April 12, 2011
In a continued effort to dismantle the retirement security net of American workers, extreme right ideologues have perpetuated the myth that public pensions are a drag on the economy. They insist that switching to a 401(k) plan would magically end with unfunded liabilities and budget problems across the states.
They’re wrong. Witness Minnesota, where a recent study by the Minnesota Public Retirement Systems dispels the notion that privatizing public service workers’ retirement is a good deal for American workers.
According to the report, the shift would cost taxpayers more than $2.7 billion over the next decade. It also concludes that pensions “can provide the same level of income at roughly half the costs” of a 401(k) plan.
As a recent editorial from the Minnesota Star Tribune states, the “move would shift the risk associated with future market downturn from pension funds and the taxpayers to workers themselves.”
At the national level, the median account balance of all 401(k) accounts is less than $13,000, a mere fraction of what is needed for a secure retirement. In aggregate, the gap between what Americans have saved and what they will need in retirement has been calculated at $6.6 trillion.
It is astounding that pundits and ideologues insist on promoting 401(k) plans that have not delivered on their promise and threaten the retirement security of millions of Americans.
Minnesota public state workers led by AFSCME Council 5 already fixed a $4 billion funding gap by raising employer and employee contributions. The council also supported legislation in 2010 that resulted in a $6 billion reduction in pension costs.
As the Star Tribune editorial says, “Those moves are paying off nicely in stabilizing the pension funds. Already, combined with the improving stock market, they have shaved unfunded liabilities by more than a third.”
Public service workers have repeatedly led by example when it comes to finding real solutions to our budget problems. It is time for the corporate-funded proponents of failed alternatives such as 401(k) plans to do the same.