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* Treasurer Dan Rutherford said the General Assembly should go ahead and pass pension reform, pushing people into 401(k)-style plans by using much higher pension contribution rates, and then let the courts decide whether it’s constitutional or not…
“It should be litigated. For years and years, we’ve been, `Oh, it’s unconstitutional.’ Litigate it,” Rutherford said at a news conference. “Because until we do it, nobody is going to really know.”
A major union said the idea wouldn’t raise the same “constitutional red flags” as simply reducing benefits. Some government employees, such as university officials, already have that pension choice, said a spokesman for the American Federation of State, County and Municipal Employees.
But spokesman Anders Lindall said AFSCME opposes Rutherford’s proposal. He said it wouldn’t fix the state’s pension problems — particularly state government’s failure to contribute its full share of retirement costs over the years. […]
Lindall said several other states have given employees a choice but have seen “very low” participation in 401(k)-style plans.
Is the Treasurer right?
* Related…
* VIDEO: Rutherford on first 100 days
* Rutherford outlines his 100-day accomplishments
* State treasurer Rutherford ‘cautiously optimistic‘ about solving budget woes
* Treasurer offers support for short-term borrowing
* Pensions to be paid without borrowing, first time in two years
* Auditor General: State’s future has promise
* Editorial: Present? Yes. Jobs? Nah: Nice to see in the official record that Senate President John Cullerton was “present” as the state continues to chase away jobs. Congrats to his fellow Chicago Democrat, Sen. Kwame Raoul, for being “present” when reform that might have helped jump-start Illinois’ sluggish economy went down.
* Bill spurred by Bianchi legal costs: A bill under consideration in Springfield would help protect county governments like McHenry County where legal bills related to the special investigation of State’s Attorney Louis Bianchi total more than $300,000. House Bill 2558, which passed through the House last week, would allow the courts to hire other public prosecutors to keep costs manageable when a sitting public official is investigated and goes to trial. It also would require that the scope of a probe be well defined and that county boards be provided itemized cost estimates and bills.
* Rep. Sara Feigenholtz opposes state plan to restrict HIV/AIDS drugs access
* Illinois announces reduced access to HIV Medication Assistance, Effective July 1
* Human services agencies brace for big cuts
* Legislation would help pay for rides for disabled
* Comptroller’s office considers move
posted by Rich Miller
Wednesday, Apr 20, 11 @ 11:31 am
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Yes. There are conflicting views and legal opinions that will ultimately have to be resolved by the courts. The question is whether proponents will be able to muster the votes to pass the GA and whether Quinn would sign.
Comment by 4 percent Wednesday, Apr 20, 11 @ 11:34 am
So does that mean if they pass the law and use that as the reason to short the payment, AGAIN what do we do when the court strikes it down in two years? We get to say, opps, we goofed AGAIN.
Isn’t this just another creative attempt at a pension holiday? With the added twist of making the judges the bad guys.
Comment by frustrated GOP Wednesday, Apr 20, 11 @ 11:37 am
Rutherford is right they should pass pension reform. and let the courts decide.
Comment by Palatine Wednesday, Apr 20, 11 @ 11:40 am
Will employees get a 10% rasise to make the contribution? Or is this another way of wacking public employees pay 10%? I bet the folks making $10 an hour at local government looking at a 15% increase in healthcare can’t wait. Yes, they exist. Of course they aren’t use as examples in the paper.
Comment by frustrated GOP Wednesday, Apr 20, 11 @ 11:40 am
No way. Aside from the fact that I strongly disagree with not honoring these contracts, this sounds like a pretty risky gamble.
Comment by Small Town Liberal Wednesday, Apr 20, 11 @ 11:41 am
Current law allows members of the Illinois General Assembly up to two years to opt out of the state pension system.
My first question is, what did Rutherford do?
Secondly, current law allows state employees to contribute to a 401(k) in addition to paying into the pension system.
The problem with forcing them out of the pension system altogether is that the taxpayers are then on the hook for paying into social security for them, which would make our pensions MORE expensive than they are now.
But, if Dan Rutherford, Tom Cross, or anyone else believes that retroactively changing pensions is legal, and they want a test case, I have a simple suggestion. Once again.
Pass a measure that eliminates the pensions for current members of the Illinois General Assembly and all other elected officials in the state, and let that be your test case.
Until now, Cross and the Republicans have wanted guys like my grandfather — who spent over 20 years investigating Medicaid fraud — to be the guinea pigs.
Well, there’s a basic rule of fairness that says you shouldn’t ask anyone to do anything that you wouldn’t be willing to do yourself.
