The political ideologues who promote their views through think-tanks and business associations have been busy this year advocating for defined contribution plans, like 401(k)s for public employees. They conjure up problems with the traditional defined benefit retirement plan to gain support for radical changes. The Texas Association of Public Employee Retirement Systems works to oppose these groups.
Take for example the op-ed recently published in San Antonio’s largest newspaper by Gary Gibson, the in-coming chairman of the Texas Association of Businesses. Gibson was taking aim at 12 pension funds which use state laws to protect themselves from the shifting priorities of temporary politicians on city councils. Gibson wrote, “These funds represent 50,000 retirees and have approximately $8.7 billion in unfunded mandates. It would take a check of more than $171,000 from ever active member of those plans to balance things out. This is unrealistic.”
Indeed, the whole scenario he created was unrealistic. The “unfunded mandates” refer to actuarial liabilities which are estimates of current assets measured against expectations for future benefits. Yes, they must be paid, but they aren’t all due at once. In fact, they will likely be paid over the next 30 years, aided by the normal growth of cities’ economies, the public workforce, and good investments.
We can’t get bogged down in correcting errors of someone who should know better. But what Gibson demonstrates is the typical effort to create false summaries so as to gin up resentment, anger and envy for public employees and their defined benefit pension plans. Just level the playing field, they say, and put police, firefighters, municipal employees and teachers in the same types of retirement plans used by employees in the private sector.
There are so many problems with that view. Defined contribution plans, like 401(k)s were never intended to be retirement plans. They were structured as supplemental plans to traditional defined benefit retirement plans. But businesses don’t like DB plans, and Gibson represents business.
Regardless, TEXPERS questions why people like Gibson want to throw the baby out with the bathwater for public employees? If a pension system is having trouble – and most of them are not – it makes more sense to make adjustments here and there. Once the adjustments post results, maybe a few more will be necessary. Or not.
The key is that public employee pension funds are long-term institutions. Cities and their pension funds don’t go out of business in the same manner that businesses do. The headlong rush to dismantle DB plans in favor of the increasingly unpopular 401(k) plan is baffling to most people, but apparently not to business groups and their members.
TEXPERS is working with San Antonio’s pension fund to create an appropriate response to Mr. Gibson’s editorial. It’s our hope that our member systems won’t let these issues go unchallenged.