It seems that the days of our parent's and grandparent's pension plans are quickly slipping away. That has pension recipients, organizations and union leaders concerned. According to MSNBC:
“It is a very hot issue,” said Rich Ferlauto, director of pension investment for the American Federation of State, County and Municipal Employees. The movement to privatize pensions “really threatens the middle-class lifestyle of people who have worked all their lives,” he said.
So the battle lines are being drawn. I hope that the people who've worked so hard for those pensions don't get left behind in the power struggle.
The private sector is moving quickly towards changing retirment benefits. Governments are beginning to move that direction as well.
In Alaska, lawmakers last year voted to stop offering a "defined-benefit" pension plan, which provides monthly checks for the lifetime of each retiree. Current teachers, police officers and other state and local government employees will keep the benefit, but new hires will be required to participate in a "defined-contribution" plan similar to a 401(k).
Part of the issue - a big part - is that many government pension funds are significantly short on resources.
But the stock market runup of the late 1990s and its subsequent collapse has left some state pension funds badly underfunded, opening the door to free-market advocates who want to see public workers funneled into defined contribution pension plans similar to the 401(k) accounts that have come dominate the private sector.
Essentially, it's boils down to giving workers a voice in where their money is invested. It's both liberating and nerve-wracking, depending on who you ask.
In essence, the debate over President Bush’s plan to privatize Social Security is being played out on dozens of smaller stages as managers of state and municipal pension plans grapple with the fallout of the 2000-2002 bear market, compounded in some cases by mismanagement, reckless political choices and possibly fraud.
So, this is one to watch.
Free-market activists say public-sector employees should shoulder more of the burden for their own retirement security, putting money aside in personal accounts that would get some government matching funds but would be managed by each individual.
That would mirror the trend in the private sector, where only one-third of new employees at larger companies are covered by a traditional pension, compared with 80 percent just two decades ago. By contrast 90 percent of government workers still have a defined-benefit pension plan, according to the Employee Benefit Research Institute.
This ain't your daddy's pension plan, is it?
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