Its time for Republicans to put their money where their mouth is.
Comment by Yellow Dog Democrat Wednesday, Apr 20, 11 @ 11:52 am
It’s inevitable. First they came for the future hires, then the current employees, and one day it will be the retirees. Even if the courts decide against it, the money will be clawed back eventually through a constitutional amendment or via taxes or by agreement. Mathmatics will eventually overcome all the political and legal obstacles.
Comment by Sam I am Wednesday, Apr 20, 11 @ 11:56 am
Request for clarification:
Does Dan Rutherford mean Social Security (FICA) plus a 401(k) style plan, or a 401(k) style plan without Social Security?
Comment by Bill White Wednesday, Apr 20, 11 @ 12:00 pm
STL - not saying you are wrong, but I am not sure why it would necessarily be more risky. It all depends on how the accounts would be managed (e.g. by the individual or by professional staff), what investments were allowed and the administrative costs (if managed by professional staff). Increased risk would be how these would compare to the same in the current pension system. Admittedly, I do not know either.
Comment by Nuance Wednesday, Apr 20, 11 @ 12:03 pm
This is not pension refomr, its the same problem that got us into this mess in the first place. Al this proposal does is ush the cost of caryying for State employees onto social services and medicare/medicaid and social security.
Private buisness likes 401(k) because this allows them to pocket the retirment costs as bonuses for upper management. The problem is we are rapidly expnading our class of poor retirees unable to cover basic expenses.
This kicks the problem of caring for retiress down the road.
The pension system is not overly expnsive or generous, its just the State robbed it of contributions to fund other matters.
If anything we should propose legislation requiring all employers wiht more then 250 employees to establish pension plans. 401(ks) were not created to replace defined benefit plans, but to supplement them.
Also a lot o State employees do not hav enough time left to build up 401(k) plans; and Since the State hasnt funded their accounts, wat does exist is not suficient.
Now if ruhterford wants to give each employee an amount equalt to 15% of their salary times their years of service compounded at 5% a year to seed thier 401(k) and to account for the investmnt they have to date, lets do it. Of use this will cost more then funding the system because they still have to cover benefits for those who have retired, and the dollar amount of the current value of current employees will cost the State more then funding up the system for those who are currently enrolled.
as for let the courst fight it out…youmean pass off dealing with the expense years donw the road until we have a court ruling…. isnt pass the buck on covering our expenses what lead us to this problem in the first place?
Comment by Ghost Wednesday, Apr 20, 11 @ 12:04 pm
pension reform discussions have been driven by the state’s ability to pay for its contributions to the system - it’s a budget driven discussion. If the GA legislates changes to the existing system, assumptions are going to be made about savings to the system, which will factor into budget preparation - possibly as soon as the following fiscal year. If changes are made, assumptions are made and factored into the FY13 budget, and the court rules against changes, then bam - another potential budget hole.
maybe it’s one of those, we’ll cross that bridge when we come to it discussions then.
Comment by Leroy Wednesday, Apr 20, 11 @ 12:04 pm
Probably not comparable but I recently read that Chile made a similar move a number of years ago. Participation in the private plans was near 90% and the private plans have dramatically out-performed the previous plan. Can’t remember all the details so again it may be comparing apples to oranges. I know this is not Chile:)
Comment by Nuance Wednesday, Apr 20, 11 @ 12:09 pm
At a minimum, the defined benefit plans for new hires should be eliminated. They should ideally be replaced with Social Security and an optional defined contribution plan, perhaps with an employer match. That would guarantee no dipping into employees’ retirement funds by the GA and would put sustained pressure on the GA to get the existing defined benefit plans fully funded as employee participation and therefore employee contributions decrease while benefit payouts remain.
For existing employees, I think the Comptroller is right. Increase the employee contribution substantially and offer the option to switch to defined contribution to avoid this and I suspect a large portion would do so and that it would stand up to a court challenge.
Comment by thechampaignlife Wednesday, Apr 20, 11 @ 12:14 pm
Yes, lets get it done,one way or the other it’s going to court. Or better yet we can have Quinn figure it out. Now the choice is simple,bring on the Judge.
Comment by mokenavince Wednesday, Apr 20, 11 @ 12:23 pm
@thechampaignlife -
LOL. Please explain how you plan to attract top professors to the University of Illinois if the only retirement benefit you’re going to offer them is Social Security.
Too paraphrase Tom Cross speaking at a fundraiser for Jim Durkin in 2008, state employees did not create this mess — they made their payments into the pension system — the entire pension debacle is the fault of lawmakers like Tom Cross and Dan Rutherford who approved budgets that skipped pension payments.
