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Question of the day

Tuesday, Nov 26, 2013

* Scott Reeder’s latest column is on pension reform

But perhaps the biggest problem with the pension system is that it forces government to predict the future and taxpayers to underwrite those predictions. What will the stock market’s performance be over the next 30 years? How much longer will people be living in 2045? What will the annual rate of inflation?

All of these items are factored in when calculating pension payments. And yet they are pretty hard to calculate with much certainty. And taxpayers are on the hook for these predictions.

To be blunt, the best solution is to walk away from the system. Eighty percent of private sector employers have embraced 401(k)-type plans. In these plans, employees actually own their retirement savings and they can make decisions on how it is invested.

It’s time for Illinois to consider switching public school teachers, state workers and state university employees over to such plans. The state would still be responsible for the pensions of those who have already retired. But it’s time to move current and future employees into a more sustainable plan.

* The Question: Do you think private sector workers with 401(k) retirement plans are better off than public sector workers with defined benefit plans because they “actually own their retirement savings and they can make decisions on how it is invested”? Take the poll and then explain your answer in comments, please.


- Posted by Rich Miller        

  1. - Shark Sandwich - Tuesday, Nov 26, 13 @ 11:58 am:

    (How long will I live) X (livable annual amt) = ?????

  2. - Bobbysox - Tuesday, Nov 26, 13 @ 12:01 pm:

    Individuals generally do not have the same amount of expertise and group buying power as pension systems. The fact that TRS has earned on average over 9% over the past 30-years is but one example of that. It is the same argument as privatizing Social Security.

  3. - WhoKnew - Tuesday, Nov 26, 13 @ 12:01 pm:

    Voted Yes because those with the 401K plan also are part of Social Security. A lot of Public sector workers in Illinois (public school teachers, state workers and state university employees) dont’t participate in the National SS program, the Illinois Pension is all they get from the system.

  4. - Darienite - Tuesday, Nov 26, 13 @ 12:04 pm:

    In “owning” their retirement plan, they take on the risk that goes with it. The average person either lacks the knowledge, discipline and luck to invest over the long term. They prefer the Showtime Rotisserie method (set it and forget it).

  5. - Dan - Tuesday, Nov 26, 13 @ 12:07 pm:

    I receive a pension from SURS. I could never have retired at age 59 with a defined conribution plan. Where else can you get an annual 3% cola? Without the cola, I would have worked until maybe 65. I know that I have had a good deal for the last 8 years.

  6. - MrJM - Tuesday, Nov 26, 13 @ 12:08 pm:

    Do you think private sector workers with 401(k) retirement plans are better off than public sector workers with defined benefit plans because they “actually own their retirement savings and they can make decisions on how it is invested”?

    They’re “better off” in about the same way that a defendant representing himself in court is “better off” without an attorney.

    – MrJM

  7. - Jim'e' - Tuesday, Nov 26, 13 @ 12:08 pm:

    The real reason businesses use the 401k is that they have no fiduciary respopnsiblity. Under a defined pension plan the employer is required (unless you are the State of Illinois) to make an employer payment. Yes, assumptions on CPI, future salaries and investment returns determine part of what the employer contribution will be; and for that reason big business walked away from DC plans and moved to 401k plans, albeit to not have any responsiblity.

  8. - Sir Reel - Tuesday, Nov 26, 13 @ 12:09 pm:


    Some economists are saying we’re in for another bubble. The market has been volatile, inflation could pick up, etc. Too much chance a 401K might not work out.

  9. - Obamas Puppy - Tuesday, Nov 26, 13 @ 12:11 pm:

    75% OF PUBLIC EMPLOYEES DO NOT GET SOCIAL SECURITY IN ILLINOIS!!! If you truly want to put these employees in a 401k style benefit then the state and public schools better get ready for a 6.2% SS payroll tax. Of course you do not hear that in the IPI rhetoric because that means a huge property tax increase. Come on Rich, why you legitimize this “puppet organization” for the wealthy investment managers that would make a killing on such a deal is beyond me.

  10. - WhatItIs - Tuesday, Nov 26, 13 @ 12:11 pm:

    The practice of boiling down the pension issue to “simple concepts” is insulting for those that receive pensions and those whose 401k’s have been dissolved by their companies. Pensions for public employees is best for all taxpayers for the simple fact that it’s the most affordable. Want the public entity to match contributions? Want to place public employees on Social Security? Watch costs go through the roof! I’ll take the pension system for its cost effectiveness any day of the week!

  11. - unionmaybe - Tuesday, Nov 26, 13 @ 12:12 pm:

    Maybe, if the paymetns were made on time, when they should be made, we would not be here discussing it today. Until it is properly funded and the Legislators dedicate that money where it should go, nothing will fix it… A shortage of workers comapred to several years ago, people living longer, I understand the factors, but you cannot take out what you do not put in.. You roll everyone over, what happens then? I want my money I paid in back if they roll over,not a piece of paper, write me out a check for what I have paid in…… Not so long ago that Blago wiped out the Charity Income Tax donatins, where were the nay sayers then??????

  12. - OLD BRASS - Tuesday, Nov 26, 13 @ 12:12 pm:


    With the current onslaught by the GA to eliminate your 3% compounded COLA (or any other benefit for that matter) promised you by the GA and Constitution when you retired, your good days are behind you.

    Living everyday under the loaded gun pointed at your head by the GA to rectify the very problem they created, cannot be much of an existence.

  13. - Reality Check - Tuesday, Nov 26, 13 @ 12:13 pm:

    @Obamas Puppy, don’t worry, I’m sure Scott Reeder and the Illinois Policy Institute would be happy to get rid of Social Security, too.

  14. - dave - Tuesday, Nov 26, 13 @ 12:14 pm:

    Krugman said it best:

    “The trouble is that at this point it’s clear that the shift to 401(k)’s was a gigantic failure….As a result, we’re looking at a looming retirement crisis, with tens of millions of Americans facing a sharp decline in living standards at the end of their working lives.”


  15. - jimbo26 - Tuesday, Nov 26, 13 @ 12:14 pm:

    Most people who have 401K’s do not have enough in them to support their retirement. Most of us don’t have the knowledge that those who invest the pension money have and don’t make the right investments.

  16. - Formerly Known As... - Tuesday, Nov 26, 13 @ 12:15 pm:

    In general and in any other state? No.

    In Illinois, where those pensions are about to be reneged upon after being promised, earned and contractually obligated?


  17. - Pot calling kettle - Tuesday, Nov 26, 13 @ 12:16 pm:

    It has little, if anything, to do with how the pension systems invested the money and everything to do with the State not putting the money in to invest. One of the basic rules of investment is that you actually need to put money in.

    Had the State put the money in in the first place, the investments would almost certainly cover the costs of retiree benefits (or come very close).

  18. - Jorge - Tuesday, Nov 26, 13 @ 12:22 pm:

    Don’t forget the exorbitant fees investment houses charge 401k account holders over the life of the accounts. It’s a scheme to make the rich even richer. Invest in Vanguard funds which feature much less overheard and fee costs.

