SESSION 2014 Pensions Talking Points



Retirement Security TP

Retirement Security Talking Points

Pensions provide dignity and security after a career of service.

Defined benefit pensions for career public servants provide a stable base to a successful retirement plan.

Shrinking wages and loss of purchasing power that comes with the higher price of basic needs make personal savings very difficult for working families placing more importance on a stable pension and Social Security benefits. After a career of service an employee should be able to look forward to a stable, comfortable retirement.  A successful retirement plan set to avoid living in poverty is comprised of 3 parts: Pensions, Personal Savings and Social Security benefits.

  • Washington State’s Public Pension program is among the best in the nation in efficiency and value. The average annual return for the State Investment Board’s Combined Trust Fund (CTF) since inception exceeds 8 percent and its performance was among the top one percent of pension funds in the country during the past 20 years, and they were in the top 10 percent during the past five years.
  • Washington is a national leader in pension reform.  Benefit changes implemented in 1977 are now being copied by other states, our State Investment Board leads the pack in investment returns, and our open pension plans are funded at 111% as of 2012.
  • Although there is an unfunded liability in the closed plans 1, employees have always paid their contributions and our investments have always met their averaged performance targets.  The deficit is due to a failure by the legislature to provide the recommended funding amounts.

The average monthly benefit for a PERS 2 retiree is about $1158.00 per month.

This, in combination with social security and personal savings gives the career employee an opportunity for dignity and security in their retirement from public service.

An excellent pension plan brings value to an employee’s compensation package that cannot be matched by straight wage amounts.

Unlike wages, the costs of pensions are shared between the employer, employee contributions and the investment funds that are pooled by the investment system. The bulk of the pension benefits come from money earned by investment pool. Wages are totally provided by the employer. Employees value pensions as part of a total compensation plan.

In 2009 state and local pensions generated $4.5 billion in economic output in our state — supporting close to 31,000 jobs, and creating almost $600 million in tax revenues for the federal, state, and local governments. Each dollar invested by the Legislature in pensions supported over $8 in economic activity in our state.   Stable, predictable pension programs help support our state’s economy. Without them many retiree’s would be forced into poverty.

RETIREMENT SECURITY PRIORITIES

  • Oppose efforts to replace defined benefit pensions with 401(k) plansThe 401(k) plan was never meant to be a mainstream pension plan and is a poor substitute for one. It’s a voluntary program that was intended to supplement retirement.  In the 1980s and ’90s we saw a shift away from traditional pension plans to something called a 401(k)-type plan. These plans were really meant to serve the needs of executives in a company that already provided pension plans for everybody else.

    401(k) plans do not replace a Defined Benefit Pension. They are expensive to administer and the employee incurs the risk. WFSE stridently opposes any attempt to substitute a defined contribution plan with a deferred compensation plan.
  • Support PSERS Expansion (House Bill 1923)Police, Firefighters, Corrections officers and Juvenile Detention workers are currently in pension systems that allow them to retire before age 65 due to the nature of their jobs and the mandatory training their professions require. DSHS had the highest compensable claims rates among employers. Within DSHS, the residential habilitation centers and mental health hospitals and institutions have the highest compensable claims rates, with rates more than twice the general population studied.
    High Risk Job Classes within DSHS institutions should be placed in the Public Safety Employees Retirement System (PSERS).
  • Support retirement security for everyoneWashington State is facing a retirement security crisis. WFSE supports the Save Toward a Retirement Today (STaRT) savings program for private sector employees.Nearly three out of five middle-class Washington retirees can expect to outlive their financial assets . More than 38 million working-age households, or 45 percent, do not own any retirement account assets, whether in an employer-sponsored 401(k) type plan or an IRA.   Workers in the private sector and those who work for small businesses are least likely to be saving through a workplace retirement savings account.  Workers under age 55 today are less likely than their parents or grandparents to enjoy the living standards of their working years when they retire.  If older adults don’t have enough money to be self-sufficient in retirement, they will be forced to rely on public safety net services – which are expensive for the state. Every dollar Washington spends on safety net services for older adults who can’t afford basic living and medical expenses is a dollar we can’t spend on other essential services like education and public safety.

I. Americans for Secure Retirement, “Retirement Vulnerability of New Retirees in Washington”, 2010.
Available online: http://www.paycheckforlife.org/uploads/ASR%20WASHINGTON_revised%20for%20Web.pdf

II. National Institute on Retirement Security, “The Retirement Savings Crisis: Is It Worse Than We Think?”, June 2013.
Available online: http://www.nirsonline.org/storage/nirs/documents/Retirement%20Savings%20Crisis/retirementsavingscrisis_final.pdf

III. AARP and Urban Institute, “What Are the Retirement Prospects of Middle-Class Americans?”, 2012.
Available online: http://www.aarp.org/content/dam/aarp/research/public_policy_institute/security/2013/retirement-prospects-middle-class-AARP-ppi-sec.pdf

1 Excerpts from “Pension Funding reform for Washington Sate” by Washington State Treasurer James L. McIntire, Sept. 13 2010

2 Excerpts from “Pension Funding reform for Washington Sate” by Washington State Treasurer James L. McIntire, Sept. 13 2010, funding level updated to 2012 per data provided by 2012 OSA Actuarial valuation

3 Source: 2012 OSA Actuarial Valuation. Pg 48  http://osa.leg.wa.gov/Actuarial_Services/Publications/PDF_Docs/Valuations/12AVR/12AVR.pdf

4 Everett Herald Op/Ed, March 12 2012 by John Burbank, Economic Opportunity Institute

5 John Wasik, “How 401(k)s have failed” Forbes magazine 4/24/13

6 Teresa Ghilarducci: “Why the 401(k) is a failed experiment” Frontline April 23 2013

7 Office of the State Actuary report on HB 1923 12/24/12

8 All bullets From STaRT legislation Draft concept paper, AARP September 2013

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