Now we want to place the responsibility for fixing that mess on the workers?
I’m not saying that 401(k) plans should be completely off the table. Quite the contrary, that option might make sense for certain classifications of workers who want more portable benefits — lawyers, computer technicians, engineers, public relations professionals — because they’re just going to leave state government once the economy improves.
But, if we’re going to attract folks to careers in government - prison guards, state police, academic professionals - we have to be willing to accept that the alternative to pension and health care benefits is a higher base salary.
Attempting to coerce folks into a 401(k) doesn’t get you around the big picture economics or the State Constitution.
Comment by Yellow Dog Democrat Wednesday, Apr 20, 11 @ 12:26 pm
How much with the employer share of Social Security be for TRS? If you push them all into 401Ks they’re no longer exempt and someone will have to pay the 6-plus percent payroll tax to the feds.
So rutherford supports higher property taxes?
And will the state be contributing anything to the 401K? any employer match?
I ask because where would the state get the money? And that’s important because you could end pensions today and it doesn’t eliminate the massive multibillion dollar unfunded liability. You still have to pay it off.
You can make the point that when times are good is when the state should consider pension reform because the start up costs (social security, etc) are going to be significant and they will be in addition to the unfunded liability payments, which are the bulk of the annual pension costs.
Comment by piling on Wednesday, Apr 20, 11 @ 12:33 pm
I am neutral on the merits of pension vs. 401(k)- which I think would be 453 anyway? But, it seems to me that the biggest reason for the pension problems is the state’s underfunding, and fail to see how moving away from a pension solves that problem. And I say this as a moderate conservative FWIW.
Comment by Anonymous Wednesday, Apr 20, 11 @ 12:35 pm
By chance would Rutherford’s office be in charge of investing all this wonderous 401K money? Getting his hands on billions of new dollars to line Wall Street might explain his exhuberance.
Comment by piling on Wednesday, Apr 20, 11 @ 12:45 pm
== No way. Aside from the fact that I strongly disagree with not honoring these contracts, this sounds like a pretty risky gamble. ==
Is it a risky gamble because the courts might rule the changes are ok?
Comment by OneMan Wednesday, Apr 20, 11 @ 12:54 pm
Guys & Gals, if you’re going to talk about the state’s pension systems (that’s plural), then talk about each system and how the changes affect it. The statements here are lumping the various systems, each of which has different rules and requirements, into one bucket and then generalizing from a false base.
TRS (teachers) don’t contribute into Social Security today unless they also work a second non-teaching job. They also get penalized for having a non-contributing job; in most cases they can’t collect from their spouse’s Social Security even after the spouse dies (this also applies to SERS non-contributing members). As several people has said, if you eliminate their defined benefit plan, then you will have to pay Social Security benefits … and Uncle Sam won’t wait on the check. And if teachers are considered government employees, then they have to have a 457 plan (similar to 401K) but, again, the payments must be made by the state on a timely basis (i.e., monthly) which will cost the state much more money than the current system. All of this goes away (more or less, still have the unfunded liability but eliminates the cost going forward) from the state budget if you dump the pension cost on the local school districts. Burt that also leads to the question of whether state school aid payments increase to cover those (now district) costs or if it all gets dumped on the local property taxes.
SURS, the university system, from what friend shave told me, is somewhat similar to TRS but I don’t know the specific details so I’ll refrain from commenting on it. Same for the legislature and judges, different rules / contributions / vesting and since I never worked under that system, I’m not sure of the specifics. However, from what I’ve read, they get the best deal of the bunch.
SERS (the actual state employees) already pay into Social Security (except for a few old timers still around from way back, most the people under the “state only” system left in 2002 or before) and they pay into the state pension system plus, optionally, they pay into a 457 plan (the government employee version of a 401K with slightly different rules).
Of the various systems, the current SERS system comes closet to meeting the three legged definition we were (should have been) taught years ago about saving for retirement. (1) Pension, (2) Social Security, (3) Personal Savings(401 or 457). Assuming this financial advice still applies, then the current SERS system is exactly what all the financial advisers have been telling us to do for generations. All the talk of changing the current SERS system is just an attempt to create one more “race to the bottom”.
If they want a test bill, then pass changes to the legislative retirement system and see what the courts say. That puts the least amount of money at risk from missed contributions. It also doesn’t create one more big pot of freed up money that could be diverted elsewhere … Do any of us really trust state government to wisely use any freed up money?
Comment by Retired Non-Union Guy Wednesday, Apr 20, 11 @ 12:54 pm
If all current and future state employees are put into a 401k plan how will today’s retiree benefits be paid?