  19. - My Thoughts For Whatever - Tuesday, Nov 26, 13 @ 12:23 pm:

    I voted NO. There are huge “fees” with investment managers, most people do not have the necessary management abilities and time, and the investment returns can be more consistent and secure when funds are pooled like our current pension systems.

  20. - Stones - Tuesday, Nov 26, 13 @ 12:23 pm:

    Why should I stand by and allow the state to bail out on their obligation to me? I accepted employment here many years ago (@$17K per year) under the premise that one of my great benefits was a decent retirement package. I sympathize with those in the private sector who no longer can count on such a pkg with their current employer but that was not my fault. I worked for low wages for years on the front end counting on a decent payoff on the back end.

  21. - Dan - Tuesday, Nov 26, 13 @ 12:23 pm:

    Old Brass, I am prepared for no cola, etc. I always have been a saver and lived within my means, and I will personally do ok. So I haven’t and won’t lose any sleep if there are changes. I am not saying that I will like the proposed changes.

  22. - wordslinger - Tuesday, Nov 26, 13 @ 12:23 pm:

    Of course not. In a 401K, the employees take all the risk. They could end up with nada.

    Until further notice, pensions are Constitutionally protected contracts. The State of Illinois is a going concern. I’ve yet to see a compelling argument as to how they wriggle out of payments for services already rendered.

  23. - frustrated GOP - Tuesday, Nov 26, 13 @ 12:24 pm:

    Does anyone think me and my small investment is going to get the same deal as someone investing Billions?
    Also, let’s remember, 401(k) replaced company pension funds saving the companies billions. If someone wins, someone loses. Right?

  24. - Andrew Szakmary - Tuesday, Nov 26, 13 @ 12:26 pm:

    I voted no, but I actually have mixed feelings. 401k plans are not inherently bad. I think they would work well for many people if they were properly funded by employers, but they have not been. Typically, firms have replaced pension plans that required 10% employer contribitions with 401k’s that entail a 3% employer match. So the switch to the 401k was simply a subterfuge to make cutting total employee compensation less obvious.

    I absolutely love the 403b plan (the nonprofit equivalent of a 401k) at the university where I work. I contribute 5% of salary, and my employer contributes 10%, on top of full Social Security. There is a wide range of low-cost investment choices, and being a finance professor I do have a good understanding of asset allocation and have done quite well on the whole investing over the past 12 years, although 2008-9 was admittedly scary. I realize, however, that my situation is not typical.

  25. - Nearly Normal - Tuesday, Nov 26, 13 @ 12:27 pm:

    A long-time retirement planner told me that 401K plans were originally devised to supplement not replace retirement plans. When businesses realized they would not have to tie up funds with retirement obligations, they ditched those plans and went exclusively with 401k’s for their employees.

  26. - archimedes - Tuesday, Nov 26, 13 @ 12:27 pm:

    From the employee perspective, the pension is more predictable and dependable than a 401(K). On the negative, a pension is not portable - you have to stay with the same employer to reap the benefit. A 401(k) can follow you to your next employer.

    Historically, a pension works if it is pre-funded each year by paying the full ARC (look at the example of IMRF) - it doesn’t work if you roll the dice (which the State did) and hope for better times in the future to pay the bill.

    By the way, its been discussed here before, but if the State were to “walk away” from the current system they still owe the $100 billion. That amount is the pension service credit already earned. And, that $100 billion is the crisis - not the yearly cost of benefits earned (the normal cost). The normal cost is only about $1.6 billion a year - the payment on the debt for credits already earned is the rest of the $6 billion plus each year.

  27. - RMW Stanford - Tuesday, Nov 26, 13 @ 12:28 pm:

    Investing does not really need to be that hard into order to produce a stable portfolio that over the long run will produce soild returns. Fininical advisors, ect, tend to make it look harder than it really is ( and often cause their clients to take on needless risk for little return) in order to line their own pocket books.

    That being said most of the problems with the public pension system does not have much to do with mis judgements on the auctorial end but because of failures on the part of the General Assembly.

  28. - Logic not emotion - Tuesday, Nov 26, 13 @ 12:29 pm:

    I voted “no” because I think a defined benefit plan will generally benefit most employees more. I wanted to vote “it depends” because I truly think it depends upon a large number of variables. I know several who retired with very large investment portfolios only to see them severely diminished in a very short time due to market fluctuations, bad advice and bad decisions.

  29. - Diogenes in DuPage - Tuesday, Nov 26, 13 @ 12:30 pm:

    If everyone were so better off with 40iKs, then why is there such pension envy of what public employees have? It’s fairly clear to me that most average citizens who are opposed to public pensions feel so because, 1) they don’t have the security of public pensions, and 2) they don’t want to pay higher taxes to let others have them.

  30. - anon - Tuesday, Nov 26, 13 @ 12:31 pm:

    You do have to factor in the fact that a private employee made significantly more than a comparable state worker. I remember a study showing that a professional state employee made 40% less. Balancing the vagaries of 401(k) with a higher base salary plus social security against a pension on a lower salary which is threatened to be diminished by legislative whim, it’s not a clear choice.

  31. - Try-4-Truth - Tuesday, Nov 26, 13 @ 12:32 pm:

    401 K retirement plans are a give-a-way to Wall Street and money managers. Nothing more. They are not cheaper, nor are they “better” for anyone. The shift just allowed private sector businesses to stop matching payments and leave it all to the employee. Businesses are about making a profit, governments are about providing services. If you don’t know the difference, please consult Woodrow Wilson. Reader shilling for his corporate masters. He should be read with that in mind.

  32. - Let's be Honest - Tuesday, Nov 26, 13 @ 12:33 pm:

    Anyone who believes that private sector employees are better off with their 401(k)’s than public employees with their defined benefit plans are simply uninformed, and have never done the math.

    Look at a typical long term employee who has retired and actually look at how much they have contributed to the system over the course of that time. They are contributing anywhere from 2-10% of their salary to get a pension that can be from 50%-80% of their salary (depending on a number of different factors) There is no investment plan that I am aware of that can get that kind of a return on their money - a return that is essentially guaranteed as well!

    I know people are angry about the proposed changes to the pension plans, but even with the changes that they are talking about being implemented, there is still no comparison between a 401(k) and a defined benefit plan.

    It is also important to mention that just because an employer offers a 401(k) does not mean that the employer makes a contribution match - they are not required to. It is simply at the discretion of the employer.

  33. - dupage dan - Tuesday, Nov 26, 13 @ 12:34 pm:

    I voted yes but just as easily could have voted no. In the short term, no is the best answer. My wife and I have saved some money and have it in a mutual fund. I am not a financial wizard but have been told by many that you put the money in and forget about it. So many folks get nervous when the market tanks and yank the funds. Bad idea. We stayed the course and are in pretty good shape right now. Having the state control it avoids having folks make unwise decisions. Having the state control it only exposes to the state making unwise decisions you, as an individual, can’t alter. My wife an I avoided the typical pitfalls - will everyone do that?

