Pension Reform
Defined-Benefit Public Pensions: Unwise and Unfair
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  • free_agent

    I think comparing the income of state employee retirees to the income of *all* workers in a state is not particularly fair, as the average state employee has a higher-skill job (and hence higher pay) than the average worker in the state. How do state employee retirees compare to the *current* state employees? That corrects for that factor.

    As for back-loading pensions tying the worker to the job, that sort of arrangement is common in unionized industries, because it also ties the worker to the union — the worker loses the ability to advance other than through the collective advancement of all union members.

    • Andrew Allison

      Higher than 72% of full time workers (“Data from the Bureau of Labor Statistics’ Occupational Employment
      Statistics survey show that the average retired state-government
      employee has an income higher than 72% of full-time workers in his
      state.”). Surely you jest.

  • Jane the Actuary

    Sorry, but you misunderstand the difference between “Defined Benefit” and “Defined Contribution.” The traditional final average pay x years of service x multiplier is just one type of DB plan. The Cash Balance plan actually, for all the criticism, was actually an attempt to remedy this, and combine the level accruals of a DC plan with the protections of a DB plan (investment earnings replaced by an investment credit, normal payment form of life annuities). There have been increasing efforts at developing other sorts of “hybrids” to provide some of the protection against investment and longevity risk outside a traditional DB plan, such as Harkin’s “USA Retirement Fund” concept, as a sort of “third-party” plan. (See http://janetheactuary.blogspot.com/2014/02/more-on-usa-retirement-funds.html ) A pure DC environment is emphatically *not* the way to go.

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