Comment by Leave a light on George Wednesday, Apr 20, 11 @ 12:58 pm
- Is it a risky gamble because the courts might rule the changes are ok? -
No, I think it’s risky because it could allow the legislators to ignore the problem for a few more years.
Comment by Small Town Liberal Wednesday, Apr 20, 11 @ 12:59 pm
Rich, you shouldn’t have buried the news that human services providers are expecting a 6% cut in rates with many grants reduced to zero, in this pension story.
I expect another round of Member Initiatives at session’s end, once again giving a one time facility improvement instead of a CODB increase which goes into a future rate base. Let’s see what community based groups are still around in FY 12 to even receive such largesse…
Comment by Capitol View Wednesday, Apr 20, 11 @ 12:59 pm
wouldn’t be the first time the GA has done this. Look what happened to medical malpractice caps. Passed by the GA and ruled unconstitutional 3 times!
Fear of the judiciary is not reason enough to say no.
Comment by heads up Wednesday, Apr 20, 11 @ 1:01 pm
heads up -
I’ve been wondering why they don’t exempt the Judicial Retirement from the proposal.
Comment by Edison Parker Wednesday, Apr 20, 11 @ 1:09 pm
==They should ideally be replaced with Social Security and an optional defined contribution plan, perhaps with an employer match.==
This would cost much MORE than the current plan and do nothing about the $80 billion dollars in debt. It istrue, however that this would stop the state from stiffing employees. The IRS don’t declare no SS holidays. The whole idea is really stupid. It is part of the class warfare being waged by rich guys who don’t want to pay their fair share of taxes and politicians who are too cowardly to own up to their own mistakes. The 80 billion owed is not going away no matter how much they screw employees going forward. What if everybody jumps to the 401k? Who will pay for benefits alreay accrued?
Comment by Bill Wednesday, Apr 20, 11 @ 1:19 pm
@Retired Non-Union Guy -
“If they want a test bill, then pass changes to the legislative retirement system and see what the courts say. That puts the least amount of money at risk from missed contributions.”
Agreed. It would be fiscally irresponsible to peg our hopes for a balanced budget on a scheme which has been repeatedly rejected by the courts.
You can’t dig your way out of a hole, as my grandfather says.
Comment by Yellow Dog Democrat Wednesday, Apr 20, 11 @ 1:27 pm
I don’t see this being resolved in the courts. Presumably, the litigants would be the gov employee pensioners on one side and the state and local governemt employee pension plans on the other. Both sides want to maintain the status quo because of their self interest, including the state court judges with their pensions. Maybe some citizen activist could get involved and try to push this into the federal court system, assuming it could exercise jurisdiction. Still, a lot of fed jusdges came from state politics and have pals with state and local gov pensions. The solution will probably be IL and local gov officials yelling to the feds to send money or the militia when they decide to either stop paying the pensions resulting in massive strikes, tax us all to extinction causing civil unrest or decrease services to the point the state devolves into anarchy. But do not despair. There are still a few years to go and kick the can, hoping for a miracle.
Comment by Cook County Commoner Wednesday, Apr 20, 11 @ 1:41 pm
I’m against the idea of being shunted into a 401(k) in lieu of a pension. I keep wondering how some politicians can continue to promote 401(k)s over SSI or defined benefit/pension programs after all of the financial fraud we’ve seen in this country over the past few years.
Comment by Phil Wednesday, Apr 20, 11 @ 1:52 pm
The Treasurer is wrong on two levels. First, both he and the GA took oaths to support the Illinois Constitution, which protects the pensions. Passing legislation that you know or should know(via Cullerton’s memo)is unconstitutional is a violation of this oath. Further, litigating a constitutional issue requires money that the already broke State does not have to spend on frivolous lawsuits.
Comment by Doubtful Wednesday, Apr 20, 11 @ 2:00 pm
Partly right. He’s correct about the courts needing to decide. I’m not sure he’s correct about a 401k style plan. From my understanding this would not work out in the state’s favor since they need current and future employees to contribute to the pensions.
I believe what we need to make sure all employees can keep what they have already earned and either raise the retirement wage and slightly reduce the benefits and/or allow a path where employees can keep their current benefits but increase their contribution levels.
Comment by Ahoy Wednesday, Apr 20, 11 @ 2:03 pm
Okay, here’s my question….if THE answer is to change the current defined benefit plan to a defined contribution plan, and the failure of the defined benefit plan is due in total to the State’s refusal to fund its share of the defined benefit plan (state employees all paid their full contributions) can anyone guarantee the employer will make its full contribution to match employee’s contributions under a defined contribution plan (which will again presumably be a mandatory payroll deduction)? Let me go ahead and answer that….NO.