    The answer for me, then, was yes.

  34. - OneMan - Tuesday, Nov 26, 13 @ 12:34 pm:

    Besides the lack of portability a pension system that basically said I get paid no matter what happens would be cool, unrealistic, but cool

  35. - Anonymous - Tuesday, Nov 26, 13 @ 12:35 pm:

    NO. If 401ks were to become the retirement vehicle for teachers, for example, then they need to receive social security AND more importantly, they need to be paid the going wage as Master’s and PhDs in the private sector. Somehow I don’t think that would ever happen. You have to actually have some money to invest, you see.

  36. - AFSCME Steward - Tuesday, Nov 26, 13 @ 12:36 pm:


    If people were really better off in 401k plans, there would be no opposition to converting the opension sysyem into a 401k.

  37. - LisleMike - Tuesday, Nov 26, 13 @ 12:39 pm:

    I maybe missing something here, but the question did not appear to me to be dealing with the current pension problem but in looking forward.
    I beleive we DO owe those in the system their pension. It is only right. Going forward, however, is a different story. There is a reason that businesses have gone away from pensions. The state needs to do likewise. If they are not in SS, get in. I do not beleive that the GA will ever have the integrity to properly look out for the workers. They (both sides) have kicked the can down the road, knowing (or hoping) that when the bill comes due, they would be out of office enjoying thier own pension. That the last 10 years have been under Dem control is not the issue, but the lack of self control on spending is an issue for me. For me a 401k (albeit risky) is a protection of your own investment against the unmitigated greed of the GA to fund what they want with your pension money. As to not knowing about 401k? I guarantee that when it is your own money, you WILL learn about them.
    My two cents worth, for what it is worth

  38. - anon - Tuesday, Nov 26, 13 @ 12:41 pm:

    If you want to increase my salary by 40% (including a retro check for my past years of service) to bring my paycheck up to the private sector. I will gladly entertain a 401(k) conversion.

  39. - foster brooks - Tuesday, Nov 26, 13 @ 12:42 pm:

    401k’s are a garbage pension. Remember when everyone called them 301k’s?

  40. - downstate hack - Tuesday, Nov 26, 13 @ 12:43 pm:

    They would not be better off than the present system but the present system in bankruptcy is not a pleasant option either.

  41. - countyline - Tuesday, Nov 26, 13 @ 12:43 pm:

    Of course there are going to be more votes for pensions as opposed to 401k’s…who wouldn’t want to collect a pension at the expense of others as opposed to saving your own money…

  42. - Chi - Tuesday, Nov 26, 13 @ 12:44 pm:

    It’s actually not hard to predict (with sufficient, not perfect, accuracy) how long a group of people will live, or what the stock market and/or inflation will do long-term. Actuaries do this for a living. Had Illinois paid the amounts the actuaries said were needed, the crisis would have been averted.

    One of the great benefits of large defined benefit pension funds is that they can weather the storm of recessions when properly funded. Individual 401k’s cannot. The problem is “properly funding” them, which is why any pension bill must include language to ensure proper funding.

    401(k)’s were never meant to be a replacement for pensions. I didn’t think reasonable people still thought that 401(k)’s are a good retirement solution for individuals.

  43. - History Teacher - Tuesday, Nov 26, 13 @ 12:45 pm:

    This is crazy. Everyone in the private sector with a 401K has Social Security as safety net (even if it isn’t a big one). No one in the public sector has that. To put ALL of your retirement into a 401k and think you are smart enough to avoid a 2008 meltdown is pure arrogance and foolishness. Besides - look at all the people trying to push teachers and public employees into the 401k style - they ALL sell that type of investment. WOW!

  44. - reformer - Tuesday, Nov 26, 13 @ 12:45 pm:

    There’s no question the average retiree is less well off with a 401K instead of a traditional pension. Those who earned high incomes have fared well with 401Ks, since they had more discretionary income to invest, were more likely to have ample employer matches, and were less likely to need to dip in to the fund for emergencies than the average Joe.

  45. - It'smyopinion - Tuesday, Nov 26, 13 @ 12:47 pm:

    If recent history is a guide, it seems like they might be better off, at least in IL. My retirement savings is in 401k type savings, and I’m certainly comfortable with that.

  46. - wordslinger - Tuesday, Nov 26, 13 @ 12:48 pm:

    –Of course there are going to be more votes for pensions as opposed to 401k’s…who wouldn’t want to collect a pension at the expense of others as opposed to saving your own money… –

    Must be another one of those “conservatives” who borrows money and doesn’t pay it back, and thinks contracts are made to be broken after the work is already done.

  47. - Chi - Tuesday, Nov 26, 13 @ 12:49 pm:

    Insurance companies make loads of money, in fact, on determining how long people will live and what an investment will return in the long run. No one is worried about the long term health of insurance companies.

  48. - Dan - Tuesday, Nov 26, 13 @ 12:50 pm:

    LisleMike, Manty state employees are not in Social Security. It is the state’s choice to opt out of social security. IL cannot or does not make their pension contributions as required. Will they be able to afford to make their employer Social Secuity contributions if all state employees were covered ?

  49. - Mason born - Tuesday, Nov 26, 13 @ 12:52 pm:

    The Question has always been what does the future hold. 401k’s are inferior provided you a. live to a ripe old age, b. all pension agreements are honored. Right now it is part b that is the question. While Pensions are Constitutionally protected if that protection is ever removed whether by a Court or a vote of the electorate then a State Pension won’t be worth the paper your statement is written on. In which case a 401k is much more secure.

  50. - nothin's easy - Tuesday, Nov 26, 13 @ 12:53 pm:

    The logic of that diatribe is not even worth the effort to rebut. It is absurd. How much more do people like Bruce Rauner and Mitt Romney want? Does no one understand that over 50% of the population will soon be retired. It’s a demographic thing. Who is going to propel our “consumer economy”?

  51. - wordslinger - Tuesday, Nov 26, 13 @ 12:56 pm:

    The whole premise of Reeder’s column is bizarre.

    Has he never heard of actuarial science?

  52. - Wallinger Dickus - Tuesday, Nov 26, 13 @ 12:56 pm:

    “No principle of law pernits us to suspend constitutional requirements for economic reasons, no matter how compelling those reasons may seem.” — The Illinois Supreme Court, Jorgensen v. Blagojevich.

    Not only that, it’s a CONTRACT, which falls within the domain of federal law.

  53. - Ruby - Tuesday, Nov 26, 13 @ 12:56 pm:

    Those with the 401K plan had matching contributions from their employer. They also are part of Social Security which includes the Medicare health care benefit for an employee contribution of 6.2% (only 4.2% in some years).

