Welcome to the latest edition of This Week in Pensions! We have gathered the best stories about pensions and retirement security from the previous week. You need to know this news in the fight for a secure retirement.
NPPC News: A historic victory for public workers was won this week when President Biden signed the Social Security Fairness Act into law, read about it here!
Rep. Bill Ohm: State retirees need pension security, too
The headline of an Op-Ed in the Union Leader this week appears to convey a message we can all agree on. However, Rep. Bill Ohm has made a dangerous proposal that would significantly threaten the stability of New Hampshire’s defined benefit pension system.
In his piece, Rep. Ohm advocates replacing the public pension program with a hybrid system, an account similar to a 401(k). While these plans are framed as a modern, more flexible option for employees, the reality is far more concerning. Hybrid plans, in practice, drain resources from the traditional pension fund by redirecting funds and reducing the system’s financial stability.
A move from a defined benefit pension in New Hampshire would be a disaster for the state, just as it has been in Alaska and every other place this risky experiment has been attempted. In fact, many communities that switched away from traditional pensions have been forced to reverse course when faced with the reality that far fewer workers want to work as public servants without the security of a defined benefit pension.
Alaska teachers, local government workers go weeks without retirement contributions after state retirement division hacked
There is a crisis in Alaska. Thousands of public workers have been denied their retirement contributions due to a hack of the Alaskan public retirement system.
Despite these contributions being deducted from the workers’ paychecks, due to infrastructure issues with the computer systems, these payments have not been deposited into their retirement accounts. One could say the state has temporarily stolen these dollars.
According to Forrest Wolfe, a spokesperson for the Department of Administration, this issue will not be quickly resolved as the retooling process to transfer these funds may take until the end of March.This is very problematic for public workers, as they do not have a clear answer about the status of their retirement contributions or how this will be resolved.
“The communication from the state has been absolutely terrible,” said Dan Maclean, a science teacher at Service High School in Anchorage.
National Education Association of Alaska President Tom Klaameyer said the delays are “unacceptable,”
This is not the first significant snafu for the state’s defined contribution retirement program. In October of 2023, the state retirement board recommended the closure of Empower-managed accounts after 10,000 public employees were duped into a more expensive product they didn’t intend to sign up for.
These issues further highlight the crisis Alaska has experienced since switching away from a defined benefit pension plan. The state’s workforce issues will only be exacerbated without a proper resolution. The solution? Switch back to a defined benefit pension plan.
Equable Institute Analysis: Performance of U.S. Public Pension Funds Improves in Q4
It is not every day that we highlight material from the Equable Institute without seriously criticizing its anti-pension mission. However, the strength of public-defined benefit pensions is too strong to deny, and even our opponents must acknowledge it.
In its own report, the institute shows that public pension investment returns improved in Q4, with the aggregate funding ratio increasing from 75.5% to 80%. This significant increase speaks to the strength of these programs.
Of course, given their goals, they felt it necessary to tamper the news with exaggerated caution. Even as they touted the increased funding level, Equable still peddles doom and gloom about so-called pension debt despite the aggregate funding level topping the 80% benchmark.
Pension opponents spread misinformation about systems’ financial fitness to trick lawmakers and the general public into believing that pensions are unsustainable. Click here to learn more about pension funding and how to separate fact from fiction.
Be sure to check back next Friday for the latest news in the fight for a secure retirement! For now, sign up for NPPC News Clips to receive daily pension news from across the country directly to your inbox.