple of months of the year, they get credit for earning it all year long.

For the legislator listing all income - the daily rate, subsistence and allowance - this is how annualization is calculated:

•$88.66 (daily rate) x 31 (days) x 12 (months) = $32,981.52

•$123 (subsistence) x 31 (days) x 12 (months) = $45,756

•$7,083 non-session allowance.

Altogether, that equals $85,820.52, and that's the pay figure that would be used for that legislator retiring now.

Now then, that political hack who is president of the Kansas hillbilly senate or whatever the operation is has defended this obscene payout because legilsators work for "...so little money....". Ok....if that is the case, why aren't all civil servants for the state of Kansas allowed to have their KPERS benefit calculated on a 372 day work year?

In calendar year 2010, employer contributions for legislators in KPERS slightly topped $900,000.

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.

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.

It's for the children, you know. shrug +++++++++++++++++++++++++++++++++

question4u 2 years, 9 months ago

"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."

That's not surprising. Even Brownback's pawns hesitate when the absurdity is pushed too far, but Brownback never turns back. It doesn't matter what the math says. It's easy to push ahead when your only goal is to eliminate your income taxes and those of your equally wealthy friends. The longterm consequences would only matter to a governor who cared about Kansas.

The Brownback legacy will be many decades of trying to repair the damage caused by the Kansas roadmap to third-world status.

verity 2 years, 9 months ago

Faith-based? More like Koch-based. That is Brownback's only constituency.

Cant_have_it_both_ways 2 years, 9 months ago

When you don't have it, you cant excrete it. If they don't do something soon, there won't be anything for anyone. The state employees should consider some kind of change as if it happens, 50% of something beats the crap out of a 100% of nothing.

jafs 2 years, 9 months ago

So much for legally binding contracts, I guess.

It's nice that the state can just renege on it's end, breach the contract, and face no consequences, while those that made possibly long-term decisions about employment and lived up to their end get scr**ed.

We should have that system in the private sector as well - anybody who wants to breach their contracts should be free to do that without any consequences.

I think I'll just tell the bank that holds our mortgage we just can't pay it - I'm sure they'll let us keep the house anyway.

average 2 years, 9 months ago

There's a very good reason that the legislators won't do the move to a 403b system. It's the same reason that it didn't happen during the Graves or Hayden administrations (they were conservative enough and had large GOP majorities in the Statehouse).

That is... the existing KPERS is badly underfunded. And, removing new entrants from the contribution end of the KPERS morass brings the day of reckoning for that underfunding much closer to the present day. 4-5 years out, not 10-11 years out.

The handful of states who did go defined-contribution (Michigan... hardly ultra-right-wing... being the biggest case) had their legacy pension obligations more-or-less funded (if their investments met targets, which they haven't so far). So, changing new employee contributions to the d-c plan was feasible. Unfortunately (as the spouse of a KPERS employee and in favor of the d-c plan), we've been backed into a corner on making a change.

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