  54. - LisleMike - Tuesday, Nov 26, 13 @ 12:57 pm:

    @ Dan
    I am only looking forward on this. We OWE the monies to those who trusted the system and the GA. Both let them down.
    I am all about leaving the place better than I found it. Going forward, the plans need to be made, measured, and adjusted. As the saying goes: “when you are stuck in a hole, stop digging” which is what is happening.
    I am not proposing going back in and paying the past SS contributions, that can’t happen. But for those hired tomorrow and beyond, it could be factored in. You have good points, I just wanted to make clear my position.

  55. - Rod - Tuesday, Nov 26, 13 @ 12:59 pm:

    I want to qualify my no vote. If you are able to stay in the employment of the public sector for the whole of your working life then you are better off with the defined benefit pension plan. But if you are moving in and out of the public sector and changing jobs you are better off with a 401k because of trustee to trustee transfer rules allowing that the funds are deposited directly into your IRA account from your former employer plan or other retirement account.

    If you cash out a traditional plan you face many problems in relation to taxes. If you cash them out, that lump sum payment then falls under the category of simple income.

  56. - Anonymous - Tuesday, Nov 26, 13 @ 1:01 pm:

    =collect a pension at the expense of others==

    First, workers in pension programs pay a good part of their income for their OWN pensions.

    Secondly, the way our government is set up, public employees are paid with public funds. That’s the way it is. Do you propose to do away with government so we can find a different way to pay for goods and services provided to the public? I’m all ears on that one.

    Third, where do private employees get off thinking the money in the company is not coming from PEOPLE, just like taxpayers? Unless the company is printing their own money, I’m probably paying for private pensions too. In addition, the tax subsidies that so many companies get so their employees can have day care facilities on campus, employee health clubs, low cost health insurance, bonuses…………..taxpayers are subsidizing that. Are private companies somehow living in an alternative universe with the employees so that no one has to pay them or their goodies?

  57. - Joe M - Tuesday, Nov 26, 13 @ 1:02 pm:

    Neither system works if the employer skips or modifies the employer contributions.

  58. - mythoughtis - Tuesday, Nov 26, 13 @ 1:03 pm:

    ==Of course there are going to be more votes for pensions as opposed to 401k’s…who wouldn’t want to collect a pension at the expense of others as opposed to saving your own money… ==

    What makes you think that it wasn’t the workers money in the first place? The worker gets paid a salary, some of which goes back to the pension from every paycheck. The state was to also pay into the pension system money that would have otherwise gone to the worker as part of compensation. Similar to the private industry where the employer and the employee both pay into 401Ks. However, as a state employee, I don’tm have the discretion to skip, increase, or decrease the amount that comes out of my paycheck, nor can I do anything about the state not paying in as scheduled.

    So, I did SAVE my own money. I am/was entitled to compensation for my work that I provide(d) to the state on behalf of and at the request of the taxpayers via their state representative and senators. You surely expect your employer to compensate you as agreed, correct?

  59. - Sangamon Sam - Tuesday, Nov 26, 13 @ 1:05 pm:

    Of course not. Defined contribution plans are almost always better for the employee but more expensive for the employer - hence the
    “pension crisis.”

    Also to Mr. Reeder’s statement:

    “All of these items are factored in when calculating pension payments. And yet they are pretty hard to calculate with much certainty. And taxpayers are on the hook for these predictions.”

    That’s a false assumption he’s used apparently to bolster his case. All of these variables and risk factors are pretty well known by insurance companies and retirement systems. It’s called actuarial science.

  60. - mythoughtis - Tuesday, Nov 26, 13 @ 1:09 pm:

    ==They are contributing anywhere from 2-10% of their salary to get a pension that can be from 50%-80% of their salary (depending on a number of different factors) There is no investment plan that I am aware of that can get that kind of a return on their money - a return that is essentially guaranteed as well!==

    Actually, if you check with investment firms, they show you charts that show that your money will double every so many years (at 8 percent interest, the double number of years is 9, rule of 72). So after 35+ years in the work force, continuing to put money in while other money is doubling, redoubling, and redoublingng, etc, etc,… you end up with a lot. Provided you invest it and leave it there.

  61. - skeptical spectacle - Tuesday, Nov 26, 13 @ 1:10 pm:

    Defined benefit plans are better for those who receive them, no doubt about it.

    The problem is that the state of Illinois can no longer afford it.

    It would be great if everyone in our state had a defined benefit plan similar to TRS or IMRF but it is impossible.

    So no, 401k is not better when compared to those who have defined benefit plans, but the state of Illnois can’t afford to continue with the defined benefit plan as currently structured.

  62. - skeptical spectacle - Tuesday, Nov 26, 13 @ 1:13 pm:

    A little talked about but better way we can all work together to solve the “retirement problem” is to reform healthcare so that retirees do not have to worry about out of pocket costs for healthcare. Think about how the retirement perspective would change for people if you could take planning for healthcare expenses out of the equation for all retirees across our entire country. It would revolutionize society.

  63. - Ghost - Tuesday, Nov 26, 13 @ 1:18 pm:

    No not better off.

    The 401(k) was actually implemtned to allow private employers managers to put away money on top of defined benefit plans.

    If the stick market is your becnhmark, then a 401k is a bad choice compared to a defined benefit plan. Since defined benefit plans continue forever, they ourperform 401k plans. In a traditional 401k you change investnment strategy from agreesive to conservative as you get older. And you are subject to where the market is at the moment you need money. A defined benefit plan does not need to adjust strategies based on age, and can whetehr the ups and downs of the market because it keeps going.

    the 401k system underperforms defiend beenfit plans has helped to make a lot of poor retirees.

    Forbes article explaning this and how defined benfit plans be the pants off of 401k

  64. - bored now - Tuesday, Nov 26, 13 @ 1:22 pm:

    of course they are not better off. *anyone* that can do math understands that. there was a reason why private corporations went to 401k plans, and that’s because it saved them money…

  65. - OneMan - Tuesday, Nov 26, 13 @ 1:23 pm:

    I think they thing many of you are missing about 401K and the BIG advantage of them is the is basic portability.

    That is, post college I have worked for 6 companies in in 23 years, besides my current employer my job no longer exists due to either an acquisition, business failure/bankruptcy or facility closure at 5 of those places

    – Facility shutdown, parent firm acquired.
    – Acquisition and later termination of the business line I was in.
    – Acquisition (firm still exists) my role would have likely not survived (95% of IT staff gone)
    – Business failure (left before it happened, dot com)
    – Company acquired, small chance I would be working from home more likely would have required a move to NC or job would have been eliminated. (they didn’t replace me when I left)…
    – Current gig…

    The longest of those was 7.5 years (might have been able to hold out for 10).. Did qualify for a pension sort of there 110 a month, rolled in into a 401k…

    So not to play into a sterotype of the person who goes and works in government forever. But for a college graduate in technology in the early 90s my path is fairly normal (can think of two guys who are with the firm the went to work for out of school) a 401k is a godsend for folks like me…

  66. - Cook County Commoner - Tuesday, Nov 26, 13 @ 1:27 pm:

    No. Not better off. The vast majority of individuals lack the salary and expertise to retire at 59 with a 3% COLA at a significant percentage of salary in a 401k. And that’s including Social Security. And, they probably would have been worse off if the various state and local pension plans had made the required contributions. That money would have had to come from somewhere, and state and local governments don’t print currency.
    Federal, state and local governments and individuals need to rethink retirement for everyone. What is not going to work is either 401ks or public employee pensions, as presently constituted, especially in a state with the second worst unemployment rate in the nation and a nation as a whole with a labor participation rate that keeps declining, in part due to an aging population, and the globalization of labor.
    Meredith Whitney, the analyst that wrongly predicted a municipal bond market meltdown, predicted a few days ago that the state and local government pension issue hobbling many states would pit neighbor against neighbor as pensions consume larger and larger shares of annual government revenues. And judging from some of the comments that totally disregard the math and the state of the average Illinois taxpayer and raise the magical state constitution as if it would start spewing endless Franklins, she may be right this time.

