Things to Come

Pennsylvania is ending defined benefit pension plans for public school teachers and state public employees. From CNNMoney:

Governor Tom Wolf signed a bill Monday, making it the ninth state to replace the pension with a “hybrid” retirement plan. It goes into effect in 2019.

The new plan combines elements of a traditional pension and a 401(k)-style account.

Overall, new workers will contribute more of their salary, work longer, and likely receive a smaller payout in retirement than under the current system, according to a report from the state’s Independent Fiscal Office.

But Pennsylvania’s pension system is currently one of the most underfunded in the country and is in need of reform. The bill had bipartisan support.

I presume I don’t need to tell you which state has the worst underfunded public pension fund. That only nine states have adopted these “hybrid” plans tells you how difficult they are politically.

Not only is this an idea whose time has come it’s an idea whose time is long overdue. At this point only 4% of U. S. companies offer defined benefit pension plans only. Another 14% offer hybrids. The overwhelming preponderance of company pensions these days are 401(K)s.

The Illinois legislature has been raiding the public pension plans for decades. So has the Chicago City Council. That’s not the only reason that Illinois and Chicago are in such bad fiscal shape but it’s an important one. Politicians can resist everything except temptation and those pension funds were wearing such short skirts.

Expect more states to do the unthinkable and behave more like the private sector.

1 comment… add one
  • Jan Link

    When government runs out of “other people’s money” it will be time to implement a “plan B.”. Here, though, in CA the Dem party​ remains on the fast tract to funding every social progressive fantasy, eveny ideological policy possible, pleasing all public sector pension plans to the hilt. Eventually the pleasant climate will not be enough to hold people here.

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