Editor, The Spotlight:
I congratulate The Spotlight for its effort to comment on the Pension battle on its editorial of 3/14, but it provides simplistic conclusions in supporting the 401(k) solution because (a) it is now common in the private sector, and (b) millions of private sector workers provide fore their retirement with 401(k)s.
The arguments for Defined Benefit Plans and Defined Contribution Plans are all about risk…who bears the risk. It is the employer for DBP, and the employee for DCP. Perhaps it is true that DBPs are no longer sustainable for the private sector. We are in a global economy competing with companies that do not bear the burden of supporting their employees retirement forty years hence. Predicting a company’s economics in a competitive world so far in the future cannot be done with certainty.
But the fact that “millions” provide for their own retirement speaks not of the many more millions who do not, either because they chose not to invest in retirement accounts or could not afford to, or, because, investing as individuals, they invested badly. There will come a day, I predict, when this cohort arrives at retirement age as was the case in the past, with insufficient savings, in poverty, and on the public SSI dole. Yes, the shift to private savings will result in more public dependency, and less dignity, than the current system.
The public DBP should not be vilified. It is a predictable, stable, retirement for which adequate funds should have provided over the years.
Yes, there are some abuses in the system, and the overtime calculation is one of them. There are others that may need to be parsed out. But fundamentally, the DBP is a more stable system for the retiree and for the economy.
The fees paid for private investment advice is not money wasted, but an investment in ensuring the stability of the State retirement system, one of only four in the nation is that fully funded. Certainly the rate of increase should be investigated and contained.
But where is it written that it must be one or the other with no in-between. Certainly one advantage of the 401(k) system is its portability. I know of many state workers for whom the pension is a set of golden handcuffs; the closer they are to retirement, the less able they are to move on to other opportunities.
A better option would be to provide a fixed amount of retirement benefit, which the worker could then choose to direct a part to a DBP, and a part to a DCP. The sponsor would invest the DBP portion, and guarantee its return (the risk for which could be outsourced), and the worker can invest the DCP portion.
Barry Hecht
Delmar
