Pension plans.
Warner, Matt
Robert Costrell and Michael Podgursky ("Peaks, Cliffs, &
Valleys," features, Winter 2008) make a compelling case for states
to shift public pensions away from defined benefit plans to defined
contribution plans. The former are ill equipped to meet the needs and
expectations of today's workforce.
[ILLUSTRATION OMITTED]
The private sector has long signaled a growing preference for
defined contribution plans. News-making "freezes" of
underfunded defined benefit plans in recent years (Verizon, IBM, e.g.)
dealt heavy blows to a practice that reached its peak among private
sector employees two decades ago.
America's prospective teachers are perhaps less likely than
veteran teachers to prefer defined benefit plans. At the fall 2007
meeting of the American Savings Education Council in Washington, D.C.,
it was reported that members of "Generation Y" in today's
workforce are more optimistic about their own abilities to save for
retirement and less concerned about government-sponsored benefits than
previous generations.
State lawmakers have anticipated these trends. In 1999, a national
task force of state legislators drafted model legislation at the
American Legislative Exchange Council's Annual Meeting in
Nashville, Tennessee, to introduce portable, defined contribution plans
for public employees. Since that time, 30 states have introduced
versions of the legislation and 15 have adopted plans to either offer
defined contribution alternatives to some or all public employees or
phase out defined benefit plans altogether.
Costrell and Podgursky's call to states to reform teacher
pensions is timely. Positioning teacher benefits to match the
preferences of today's workforce is critical to attracting and
retaining the supply of qualified teachers needed to meet the challenges
we face in education. At the very least, states must offer teachers
choices.
MATT WARNER
Director, Education Task Force
American Legislative
Exchange Council
