List: Fixing the public pension problem

The most effective reform, according to many experts, is shifting public employees to a defined contribution pension plan. Doing that means that existing defined benefit accruals for current employees would be frozen and employees would be moved to a defined contribution plan with the previously accrued amount placed in their new defined contribution account.

But it's not the only option for city and state governments. Here's what State Budget Solutions also suggests:

Primary reforms to existing defined benefit plans

  • Cap employer cost (i.e., state will pay no more than 10% of salary toward an employee benefit);
  • Require the full ARC (actuarially required contributions,or normal cost) of the plan to be paid each calendar year or legislative per diem will be canceled until full ARC is paid;
  • Require that the ARC be calculated using a realistic discount rate (either the Treasury rate or the bond rate of the plan sponsor);
  • Smooth pension wealth accrual making it a constant percentage of earnings(i.e. a cash balance or constant accrual plan).

Close loopholes to reform pensions

  • Eliminate double-dipping;
  • Eliminate spiking;
  • When calculating base pay, do not base the calculation of retirement pay on anything other than base salary;
  • Require any purchase of service credit to be at full actuarial cost or prohibit the purchase of service credit;
  • Eliminate cost-of-living adjustments or tie them to the CPI.

Secondary reforms

  • Increase employee contributions;
  • Increase retirement age;
  • Increase vesting period;
  • Impose penalty on retire/rehire -new employer must pay pension;
  • Increase the number of years used in final-average-salary calculation;
  • Require that any purchase of service credit be at full actuarial cost (or prohibit the purchase of service credit);
  • Cap retirement benefits at not more than 100% of final average salary;
  • Eliminate pensions for employees who are convicted of work-related crimes;
  • No pension benefit for voluntary service;
  • Have tight review of disability claims.



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