Kentucky Republicans Cave On Pension Reform; Stick It To Taxpayers With “Kick The Can” Approach Instead
Posted by Tyler Durden on October 19, 2017 11:15 pm
Tags: 401, Defined benefit pension plan, Defined contribution plan, Economy, Finance, General Assembly, Investment, Kentucky's Public Pension Oversight Board, Labor, MONEY, Pension Crisis, Pensions, Pensions in Norway, Reality, republican party, Retirement plans in the United States, Social Issues, Twitter
Categories: 401 Defined benefit pension plan Defined contribution plan Economy Finance General Assembly Investment Kentucky's Public Pension Oversight Board Labor money Pension Crisis Pensions Pensions in Norway Reality republican party Retirement plans in the United States Social Issues Twitter
After months of planning and cogitating over how to address the failing public pension systems in their state, which are somewhere between $40 and $80 billion under water, Governor Matt Bevin and the leaders of the General Assembly’s Republican majorities released their plan earlier today and it appears to be nothing more than the same old “kick the can down the road” approach to “pension reform” that has perpetuated the pension ponzi in this country for decades while doing absolutely nothing to address the actual crisis.
Here is a summary of the ‘plan’ courtesy of the Courier-Journal…notice that aside from putting new teachers into a “401(k)-style” defined contribution plan, the Republican proposal does pretty much nothing else except demand that more taxpayer dollars be diverted to service failing pension plans.
Here are highlights of the multi-point proposal:
- There is no increase in the full retirement age for current workers
- There will be no reductions in pension checks for retirees, and it protects health care benefits for them.
- Future non-hazardous employees and teachers will be required to enroll in 401(k)-style plans.
- Hazardous duty employees, such as police officers and firefighters, will continue in the same system they are in now.
- The plan would close a loophole to ensure payment of death benefits to families of hazardous employees.
- The plan would stop the defined benefits plans for all legislators, moving them into the same plan as other state employees under the jurisdiction of Kentucky Retirement Systems.
— Morgan Watkins (@morganwatkins26) October 18, 2017
Not surprisingly, Governor Bevin, who as a politician is worried not so much about the long-term solvency of his state’s pensions as he is about getting through the next election cycle, said the plan “will be a model for this nation” as it “keeps the promise” to public workers and delivers on his promise to “do what is legally and morally right.”
In reality, of course, Bevin’s plan does nothing to “keep any promise” and simply delays the inevitable collapse of a ponzi scheme that will eventually buckle from a wave of retiring baby boomers who have been sold a lie for decades.
Just as quick reminder to Bevin, below is a recap of the changes that his own pension consultants told Kentucky’s Public Pension Oversight Board would be required to save the pensions in his state (courtesy of the Lexington Herald Leader)…suggestions that he seemingly dismissed in their entirety…
An independent consultant recommended sweeping changes Monday to the pension systems that cover most of Kentucky’s public workers, creating the possibility that lawmakers will cut payments to existing retirees and force most current and future hires into 401(k)-style retirement plans.
If the legislature accepts the recommendations, it would effectively end the promise of a pension check for most of Kentucky’s future state and local government workers and freeze the pension benefits of most current state and local workers. All of those workers would then be shifted to a 401(k)-style investment plan that offers defined employer contributions rather than a defined retirement benefit.
PFM also recommended increasing the retirement age to 65 for most workers.
The 401 (k)-style plans would require a mandatory employee contribution of 3 percent of their salary and a guaranteed employer contribution of 2 percent of their salary. The state also would provide a 50 percent match on the next 6 percent of income contributed by the employee, bringing the state’s maximum contribution to 5 percent. The maximum total contribution from the employer and the employee would be 14 percent.
For those already retired, the consultant recommended taking away all cost of living benefits that state and local government retirees received between 1996 and 2012, a move that could significantly reduce the monthly checks that many retirees receive. For example, a government worker who retired in 2001 or before could see their benefit rolled back by 25 percent or more, PFM calculated.
The consultant also recommended eliminating the use of unused sick days and compensatory leave to increase pension benefits.
All of which just reminds us once again of how we once summed up public pensions in this country:
Defined Benefit Pension Plans are, in many cases, a ponzi scheme. Current assets are used to pay current claims in full despite insufficient funding to pay future liabilities… classic Ponzi. But unlike wall street and corporate ponzi schemes no one goes to jail here because the establishment is complicit. Everyone from government officials to union bosses are incentivized to maintain the status quo…public employees get to sleep better at night thinking they have a “retirement plan,” public legislators get to be re-elected by union membership while pretending their states are solvent and union bosses get to keep their jobs while hiding the truth from employees.