  67. - Ruby - Tuesday, Nov 26, 13 @ 1:28 pm:

    The biggest problem with the defined benefit pension system is that it depends on the government or the private employer to make their contributions but does not actually require them to do this.

  68. - Ahoy! - Tuesday, Nov 26, 13 @ 1:28 pm:

    It’s kind of an incomplete question, I’m guessing the comparison is to the Illinois retirement system which is very generous to workers (early retirement, compounded COLA and the generous match from the general fund that never gets paid).

    The private sector switched to 401K’s for a couple reasons. Chief among this is that they offer flexibility to the organization. Also, they provide a benefit to workerss as businesses aren’t’ always around forever and private sector workers are better off owning their own retirement instead of relying on businesses that can go bankrupt.

    The bigger issue with the state is the generous benefits given and the lack of paying the bills.

  69. - skeptical spectacle - Tuesday, Nov 26, 13 @ 1:32 pm:

    Cook county:

    Yes! I think so too regarding this:

    Meredith Whitney, the analyst that wrongly predicted a municipal bond market meltdown, predicted a few days ago that the state and local government pension issue hobbling many states would pit neighbor against neighbor as pensions consume larger and larger shares of annual government revenues. And judging from some of the comments that totally disregard the math and the state of the average Illinois taxpayer and raise the magical state constitution as if it would start spewing endless Franklins, she may be right this time.

  70. - Arthur Andersen - Tuesday, Nov 26, 13 @ 1:33 pm:

    A very disappointing effort from a once credible journalist. That IPI Kool-Aid must be tasty and strong.

  71. - Steve - Tuesday, Nov 26, 13 @ 1:35 pm:

    This is a difficult question to answer. Those who retired years ago are getting a better deal than most who have a 401K and Social Security. But, in the future , that may well change. It’s very, very difficult to answer this question because we all have no idea what changes the state legislature has in store for public pensions. No doubt a valid question but… almost impossible to answer.

  72. - bmcosti - Tuesday, Nov 26, 13 @ 1:37 pm:

    As the pensioners of Detroit who are facing only receiving 16 cents on the dollar of the pension they thought the were going to get. I bet a lot of them wish they would have had a 401(k) style pension that they owned.

  73. - the Other Anonymous - Tuesday, Nov 26, 13 @ 1:37 pm:

    I skimmed through the comments, so maybe I missed it, but isn’t the real point here that each individual cannot really predict what she needs in a 401(k) because she has no idea how long she will live? On the other hand, we do have a pretty good idea how long a large group of people is expected to live, so we can plan better for the large group.

    For me, this actuarial aspect is far more important than investment expertise (although that’s part of it) or risk shifting.

    Of course, it seems that conservatives hate the concept of insurance of any kind these days except as a business concept. I think their contempt for insurance is even deeper when we talk about social insurance.

  74. - Demoralized - Tuesday, Nov 26, 13 @ 1:38 pm:

    ==the state of the average Illinois taxpayer==

    State workers are average Illinois taxpayers too. Some seem to forget that in their zeal to try and take away benefits that rightfully belong to the workers.

  75. - In the Middle - Tuesday, Nov 26, 13 @ 1:40 pm:

    Defined benefit plans are better, indeed… until they can’t make good on all promised benefits.

    I strongly favor a defined contribution plan with qualified advisers who can help the individual invest.

    Furthermore, why do so many people think 8-9% returns are magical. I think of Lynch or Driehaus when I think of magical returns, but 8-9%??? It doesn’t take an expert to get that… just a little discipline to read, study, and do your own research.

  76. - Ruby - Tuesday, Nov 26, 13 @ 1:42 pm:

    Ahoy! - @ 1:28 pm - There is another reason the private sector switched to 401K’s. It had to do with improving executive compensation and executive pension benefits .

    “As Ellen E. Schultz, an investigative reporter for the Wall Street Journal, reveals in her new book, “Retirement Heist,” it wasn’t the dire economy that led these companies to plunder their own employees’ earnings, it was greed…There were billions in promises to retirees for pensions and healthcare and death benefits and life insurance, and the companies figured out that if they cut or eliminated them altogether then they could get those billions in profit — and even use them for executive compensation.”

  77. - Joan P. - Tuesday, Nov 26, 13 @ 1:44 pm:

    I’m noticing in the comments that a lot of folks are lumping all public sector pensions together.

    “The biggest problem with the defined benefit pension system is that it depends on the government or the private employer to make their contributions but does not actually require them to do this.”

    “In Illinois, where those pensions are about to be reneged upon after being promised, earned and contractually obligated?”

    “Everyone in the private sector with a 401K has Social Security as safety net (even if it isn’t a big one). No one in the public sector has that.”

    None of those statements is accurate.

    They may be true of SOME, but a slew of public sector employees are fortunate enough to be under IMRF, which a) is 85.9% funded (that’s huge), and b) does in fact have the authority to require participating units of government to meet their obligations.

    Furthermore, many public sector employees (including some state of Illinois employees) do participate in Social Security.

  78. - Skeptic - Tuesday, Nov 26, 13 @ 1:46 pm:

    I voted no. Seems to me if the private sector were that much better off, then we wouldn’t even be having this discussion. State employees would get switched to a 401(k) (which would be constitutional since it’s not a reduction in benefits) and everyone would go home happy.

  79. - OneMan - Tuesday, Nov 26, 13 @ 1:48 pm:

    Would your feeling about 401K vs Pension be different without the constitutional protection?

  80. - Harry - Tuesday, Nov 26, 13 @ 1:50 pm:

    I said “no” but it’s more complicated than that. In ten private sector, people have Social Security, a form of defined benefit retirement plan, and their 401(k) sits on top of that.

    THAT would be a good model for public employees–a smaller DB plan (or just go into SS) for basic security against destitution, and then a defined contribution plan sitting atop it.

  81. - Ruby - Tuesday, Nov 26, 13 @ 1:52 pm:

    401k plans were never meant to replace pensions but rather to supplement pensions or to supplement Social Security.