Pension systems are expensive and the 401K program was created for top earners. I’ve been around the legislature for over three decades and I can recall former Rep. Joe Ebbesen railing about the unfunded accrued liabilities when it was just $1 billion in 1977.
Comment by Commonsense in Illinois Wednesday, Apr 20, 11 @ 2:12 pm
@Retired non-union guy:
In your posting you spelled out all the problems that would crop up if the “just dump them into a 401k plan!” shouters got their way. Too bad nobody questions these politicians about the side effects of their losing proposition. Class warfare is not the sole property of the Right…
Comment by Roadiepig Wednesday, Apr 20, 11 @ 2:36 pm
I go back to Steve Schnorf’s comment the other day, I believe he said that changing the pension plan does NOT fix the problem of the Legislators not paying into the pension system. (Steve if you want to give your exact quote that would be great).
My question is if we go to a 401K matching plan, then the GA is REQUIRED to put in the match each year correct? They have not been able to live up to their contractual obligations as it is now.
Also to Rutherford: How irresponsible is it to rack up legal bills on this?
Comment by He Makes Ryan Look Like a Saint Wednesday, Apr 20, 11 @ 2:41 pm
AFSCME, AFSCME, AFSCME
It’s always an AFSCME issue. There are plenty of SPSA’s out there who are vehemently anti-union and aren’t in AFSCME who will see their benefits cut too if this flies. It’ll effect all state workers, union and non-union, correct?
Comment by I can't Say Wednesday, Apr 20, 11 @ 2:41 pm
Would Republican legislators be willing to submit a bill making substantial changes to the legislative pension plan only? If the Democratic legislators oppose the changes, then it might help the R’s in future campaigns. Likewise, if it is passed and D legislators challenged it in court. Of course the R’s have to be willing to take the personal financial consequences of any reductions to their own pension benefits. Could be interesting.
Comment by east central Wednesday, Apr 20, 11 @ 2:53 pm
HE is right, but I think you missed a key part of his proposal.
“The Republican said current employees should have a choice between the existing plan, which guarantees certain retirement benefits, and a new 401(k)-style investment plan.”
It does not force anybody into anything, just offers a choice. Doubt anyone could successfully challenge it. Now, as to whether or not it is a good idea, not sure.
Comment by Bigtwich Wednesday, Apr 20, 11 @ 3:00 pm
STL - “No, I think it’s risky because it could allow the legislators to ignore the problem for a few more years. ”
Now I understand what you meant. That makes sense, I would agree.
Comment by Nuance Wednesday, Apr 20, 11 @ 3:03 pm
Is the Treasurer right? NO
The Defined Benefit Pension is not the problem although the Republican pat answer to any pension problem is the 401K. The problem is the 80 billion dollar puzzle with almost no realistic solution. Yes the plans do need tweaked going into the future and that can be done. What has everyone dithering is that the three ways to deal with the real problem all hose somebody. Raise taxes, Hose State Workers, or Hose the Needy with budget cuts.
Comment by Bemused Wednesday, Apr 20, 11 @ 3:05 pm
Pension reform - hmmmm, here is a novel idea: Have the damn GA pay the state’s share of the pension contribution into the pension system!
As a former state employee, paying into the state pension system was not optional. On every pay check, there was the little box with money taken out to pay my pension contribution.
We put our blind faith (foolish us) into the GA that THEY were doing the honorable thing of paying the state’s share into the pension system.
We are fools to think that this so called “pension reform” push will do anything but get the GA out of the responsibility of paying the state’s share of the pension.
Comment by Huh? Wednesday, Apr 20, 11 @ 3:20 pm
For continuation of the defined benefits programs, there would be savings if the terms are changed going forward, such as in HB149 which proposes higher contributions from employees. For switching away from defined benefits, there might be savings for SERS workers for whom FICA is already paid but not so much for TRS or SURS employees where the 6.2% for Social Security would be a new expense (unless the State dumps this cost on school districts and universities, as has been pointed out by others in this discussion). Potential savings may not be huge unless the State really socks either the employees or the school districts and universities.
Comment by east central Wednesday, Apr 20, 11 @ 3:30 pm
To all those railing against making changes to the pension system, I have one question:
What part of “unsustainable” don’t you understand?
Comment by tberry Wednesday, Apr 20, 11 @ 3:35 pm
Well said, tberry.
