Kentucky teacher and activist Randy Wieck writes on Fred Klonsky’s blog about the renewal of the Republican legislators’ efforts to raid teachers’ pension funds in Kentucky.
He begins:
At a time when the Republican super majorities in the Kentucky Legislature would seem to have more pressing issues to face – Covid-shuttered schools and businesses, unemployment supplements, eviction waivers, universal Covid testing and tracing – they nonetheless carry on with a new drive-by attempt at teacher pension “reform” which, once again, is a thinly veiled attempt to dismantle (let us be honest and use the proper term – gut) the Kentucky teacher defined benefit pension plan; kill it once and for all.
The idea of properly funding the plan, according to relevant GASB accounting standards, and repairing the damage inflicted over several decades of underfunding – is one legislators choose to duck. Better to chisel Kentucky’s way out of the debt it has run up through using funds that should have gone to the teacher pension (known as the actuarially required contribution), and which were instead used for other purposes. Perhaps they are following the lead of Kentucky Senator Mitch McConnell who refuses to allow federal aid to states beset with heavy, unforeseen expenses during a worldwide pandemic.
Rather than supply much-needed and adequate funding to TRS, (some $2 Billion per year for the foreseeable future) legislators instead prefer to “reform” the plan, placing new-hires into the old “beating-a-dead-horse” hybrid pension system.
Why not simply begin to pay back the missing funding and repair the damage inflicted by the legislature, and not by teachers who have dependably paid one of the highest pension contribution rates in the country (13%)?
This appears to be Mitch McConnell’s plan for every state: withhold funding so that they each have to declare bankruptcy, then dump state pension obligations. One more reason to never vote for a Republican, especially in Kentucky.
it feels like a national sickness that so many people KNOW McConnell’s character and know all about his long-term public-service-devastating plans but somehow cannot stop him
There are suggestions on the Twitterverse that the voting machines in Kentucky were rigged for McConnell. He won districts that usually vote Democratic.
Yes, and apparently he didn’t just squeak by in those Democratic strongholds. He “won” by significant margins not even close to being supported by historical data and polling. I wrote somewhere I didn’t understand why the results weren’t being challenged but if he controls the apparatus it may be a futile exercise.
I’ve suspected that Stop the Steal is, as usual, Trumpian projection. Trump’s anger may stem from the knowledge that the vote was rigged in his favor and he still lost.
When politicians use the word “reform”, take your earrings off. Put your wallet in your front pocket. Tell your children to get in the basement. Hide everything. They’re on a raiding and looting spree, and there is no one to stop them.
I think the best way to avoid these problems is with a defined contribution plan. Teachers should be fully compensated for a year of teaching in the year that they teach. This would prevent politicians from raiding or looting.
These teachers were already contributing 13% to their pension funds. If teachers entirely pay for their retirement, they would have to pay them a lot more money. The deal most teachers make during their careers is that the accept lower pay compared to similar professions, but the defined pension benefit takes care of them when they retire. In many states teachers cannot even participate in Social Security.
FYI-States where teachers are ineligible for Social Security: Alaska, California, Colorado, Connecticut, Georgia (some areas), Illinois, Kentucky (some areas), Louisiana, Maine, Massachusetts, Missouri, Nevada, Ohio, Rhode Island (some areas) and Texas.
Retired,
Defined contribution programs typically have the employer paying into a retirement account controlled by the employee with each paycheck. Employees make their own contribution as well. For example, a teacher might devote 13% of their salary to their retirement account and the school system might contribute 13% of the teachers salary (or whatever percentage the union negotiates) to the retirement account with each paycheck.
Left Coast Teacher’s concern is that the defined benefit pension will not take care of teachers when they retire because politicians will raid and loot the system. A defined contribution system prevents that from happening.
Social Security was originally intended as a retirement system for people who worked in the private sector. When it was passed it was not clear that the Federal government could force state governments to pay taxes to the Federal government, so state government employees were left out. See https://www.fool.com/retirement/2018/10/07/why-does-social-security-leave-out-teachers-in-the.aspx for more details.
