Despite years of underfunding by state and local governments, most public pension plans are “solidly funded and are experiencing a robust recovery from the Great Recession,” according to Hank Kim, executive director and counsel of the National Conference on Public Employee Retirement Systems (NCPERS).
Kim, in a written response to the Report of the State Budget Crisis Task Force, said he agreed with the report’s verdict that public pensions are playing into the financial woes of many local and state governments. He also agreed that stronger local funding policies and greater disclosure are needed.
“Three, five, 10- and 20-year investment returns are all on the rise—and long-term returns are far more indicative of a plan’s health than short-term fluctuations,” he said. “Unfortunately, the real American retirement crisis was beyond the Task Force’s portfolio – and it needs to take center stage in our national policy debate.”
Kim asserts that defined contribution plans, which are the primary retirement savings vehicles for private-sector worker, are underfunded by more than $8 trillion. The task force said that public pension plans are underfunded by $1 trillion to $3 trillion.
“Retirement security can no longer be viewed as a luxury – it is a necessity, both for the individual and for our national economy. Young adults entering the workforce are competing with Baby Boomers for the few jobs that are available, because Baby Boomers, whose defined contribution plans lost a significant portion of their values in the Great Recession, can’t afford to retire. Baby Boomers forced to retire with insufficient assets not only won’t be able to contribute to the economy, they will likely become drains on public resources. A strong economy demands that we manage our workforce. Older workers must be able to retire with financial security to make room for younger workers,” he said.
NCPERS believes that the country should extend defined benefit pension to private-sector workers. It proposed a Secure Choice Pension, which is envisioned as a public-private partnership to provide affordable, easy-to-administer pension plans to private sector employers.
SCPs have proven very popular with small business owners who want to attract and retain talented and reliable workers, he said.
The SCP would provide guaranteed, lifetime retirement income that is immune to market fluctuations and sudden, unexpected economic downturns like the one that launched the Great Recession – at no cost to taxpayers.
The National Conference on Public Employee Retirement Systems (NCPERS) is the largest trade association for public sector pension funds, representing more than 550 funds throughout the United States and Canada.