Comment by One of the 35 Wednesday, Apr 20, 11 @ 3:45 pm
@tberry -
Um, it IS sustainable if the state makes their required payments.
Comment by Yellow Dog Democrat Wednesday, Apr 20, 11 @ 3:47 pm
The idea of this change makes for an interesting policy discussion but it may turnout to not be a budget solution.
Take TRS for instance, the pension contribution for FY 12 is $2.4 billion. Of that, around $700 million is the real, current costs. The rest is to cover the unfunded liability because past payments weren’t made.
If you switch to a 401K system, you could dump the $700-some million on the school districts and let them deal with it but the state is still left with a roughly $1.7 billion pension payment.
And those payments don’t get smaller anytime soon. The pension backlog won’t be paid off until 2045 regardless of whether there’s a pension system or a 401K system.
Except under Rutherford’s plan hundreds of thousands of teachers are now paying for their own 401K retirements and no longer contributing to TRS. Part of their existing contributions go to help pay down the unfunded liability, they basically pay twice, oce via state taxes and the second time with their contributions. It’s not a bank buster but its millions that will have to be accomodated in the budget.
Plus, now someone has to cover the social security contributions.
Again, this may be a policy debate worth having, but it may very well turn out to not be the budget panacea may predict.
Comment by piling on Wednesday, Apr 20, 11 @ 3:47 pm
@tberry - Well said except the solution wants to punish those who played by the rules. It’s a bit like cutting off a hand because one finger has a splinter in it.
Comment by Commonsense in Illinois Wednesday, Apr 20, 11 @ 3:50 pm
The courts are going to have to chime in at some point, otherwise Fahner and the Establishment types on the Civic Committee will keep yapping on the issue with their dishonest radio spots (when are they going to file suit, anyway; they’re spending a lot on radio)?
Are any of those public university types on the Civic Committee foregoing their big salaries and pensions for “the cause?”
Seriously, does anyone think that state employee pensions are the Big Kahuna in the small part of our economy that is the state budget? It’s a problem, but it’s not an existential problem.
I know the accountants and actuaries will tell you we’re doomed, but I just don’t buy it. According to Malthus, we should all be dead now from overpopulation.
In my lifetime Social Security has been bust about four times; the Commies were too big and too strong to deal with; the Japanese, then the Chinese, were taking over the world; there was a new Ice Age coming; then there was Global Warming coming.
The Reagan Deficits were going to bury us; the Sandinistas were an existential threat to America; and the Big Cities of America were ungovernable.
And, of course, the Killer Bees were going to kill us all.
Meh, I don’t rattle that easily. Let’s deal with the here and now and the future will take care of itself.
No one’s ever missed a pension payment, and no one ever will. And the state budget is a part of the economy, but a relatively small one. Some of the bankers on the Civic Committee who took the bailout money are really shameless when they’re claiming that the janitors and donut makers at the state universities are sending us to perdition.
As a layman, I think the language of both the state and U.S. constitutions are pretty clear.`You owe what you owe. Budget for it. Pay it. Move on.
Comment by wordslinger Wednesday, Apr 20, 11 @ 3:56 pm
Rich’s question,
“Is the Treasurer right?”
Factually about changing to a 401k, or about having a change submitted to the Supreme Court for adjudication? Certainly, constitutionality has little or no meaning to the GA (c.f. balanced budgeting).
I have always said that I think that a 401k system, while slightly more expensive up front will have many benefits, not the least of which is removing a huge pot of money from legislator’s greedy hands. We would be able to plan more efficiently at the budgetary level since we would be able to directly understand personnel costs and adjust them on a year-to-year basis. Employees would own their own retirement money, for which they would be responsible and accountable. Furthermore, a retiree can will his plan to his heirs.
Furthermore, a change to 401k immediately stops double-dipping in it’ tracks, and eliminates the need for multiple pension plans (and their administrative overhead).
If localities still want to have pensions, so be it. They can have them at the local level. The choice for pensions and the effects on local costs are now at the point of service instead of miles away in Springfield.
Comment by Cincinnatus Wednesday, Apr 20, 11 @ 4:00 pm
==It does not force anybody into anything, just offers a choice.==
Actually, it offers us a “false” choice because they would raise the retirement contribution rate so high that we would not be able to afford it and would have to move to a 401K system.
Comment by Demoralized Wednesday, Apr 20, 11 @ 4:32 pm
I will move to a 401K system but I want all of my money back, plus the state’s portion, plus interest. I also want the state to make a reasonable contribution to my 401K. Additionally, since a pension is all I have left in terms of perks from the state, I would like to start receiving raises again. Without those conditions I would be right there in the court challenge to any change to my retirement.
