This Week in Pensions: June 28, 2024

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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.


A new report in Vanguard highlights the inequity in 401(k) benefits, showing that the majority of employer contributions benefit white, higher-earning employees. Read about it here.

White House puts a spotlight on more than 1 million pensions saved under a 2021 law.

The White House announced this week that the Butch Lewis Act has helped to prevent benefit cuts to over 2 million union workers by providing a fund for pension plans facing insolvency. The law– named after a Teamsters union leader who dedicated the last years of his life to preventing massive cuts to the Teamsters’ Central States Pension Fund, became law in 2021.

When states move away from Defined Benefit plans for new workers, it hurts the pension system for employees who were grandfathered in and can lead to funding shortfalls when there are more retired workers than active contributing employees.

While this act is vital in helping to save retirement plans for so many workers, it would not be necessary if America had a robust pension system across the board. When a pension plan covers a large section of workers, solvency becomes a rare issue. This is because the pension has a much larger funding base; the entire worker pool can’t retire at once.  The larger the funding base, the more robust the pension’s opportunities for investments are, which is a significant source of funding for the plans.

The Butch Lewis Act has vital support from President Joe Biden, who said, “Whether it is Social Security, Medicare, or pensions, workers who earn a dignified retirement through decades of hard work and sacrifice should never see their benefits cut due to broken promises or policies that favor the wealthy over working families” in a statement.

Gen X finally tops boomer 401(k) balances, but will it be enough to retire?

 New data from Fidelity shows that Gen X retirement accounts finally have more money than their Baby Boomer counterparts, with Gen X workers’ balances averaging around $543,400. 

One of the driving factors behind this discrepancy is that Boomers are mostly retired or retiring soon, which means they are no longer contributing to their retirement but rather drawing from it. In addition, now that Gen Xers are approaching retirement age, they are socking away money at higher rates, averaging around 15.2%.

Despite these balances, 401(k)-style defined contribution plans are still volatile and challenging retirement plans and do not provide the same reliability as a Defined Benefit pension plan.

Dan Doonan, the National Institute on Retirement Security Executive Director, said in a statement, “This really isn’t surprising given the terrible retirement hand that has been dealt to the latchkey generation. Most Gen Xers don’t have a pension plan, they’ve lived through multiple economic crises, wages aren’t keeping up with inflation, and costs are rising. The American Dream of retirement is going to be a nightmare for too many Gen Xers.”

The answer is clear, more workers need a Defined Benefit pension plan, not a 401(k).

PERA’s investments bounce back in 2023.

In 2023, the Colorado Public Employees’ Retirement Association’s (PERA)saw its investments grew by 13.4%, matching the previous year’s losses– according to its annual financial report released Friday, the Colorado Sun reports

PERA, which serves over 220,00 current public employees and more than 700,000 members in total, is striving to meet its target of 100% funding by 2048. To do this the pension must “average 7.25% returns a year to meet its funding targets.” These funding gaps are being covered in part by the highest employee contribution rate to date, at 11%.

These gains have been enough to avoid benefit cuts and further contribution hikes. The article notes that “large pay raises for teachers and state workers coming out of the pandemic took an even larger bite out of the pension, adding nearly $800 million to the unfunded debt.” 

The funding ratio for PERA is healthy, and oftentimes the fears about funding ratios are uncalled for due to misinformation. And as trends continue with increased employee contributions, these funds will become stronger and the plans will be funded. Colorado is an excellent example of why pension plans need to be ubiquitous among all workers.

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.