Wyoming Liberty Group
Pension Reform – Who Controls our Retirement Future?
Talk of pension reform in the government sector starts the usual hand wringing among those who think they know best for everyone else. At the moment, Wyoming’s government signs most of its workers up to a defined benefit pension plan, whether these workers would prefer another option or not. Most people in the private sector, if they have a pension plan at all, have a defined contribution plan. Some workers in the government sector have a choice between defined benefit and defined contribution plans. Given the litany of excuses used by hand wringers against shifting new government workers to a defined contribution pension plan, one would think no government worker would freely choose a defined contribution plan.
However, when government workers have a choice, up to 60 percent choose the defined contribution plan.
Perhaps it is time for the hand wringers to relax and take a look at solutions that work for pretty much everyone, including government workers.
The Wyoming Retirement System (WRS) runs Wyoming’s government pension plans. It manages nine defined benefit pension plans, one defined compensation pension plan, and Wyoming’s Social Security plan. The Public Employees Plan, the largest plan, has about 84,000 members, including 23,000 retirees, 36,000 active or vested employees, 5,600 inactive but vested employees, and about 20,000 non active and non vested employees (former employees who leave money in their account if they think they may come back to work for the state, and others who may not realize they are eligible for a refund of the money in their accounts).
When people start work at a state agency, school, city, in law enforcement or with a variety of other government employers, they have no choice but to join a defined benefit plan. An employee may choose to contribute to the above-mentioned defined compensation plan but even if employees prefer this plan, they are still forced to join the defined benefit plan.
According to WRS, compared to Wyoming’s population of about 583,000 in 2013, one-in-six Wyomingites are members of WRS. That means a lot of people depend on a government promise of retirement security. An even more worrisome comparison is to the number of people employed. With total employment of about 292,000 in 2013, the number of people expecting taxpayers to fund their retirement rises to closer to one-in-three. This implies a tremendous burden on the taxpaying public and a great risk to government workers as according to the Bridgewater Associates hedge fund, 85 percent of public pension funds could go bankrupt within the next three decades.
Yet if given a choice of sound alternatives, state employees could reduce their risk of waiting at their mailboxes for pension checks that never arrive.
At the University of Wyoming, employees can choose between the state’s defined benefit plan and a defined contribution plan managed by a private company called TIAA-CREF. Approximately 60 percent of UW employees choose to belong to the defined contribution plan and are not forced to join the state’s defined benefit plan.
UW’s employees are not the only state employees with the opportunity to control their retirement future. Employees at community colleges can also choose between the state’s defined benefit plan and privately provided defined contribution plans, and between 25 to 50 percent of these employees choose the defined contribution plan.
Most counties and municipalities also belong to the state’s retirement system and require their employees to join the plan. However, three small municipalities, such as the Town of Kirby with but three part-time employees, choose not to give a pension to their employees at all.
Perhaps it is time for those who think they know better to take a look at the facts of reality and instead of blocking reform, work instead towards real options. When freed from outdated no-win retirement plans, government is in a better position to keep its commitment to secure retirements for government workers without breaking the backs of taxpayers.