But, to answer Rich’s question, I think the Treasurer is right. If this is ever going to be resolved it has to go to the courts.
Comment by Demoralized Wednesday, Apr 20, 11 @ 4:37 pm
Bemused said,
“The Defined Benefit Pension is not the problem although the Republican pat answer to any pension problem is the 401K. The problem is the 80 billion dollar puzzle with almost no realistic solution.”
While you are correct that the defined benefit scheme is not necessary a problem per se, it is in fact a very real problem. Money being fungible, as long as legislators east, they will not properly fund a pension program. There is no lockbox. I repeat what I said before, a defined contribution plan gets the corrupting effects of the pension fund out of the hands of the people most likely to be corrupted, and puts that money into the hands of the owners of the benefit. Everyone knows where they stand in a pay-as-you-go retirement plan.
Comment by Cincinnatus Wednesday, Apr 20, 11 @ 4:39 pm
*necessarily
*exist
Comment by Cincinnatus Wednesday, Apr 20, 11 @ 4:41 pm
Good idea, Mr. Rutherford. Let employees use their accumulated sick and vacation time to contribute to their 401Ks or make them use the vacation time each year and eliminate all the sick days, too
Comment by waitress practicing politics. . Wednesday, Apr 20, 11 @ 4:54 pm
Proposed Comptroller office move - they may not be considering all the necessary infrastructure costs when they do the lease comparisons. To cite one example, the current building is very near both the existing centralized computer facility and the telecom building. I know for a fact there is some “private” (state owned) fiber connecting the building(s); currently the ongoing cost of that communications infrastructure (the fiber itself) is basically zero. Building a new dark fiber infrastructure to a different site can cost millions … and that is cheaper in the long run than leasing the fiber from the telcos. So when they start touting savings, it probably doesn’t include all the associated costs .. but what the hey, that’s a different line item in the budget … so we can still claim “savings”.
Comment by Retired Non-Union Guy Wednesday, Apr 20, 11 @ 5:02 pm
I have both 401k and SURS. I used to believe in the 401k. Then came the Great Recession and the crash. Despite moderate aggressive strategy (recommended for my age/retirement plan) and regular contribution, it is still not back to what it was during the Last Bubble. And there is no guarantee that I will be able to start drawing from it at the peak of the next Bubble rather than when it pops. In contrast, the SURS, from which I expected little, is turning into a much more reliable and, though modest, dependable source for retirement. My faith in 401k is shot to hell and is revealed to be the scam that it has always been–as Ghost stated earlier. I can’t imagine surviving to mid-80’s as my Mother continues to do w/o a defined benefit as part of the picture…or w/o a lotto win!!
Comment by D.P. Gumby Wednesday, Apr 20, 11 @ 5:49 pm
Another Republican who has lost my family’s support.
Comment by Norseman Wednesday, Apr 20, 11 @ 6:03 pm
Retired Non-Union Guy has it right about the affect of the Government Pension Offset(GPO) rule for Social Security. My wife is in SURS and will not qualify for a widow’s benefit at my death.Social Security’s Windfall Elemination Provision(WEP) will be in effect on her own account since she will have a pension from a job where she didn’t pay SS taxes.She has put in 8% for her pension for all these years. Another result of GPO is that if I die before I collect SS then all my contributions never benefit my family.
Comment by Decaturite Wednesday, Apr 20, 11 @ 7:19 pm
DP Gumby, too bad it isn’t a 457 plan (i.e., “deferred comp”). The one big advantage of a 457 is that you can take the money out at any time / any age without penalty AS LONG AS you have left government service. Still have to pay the normal taxes Good source of funds if you aren’t 59 1/2 (IRAs) or 62/65 (Social Security).
Comment by Retired Non-Union Guy Wednesday, Apr 20, 11 @ 7:59 pm
Rutherford’s suggestion is probably more of a pragmatic leadership approach than what we’ve seen the past 8 years (if not longer). Every two years, a new General Assembly takes their seat and fundamentally punts on 3rd down when it comes to tackling the issue. That’s the beauty and the burden of a legislature. I think Rutherford, like many pragmatic people, think that it’s time to take care of business or get off the pot (to paraphrase my grandpa). Ultimately the courts would decide anyway, so DO SOMETHING and at least move forward.
Comment by dznuts Wednesday, Apr 20, 11 @ 9:47 pm
This plan of Rutherford’s is just to get his name into the pension discussion. He is trying to increase his name recognition so he can run for a higher office. He doesn’t understand pensions but has to pretend he has a position, even if it is a reckless one.