  82. - Howie - Tuesday, Nov 26, 13 @ 1:53 pm:

    No. 2008. Who thinks it won’t happen again?

  83. - Jogger1950 - Tuesday, Nov 26, 13 @ 1:55 pm:

    The only reason they are better off is because the State of Illinois can no longer be counted on to do their part for any pension system. Employees did their part, investing boards did their part(average 9.6% return over 30 years), but the state did not. If they had their would no pension problem. But, unfortunately, they cannot be trusted to do the right thing anymore.

  84. - Ghost - Tuesday, Nov 26, 13 @ 1:58 pm:

    if you look at the big private employers, the majority pay more in executive compensation bonuses then it was costing to fund their defined benefit plans.

    Executive compensation has soared from 20-40%, while the middle class wager earners salaries decline. 401k’s for private companies were about making the rich richer and the middle class poorer.

    We are in a race to the bottom, moving more and more of our nations wealth to fewer and fewer hands.

  85. - walkinfool - Tuesday, Nov 26, 13 @ 2:03 pm:

    It’s easy.

    401K’s and the like have proven better for employers, and worse for employees. Any recent historical analysis has proven this beyond any doubt. The average age-60+ 401K holder right now, even with record market levels, has less than 25% of what they “expect to need” for retirement.

    In terms of what they were supposed to do for average individual retirees, 401Ks have been indeed a “disaster” so far.

    These retirees will be putting even more political pressure on increasing SSN over the next fifteen years.

    The future might be better, as more years of experience teach most individuals how much and how long they have to sacrifice other things to build up sufficient amounts. I don’t see it happening in this culture of “I deserve to have it now”.

  86. - Ben - Tuesday, Nov 26, 13 @ 2:13 pm:

    Many ETF investments have no fees so let’s drop that point. If the State moved to a 401K, they still have to come up with the under-funded amount. You can’t move a State of Illinois IOU to a defined contribution plan.

  87. - Ronbo - Tuesday, Nov 26, 13 @ 2:15 pm:

    I retired in 2008. Shortly after I retired the value of my deferred comp account dropped to half what it was the day I retired. If I hadn’t had a state pension to rely on I probably would have panicked and drew it all at at some point. Since I had the state pension I was able to leave it alone and it has just now come back to the value it was on the day I retired. I would hate to imagine what it would be like to have my future riding solely on the stability of Wall Street.

  88. - Anonymous - Tuesday, Nov 26, 13 @ 2:17 pm:

    Coming up with the employers payment to social security and funding 401ks for public employees would be more expensive than the current defined benefits system. Do we need more complaints about funding peoples’ retirements?

  89. - 47th Ward - Tuesday, Nov 26, 13 @ 2:26 pm:

    In 2007-2008, I might have said yes. In 2009, definitely no. Since then, maybe. As long as Social Security stays in place as is, I probably won’t have to eat cat food in retirement.

    As Wordslinger points out, what we “own” in our 401K, or 403B, is the risk, and there is a lot of risk. Pensions remove a lot of that risk from employees and put it on the employer, which is why so many employers are trying to dump their pensions.

    Employers are “rational” when the seek to dump their pension obligations. Employees are “greedy” when they try to keep their pension plans intact.

    I’ll hang up and listen now as someone yells “class warfare” about that statement.

  90. - RNUG - Tuesday, Nov 26, 13 @ 2:26 pm:

    I voted NO …

    History lesson - back when I was young, the financial planners suggested a three legged approach to retirement security:

    1) workplace pension

    2) SS

    3) personal savings

    The three legged approach worked very well for a couple of generations.

    The 401K , when it was first introduced, fit into category #3 (personal savings) above. Now that private businesses have wiped out #1 (workplace pensions) and gone to just a 401K, there are only two legs supporting retirement security. And if a bad year wipes out your 401K, you are left with just 1 leg - SS.

  91. - Old Guy - Tuesday, Nov 26, 13 @ 2:28 pm:

    I’ve done the math. IF the state had put their required contribution into my deferred compensation plan and IF my pension contributions had gone into my deferred compensation plan and IF I had been allowed to invest those funds in the same way I’ve invested my deferred comp savings, then YES I would be better off.

    The reason is that I am willing to assume a higher risk than the state pension boards can legally assume. Hence I’ve earned a higher rate of return on my investments in deferred comp than the state pension boards can possibly earn.

    The problem though is that I’ve yet to see any proposal in which the employer match is equal to what the state is currently supposed to be paying into the pension plan.

    In order to generate any savings to the state, most of the proposals under match the employee contribution (paying less than they are legally required to pay now).

    So, people would be at least as well off and possibly better of IF the state made the same match that it is currently supposed to be making.

    However, the savings to the state would likely be fairly small, since required payments would not decrease. Savings would be generated primarily by eliminating the administration and investment costs associated with the current pension systems.

  92. - wordslinger - Tuesday, Nov 26, 13 @ 2:30 pm:

    –Employers are “rational” when the seek to dump their pension obligations. –

    Unfortunately, in the private sector it’s quite easy to run through bankruptcy court, shed pension obligation, and then start over again like nothing happened.

  93. - Hit or Miss - Tuesday, Nov 26, 13 @ 2:30 pm:

    I voted no. As pointed out above by several people, many individuals are poor money managers when it comes to investing for retirement.

    In addition, the law of large numbers works well for a defined benefit plan for a group of people but not for a 401(k) type plan. With a large group plan you can manage the plan for the ‘average’ person in the plan. For a 401(k) type plan you need to manage for the ‘worst case’. This means, for example, you need to manage the 401(k)for a much longer possible (but unknown) life span of the one person than for the known (in the statistical sense) life of the average member of a large group.

    Looking back in history you find that the 401(k) was originally designed as an adjunct to defined benefit pensions. It was devised primarily as a way to reduce income taxes. For that it is a good idea but as a persons only way to fund retirement it probably will not work well for most people be the in the private sector or working for the State of Illinois.

  94. - Norseman - Tuesday, Nov 26, 13 @ 2:31 pm:

    === Would your feeling about 401K vs Pension be different without the constitutional protection? ===

    No. That’s not to say I wouldn’t have participated in one if forced to by the mismanagement and political abuses that are all to evident now.

    Portability is the best element of 401k. As more and more people try to retire on what’s left of their 401k, a political firestorm will emerge.

  95. - RNUG - Tuesday, Nov 26, 13 @ 2:32 pm:

    The other thing I want to point out (as some have stated or implied without explanation) government employees do not have 401K plans, they have 403B (deferred compensation) plans.

    Yes, a 403B is often described as a government version of a 401K … and it mostly is, with a few not so minor rule changes. I’ve mentioned it before, but the biggest difference is the ability to withdraw money from a 403B at ANY age as long as you have LEFT government service.

    Human nature being what it is, I see people pulling their money out at ages 30 or 40 instead of leaving it there for retirement, thus destroying their retirement.

