Comments on: Let’s stack the deck http://blogs.reuters.com/muniland/2011/05/17/lets-stack-the-deck/ Bridges, budgets, bonds Mon, 24 Nov 2014 00:29:08 +0000 hourly 1 http://wordpress.org/?v=4.2.5 By: Mangojulie http://blogs.reuters.com/muniland/2011/05/17/lets-stack-the-deck/comment-page-1/#comment-68 Thu, 19 May 2011 12:44:26 +0000 http://blogs.reuters.com/muniland/?p=855#comment-68 Having 50 different state pension plans with 50 different approaches to funding/investment management of state employee pensions will surely lead to major disasters in several of them. The public will end up footing the bills anyway.

So, perhaps the stacking should be composed of moving a portion of each state’s pension into Social Security based on earnings up to $50,000. The funds to support this should also be moved over to the Social Security trust in the amount that would have been attributed to the workers, had they been covered by Social Security up to the first $50k of salary. This will lead to a consistent safety net across all states, and funding consistent with how it works for the rest of us.

The remaining portion of the pensions should be converted to a defined contribution plan at the state level funded by the state worker. This way, state employees look like the rest of us and would be subject to the same risks. There is no good reason that a state employee should be in a more privileged position that ordinary American workers when it comes to pension benefits … that only leads to the financial problems that have ultimately emerged with all of these state pension plans.

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By: kenvolvo http://blogs.reuters.com/muniland/2011/05/17/lets-stack-the-deck/comment-page-1/#comment-66 Thu, 19 May 2011 11:07:24 +0000 http://blogs.reuters.com/muniland/?p=855#comment-66 A defined contribution plan need not shift the full responsibility to the employee (as stated in the article). The employer can contribute a portion of salary to a fund managed by the employer/fiduciary. That portion could be provided solely by the employer, mandated to come from the employee (as Virginia proposed)or be voluntary. In addition to contributions, growth of the fund may be based on an the stock market or an index like the yield of the 30 yr. Treasury yield.
In addition to the added risk, the employees payout is based not on their highest years of earnings as is typical in defined benefit plans, but instead based on earnings over time and a contribution rate that could change in the future.

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