Comment by Tom Joad Wednesday, Apr 20, 11 @ 10:07 pm
Cincy
As someone else said a good retirement plan has been like a stool with three legs. A 401k program as one of those legs is a fine idea. Some on the right feel we should pull the other two legs and go with the 401K alone. Some of the population could pull that off. My numbers may not be dead on but as I understand it the average 401 account now has less than 100k in it. You can figure out the number of blissfull years to be had on that. Heirs are more likely to pay for last rites than spend windfall. If the state workers cannot count on thier employer to pay into system then both 401 and pension are worthless. Defined benefit plans can be made to work and in my opinion have a better chance at funding complete retirement. That might help lower future taxes by lowering need for help to seniors. In short, sorry I see 401K as a huge lie and future liability to the American Public.
Comment by Bemused Wednesday, Apr 20, 11 @ 10:23 pm
“And, of course, the Killer Bees were going to kill us all.”
Wordslinger, don’t forget my favorite, Y2K.
Comment by LittleLebowski Wednesday, Apr 20, 11 @ 11:30 pm
DP Gumby,
Well, I think you have pointed out exactly the problem. Your defined benefit pension is being paid for by people in defined contribution programs (if they have any retirement program other than Social Security).
While you enjoy guaranteed returns, politicians spend your pension contributions which must be made up with interest by primarily taxpayers who have no such guarantees. In addition, you enjoy better benefits and job security.
I do not blame you a whit, this is the system and you should take advantage of it. But you must admit that this is a problem, and as others have said, the cause lies in the GAs and the Governors, past, present and probably future.
Comment by Cincinnatus Wednesday, Apr 20, 11 @ 11:47 pm
I just want what’s coming, based on what I signed up for 16 plus years ago. It was the offered the job, the plan for my agency, so I want no more & expect no less. I come to work everyday, pay into the pension system @ 8 1/2% of my salary every two weeks & hope to get something at the end. I’m banking on the promise of our fair state & that they’ll honor it.
State however needs to own up to it’s obligations past/ present & get it caught up pension contributions along with these bills to providers, vendors/ contractors. I thought the 66% increase in tax passed retro-active to Jan. 1st was the ticket? Stop with the new programs ect. & get the bills paid.
I’m doing my part & that’s all I can do. I pay in , pay in to S/S, pay my taxes & come to work every day. At 5–8 years from being able to go ; I’m wondering lately if I really can. 401-k scares me too for many of the reasons stated. The 401 type alternative we have now or “deferred comp” hasn’t exactly been setting things on fire either. In -3- recent reporting periods lost about what I put in during those periods as it’s driven by the markets, in conservative funds I might add. They can change plans, talk about it ect., ect. but if my employer doesn’t do as they are expected ; it’s just the same problem with a new name.
This has been my job, a career & despite the opinion of some about state workers ; I like my job & have done my job. I agree with one of the commentors above….try it out on say the legislative or judicial system,as a test run, affecting an overall smaller number & see how that works out. It’s like going to the doctor, tells you what’s wrong & ignore the diagnosis/treatment while going back every time it threatens or flairs up only to get the same diagnosis again, perhaps worse. The only difference here is each time it flairs they owe more $$$ than last time & more folks jumping on the retirement train. There are people leaving in droves right now hoping to lock it in before it changes. I think to those starting out as employees of the state ; a -20- year career as they think it might be will be obsolete.
Comment by The Doubtful Retiree ? Thursday, Apr 21, 11 @ 5:34 am
==No one’s ever missed a pension payment, and no one ever will==
Except that theyhave and they will.
http://www.nytimes.com/2010/12/23/business/23prichard.html?_r=1&emc=eta1
In the private sector there are legions of examples where it has happened too.
The sooner it happens the better. Then there will be some serious efforts to restructure the programs to make them sustainable.
Comment by Sam I am Thursday, Apr 21, 11 @ 9:45 am
“And, of course, the Killer Bees were going to kill us all.”
Not to mention that as of Tuesday, computers were supposed to have become self-aware enough to start plotting to eliminate the human race (see “Terminator 3″)…
Seriously, though, Word’s mention of killer bees reminds me that just this morning, I read a story concerning an elderly couple in Texas that WERE stung to death by killer bees recently. For THEM, killer bees were an “existential” level problem even if they are not for the other 300 million- plus residents of the U.S.
Likewise, while public pension funding may not be an existential problem to the state or nation as a whole, it is to a lot of us on this blog!
Comment by Secret Square Thursday, Apr 21, 11 @ 10:15 am