Kentucky has a defined benefit pension plan and politicians have raided the pension funds for their pet projects for years.
Defined contribution plans are horrible. If the states would make the pension payments on time, there would be no problem. The politicians create the problem then blame the teachers for the deficits and the shortfall in the pensions. The teachers contribute to the pension fund with each and every paycheck for decades throughout their whole careers. The teachers uphold their part of the bargain, it’s the politicians (of both parties in NJ) who have dropped the ball.
Defined contribution plans are standard in higher education. TIAA was founded in 1918 and is still going strong. I think you would find that most faculty like the freedom that a defined contribution retirement plan offers by lowering the cost of changing universities or leaving the academy.
I agree. It is a ploy that could leave thousands of teachers eating cat food in retirement. State retirement systems can hire consultants to invest pension funds collectively. Most teachers have neither the time, energy knowledge to do it for themselves. It is not the fault of teachers if states fail to make payments into the fund or mishandle the money. When states keep their end of the bargain, the system works well.
From the NEA: Educators overwhelmingly favor defined benefit plans like pensions over their defined contribution counterparts. Maintaining a sound and predictable pension plan for educators and education support professionals enables them to have retirement security after a career in public service.
From the NJEA: NJEA believes that the mainstay of a secure retirement is the defined benefit pension plan. In New Jersey, teachers and educational support professionals contribute a percentage of their salary and receive credit for the time they serve public school students in a pension plan that provides a guaranteed income in retirement. This is deferred compensation that members earn as part of their compensation package.
From Dean Baker, 1-12-18, at labor notes: While many current retirees are reasonably comfortable because they have pensions, the future does not look bright for those yet to retire.
Traditional defined-benefit pensions are rapidly disappearing in the private sector—less than 15 percent of workers have them. Most public sector workers still have them—more than 20 million are either now receiving or looking forward to a pension. However, public sector pensions are coming under attack from the American Legislative Exchange Council (ALEC) and other right-wing groups.
Over the last four decades employers have been anxious to convert the traditional defined-benefit pensions into defined-contribution 401(k) plans.
The difference is that with a defined benefit, the worker is secure while the employer does not know exactly how much it will have to pay in. Workers are guaranteed a lifetime benefit based on their salary and years of service; the employer’s bill depends on the worker’s longevity and on stock market performance.
With a defined-contribution plan, the employer knows just how much it will pay each year, and the worker shoulders all the uncertainty. This means that workers face the risk that the market will plunge just after they retire—and they may quite possibly outlive their savings.
By getting rid of defined-benefit plans, employers are transferring risk to workers. In addition, they often contribute less to a defined-contribution plan than to the defined-benefit plans they replaced, in effect cutting workers’ pay. end quote
I am a retired Kentucky state government retiree, and I live in constant fear of losing my pension. Without my pension, which I earned by working 30+ years in a terribly abusive job, I will be out on the street. I am 68 years old, and cannot go back to work. Is this how I have to live my last remaining years, in perpetual fear of poverty?
Your reward for all your years of hard work, low pay and suffering indignities of red state politicians is supposed to be a retirement you can count on. It should be that you can retire with dignity. If politicians abused the agreement that was made, they should have to make it right instead of trying to change the nature of the deal now that you are eligible to collect.
The defined benefit plan is superior to the defined contribution plan, assuming States properly fund them and Courts – for the most part – continue to protect beneficiaries.
(Keep an eye on Illinois, California, R.I. as well as Kentucky.)
2004 was the LAST time KY contributed the full ARC, (actuarially required contribution). Since that time, except for bonds in 2011, the legislature has repeatedly shorted the pension by 20-25%. (See Tobe, KY FRIED PENSIONS). The local teacher union, JCTA, has gone along with this – under the same president for 20 years (who engineered elimination of term limits), and who has BLOCKED calls for open accounting books by the members of the union. We are not allowed to know how our money is charged for fees, and what the performance is of the private money investments in KTRS. It is called “proprietary information”.