  96. - RNUG - Tuesday, Nov 26, 13 @ 2:33 pm:

    Old Guy @ 2:28 pm:

    The state DID place your moeny in the pension fund. It was the employer (state) contribution that was shorted.

  97. - RNUG - Tuesday, Nov 26, 13 @ 2:35 pm:

    Old Guy @ 2:28 pm:

    ignore my comment. I mis-read your supposition.

  98. - Anonymous - Tuesday, Nov 26, 13 @ 2:37 pm:

    Absolutely not. I have a very small (let’s be clear here) pubic pension, and now working in the private sector, have a 401(k). The 401(k) bites, and the last 5 years has underperformed. And candidly, I am personally not equipped with the knowledge to manage my “investment”.

  99. - Not the same - Tuesday, Nov 26, 13 @ 2:49 pm:

    Interesting question but has more to do with distracting attention from the pension issue and that the employer just doesn’t want to pay their part of the pension. It would be impossible for the retirees or even those within 10 years of retirement to change their choice and be able invest any amount of money in a 401k to have it positively impact their retirement. SURS does more for the employees of the Universities than just provide retirement of which they pay an additional part of their income to fund including their COLA and Healthcare.

  100. - Ronbo - Tuesday, Nov 26, 13 @ 2:51 pm:

    Anonymous @ 2:37 pm “I am personally not equipped with the knowledge to manage my “investment”.

    Neither are some professional financial advisers. I remember a financial adviser that SERS had speak to us at a retirement seminar I attended. He predicted that the DOW would be over 20000 by now.

  101. - the Patriot - Tuesday, Nov 26, 13 @ 3:01 pm:

    When you consider how much we dump into these plans the 401k is much better. We pay about 16% of a teachers salary into a broken pension. If I go to any financial planner and give him 16% of a teacher salary over 35 years, he will guarantee me they retire a millionaire.

    1. Every teacher is a millionaire.

    2. If I get sick, get RIf ed, move, or die, the member or their family get the money no strings attached.

    3. I would love to play poker with any clown that thinks letting the state manage their money instead of having their own control, the option to walk and take it at any time, and be almost guaranteed I retire a millionaire.

    Lets keep in mind the people in charge of the pensions don’t understand that balanced budget means you spend equal to, or less than you bring in.

  102. - Earnest - Tuesday, Nov 26, 13 @ 3:03 pm:

    No way are they better off. We have an employee match where I work, but fairly high fees based on where we can invest. Add in to that the complexity of making choices for people who aren’t familiar with the stock market, and it leaves you with people vulnerable to being steered to the worst of choices.

  103. - Joe M - Tuesday, Nov 26, 13 @ 3:07 pm:

    After the economic meltdown that started in 2008, for a while, 401(k)s became synonymous with loosing money. “I can’t buy a new car this year, because I got 401(k)’d”

  104. - Anonymous - Tuesday, Nov 26, 13 @ 3:11 pm:

    Is IMRF broken? Its a defined benefits program. The reason it’s funded at 85+ % is because no one stole the money from it and funded it every year in addition to employees contribution. None of the public pensions would be “broken” if our highly moral legislators hadn’t absconded with the cash intended for retirees. Lets’ get that straight. There is NOTHING wrong with the structure and intent of the pension funds that not stealing from it wouldn’t fix.

  105. - Jimbo - Tuesday, Nov 26, 13 @ 3:17 pm:

    I wish uneducated dolts would stop pretending it is possible to switch. It isn’t. Teachers would have to be in SS. Illinois would pay more than they do presently to get them in SS. Not to mention I’m fairly certain they’d have to pay a pretty penny for all those years they skipped because they administered a “qualified” plan.

  106. - Did the Math - Tuesday, Nov 26, 13 @ 3:43 pm:

    They are not better off just because they own their accounts and can choose their investments. There are so many other factors in DC plans that negate that benefit.
    First of all, defined benefit plans are more efficient. What that means is for each dollar contributed, defined benefit plans return more in benefits to the recipients than defined contribution plans. The reasons for that are in how they are configured and managed. In most cases, individuals in defined contribution plans make their own investment decisions from among investment vehicles that cost more and yield less than institutional investors of defined benefit plans. Some estimate that the investment return difference is at least 1%. Additionally, converting a 401K balance into an annuity is another inefficient return to plan participants. Defined benefit recipients can receive annuities 1.5 times (or more) higher than defined contribution plan recipients. This is because the annuitants pay someone to assume the risk for investment return fluctuations and mortality and that someone makes a handsome profit.
    One huge myth is that defined contribution plans are cheaper than defined benefit plans. DC proponents cite numerous examples of private sector employers switching to DC plans. Those companies don’t do it because all DC plans are cheaper than DB plans. They switch because their new DC plan is cheaper than their old DB plan. For example, IBM had an excellent DB plan for many years. They switched to a DC plan and still contribute 8% into that plan for many employees. That 8%, coupled with their 6.2% contribution to Social Security add up to 14.2%. SURS and TRS have never been that expensive.
    If you look at the benefit costs to the state for the Tier 2 members (employer normal cost) you will see those costs being around 2% - 3% for SURS and even less for TRS. The average private sector employer contributes much more than that into their respective DC plans plus they pay into Social Security. The Illinois defined benefit public pension plans are a bargain, but nobody wants to believe it.

  107. - capncrunch - Tuesday, Nov 26, 13 @ 4:04 pm:

    “The Illinois defined benefit public pension plans are a bargain, but nobody wants to believe it.”

    Count the folks in Springfield among the non believers.

  108. - Joe M - Tuesday, Nov 26, 13 @ 4:05 pm:

    I don’t know why Mr. Reeder keeps pushing this fantasy that public employees could involuntarily be booted out of their pension system and put into 401(k) type plans? The Illinois Supreme Court has ruled multiple times that for those public employees hired after the 1970 Constitution public pension protection clause, that the retirement system in place at the time of hire, is the retirement system for a public employee’s entire working career, and into retirement.

  109. - Earl Shumaker - Tuesday, Nov 26, 13 @ 4:09 pm:

    There was a comment about IMRF being 85.9% funded
    The reason for this, of course is because as taxpayers part of our property taxes goes to fund municipal worker’s pensions. Unlike, our state politicians who diverted the state’s share of legally mandated funds into our state pensions, pension contributions from property taxes have actually been deposited into the IMRF consistently

  110. - dupage dan - Tuesday, Nov 26, 13 @ 4:13 pm:

    In the event the ILSC agrees with the GA/Gov that there is a bonafide emergency that could expose the pension to a claim of insolvency, what then? I know the state can raise taxes to meet the obligations. Who here believes they have the political will/desire to do that?

    That will be the argument if the pension “reform” is voted on and the lawsuits get to the SC. I realize that the GA/Gov have quite a hill to climb. But that could very well be the legal theory. What prevents the gov’t from redoing the (MY!) pension to suit their political needs at my expense should they prevail? Yes, a 401k is my risk. But it IS MINE. So many folks came to this country so many generations ago to take on their OWN risk to make their OWN lives. Not to depend on the vagaries of a feckless gov’t bent on taking care of it’s own needs.

    Actuarial tables aside. I would prefer to take my own risks. I started with the state 24 years ago. My wife and I thought about this at that time and made our own plans. She works for the gov’t & will get a pension w/out SSA. I will get some SSA in addition to my pension. We also made our own arrangements, something we would have done in any event. All the experts say to diversify. We did that. A hedge on the future. We never thought the gov’t would renege - now it looks like that is precisely what they plan on doing. After failing to make the payments they were supposed to.

    As my father has said often - “protect yourself at all times”. Paranoid, yes. Wise, yes. Sometimes the two work together.

  111. - Earl Shumaker - Tuesday, Nov 26, 13 @ 4:23 pm:

    I vote no. I am very concerned that because there is so little oversight and regulations of Wall Street, this country could easily once again experience another Wall St crash. What I have been reading is that the “too big to fail” banks are now even bigger

  112. - Henry Clay - Tuesday, Nov 26, 13 @ 4:59 pm:

    No, they aren’t better off but it shouldn’t be the state’s job to guarantee them cradle to grave financial security either. Pay them a fair wage (based on comparable wages in the private sector) and then “they are on their own” like the rest of the residents in Illinois when it comes to saving for their retirement. If that doesn’t prove agreeable to them, then they need to search for another job.

  113. - Demoralized - Tuesday, Nov 26, 13 @ 5:14 pm:

    ==it shouldn’t be the state’s job to guarantee them cradle to grave financial security either.==

    Who’s doing that? I don’t think the average state pension is guaranteeing anybody financial security.

    ==then “they are on their own” like the rest of the residents in Illinois when it comes to saving for their retirement==

    That’s an argument against any company sponsored or paid retirement in general.

  114. - kimocat - Tuesday, Nov 26, 13 @ 6:48 pm:

    When I joined the state, it was still considered a decent career path. I worked with highly educated professionals, in sciences and engineering. And one of the key issues we had was encouraging high quality people to come to our agency. Because those folks have choices. So even beyond the issue of broadcasting to one and all that the state welches on it’s contracts with employees, is the issue that Illinois will also no longer attract the best and the brightest. And a lousy 401K with mediocre salary won’t get you the best.

  115. - cod - Tuesday, Nov 26, 13 @ 6:49 pm:

    Reeder’s opinion is so biased towards helping the executive class, it is not worth responding to his “thoughts”. The notion that a 401-k is better than a pension is just ridiculous, unless you are a CEO/CFO trying to reduce labor costs.

    Asking 100% of the population to become expert at managing investments is not just ridiculous, it is completely out of touch with reality.

  116. - Just The Way It Is One - Tuesday, Nov 26, 13 @ 7:04 pm:

    No, you just can’t trust a 401(k) considering all the crazy fluctuations of our economy. A pension, on the other hand, is at least suPPOSED to be Constitutionally-guaranteed. It’s like taking the Brick house over the frame one–just more reliable overall…!

  117. - Catrike - Tuesday, Nov 26, 13 @ 7:33 pm:

    “Where else can you get an annual 3% cola?”

    No where and that’s the point. It is not a cola it is a guaranteed pay increase not associated with the cost of living.

  118. - RNUG - Tuesday, Nov 26, 13 @ 9:40 pm:

    Catrike @ 7:33 pm:

    Actually, over time you can get the same 3% from Social Security. The average CPI over the past 40 years and almost 100 years (since the government started tracking it) as been 3.1% and 2.9%.

  119. - wordslinger - Wednesday, Nov 27, 13 @ 12:47 am:

    RNUG, you and AA are the scourge of Civvies and pension hysterics, lol.

    Ty and Big Brain Bruce must have nightmares about you guys. Don’t they look stupid.

    From me, salud.

  120. - HGW XX/7 - Wednesday, Nov 27, 13 @ 1:31 am:

    == @ 4:59 pm: “Pay them a fair wage (based on comparable wages in the private sector) and then “they are on their own” like the rest of the residents in Illinois when it comes to saving for their retirement.”

    Well OK under that premise then current retirees should get corresponding back pay for their years of underpayment. In my case this represents a 25% underpayment by the state in comparison to equivalent work performed in the private sector. Somehow I do not believe the state would be willing to cut me a check for $200k AND throw in all the interest this could have been parlayed this into over those 30 years which would boost that fair market figure to even substantially more. Now multiply that by the number of current retirees who also have been underpaid substantially for their career with the state.

    == capncrunch @ 4:04 pm is absolutely correct that “the Illinois defined benefit public pension plans are a bargain, but nobody wants to believe it.”

    Simply put the State will be far better off for a lot less money to honor their contractual and constitutional obligations and drop all the nonsense on this manufactured ‘pension crisis’ that is readily and most importantly constitutionally solved.

    State retirees have fulfilled their contractual obligations for the State. It is not an unreasonable expectation, certainly not out of line for the State (and the people) to honor theirs?

  121. - RNUG - Wednesday, Nov 27, 13 @ 6:19 am:

    Word @ 12:47 am,


    To quote Stan Freberg: “Just the facts, Ma’am”.

  122. - PublicServant - Wednesday, Nov 27, 13 @ 6:47 am:

    RNUG (or anyone), any idea on whether and when we can request a stay, if and when this unconstitutional attempt by the state to complete the theft of deferred compensation from state retirees and current employees were to temporarily become law?

  123. - RNUG - Wednesday, Nov 27, 13 @ 7:10 am:

    PublicServant @ 6:47 am:

    There is a difference of opinion on that.

    *Old and In The Way* who is, I believe, a retired lawyer, seemed to think it could be requested as soon as it was signed into law, even if it has a delayed effective date.

    I was never a lawyer but I think it has to wait until the effective date of the bill or until actual “harm”, like a lowered or skipped AAI, occurs.

    Actually getting a stay is whole other issue. You usually have to be able to show a likelihood of prevailing at trial or a case of irreparable harm to get a judge to issue a stay.

    I would not bet on a stay against any AAI reduction because the State could always make it up later because, at least for now, the pension funds are still “solvent”, just underfunded. But there MIGHT be a stay against any new deductions from employee’s paychecks, although it could take the form of the Maag case where the deduction was allowed but it had to be placed in escrow instead of given to the State.

    Going to be interesting times … if it didn’t affect me personally, I would be very amused by the whole thing.

  124. - No Sense - Wednesday, Nov 27, 13 @ 8:12 am:

    You know when I started with the State Of Illinois I wasn’t given a choice of whether or not money would be taken out of my check for retirement they just took it out. Over the years people retired they got the full benefit’s and everyone that is invested in the system should be given the same. The State borrowed the money and by law they should pay every cent back. A 401k could be good for new hire’s coming in to the work force they should not a have choice take it out at the same % like they do for the retirement system. YOU CAN”T FIX A PROBLEM THEY CAUSED !

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